History of Political Economy 32.3 (2000) 695-696
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Comparative Advantage in International Trade:
A Historical Perspective
Comparative Advantage in International Trade: A Historical Perspective. By Andrea Maneschi. Cheltenham, U.K., and Northampton, Mass.: Edward Elgar, 1998. 258 pp. $81.00.
A problem from which economists suffer has been pointed out by Paul Krugman. The theory of comparative advantage seems so obvious to them that they cannot credit that others may not understand it. So, in arguing with politicians and others, economists tend to move into too high a gear, assuming that second-best subtleties are at issue, when in fact the elementary basics cannot be assumed. Similarly, if comparative advantage is blindingly obvious, surely David Ricardo, for all that he may have demonstrated it beautifully, cannot have originated the conclusion. It must be the case that many intelligent precursors more or less got the message.
In this beautifully orchestrated and deeply scholarly study, Andrea Maneschi shows that a clear understanding of comparative advantage came into this world only after a prolonged and painful labor. Ricardo was not alone, true. And John Chipman pointed out that even Ricardo is not 100 percent clear. Yet Ricardo does better than Robert Torrens, whose claim for priority has been pressed. If we go back further, there are precedents, of course. There always are. The best that can be excavated is older than Adam Smith. Maneschi calls it the Eighteenth Century Rule. This says that a country should not produce a good if it could divert the resources so employed to producing exportable goods of a value that would permit the import of more of the same product. Plainly this rule, most modern in spirit, entails the principle of comparative advantage. But you have to see that, and really at that time they did not.
Fortunately for his readers, the author takes a broad view of history, and the exposition extends right up to recent works, including the new trade theory with imperfect competition. While there is not enough detail to make this an effective textbook of real trade theory on its own, it can only be wished that every graduate student of international economics would study it. For it would be hard to find a more effective antidote to the “nothing published before 1980 can be significant” philosophy favored by too many graduate students.
Given the quality of this book, comment and criticism can only be minor and nitpicky. Two points are perhaps worthy of remark. There are four brief references to “dutch disease” in the text, but not one of them provides an adequate analytical exposition of the theory usually invoked. This depends upon an elevation of the real exchange rate that follows a resource discovery, that is, a rise in the price of nontradables relative to the price of tradables. That such a change can alter comparative advantage is not to be doubted. But the mechanism involves the costs of nontradables and needs a careful discussion, which it does not receive here.
A second point is that the author probably does the profession no favor when he lavishes an unusual amount of (admittedly critical) attention on Alfred Marshall’s rightly neglected concept of “representative bales,” which are some kind of aggregates of the goods exchanged between two trading countries. Unlike Mill’s simple exchange of cloth for linen, the bales import a spurious richness and realism into [End Page 695] the discussion, as Marshall was all too wont to do, while from the analytical point of view adding mainly confusion. Either one should stick close to Marshall and conclude that the “representative bale” is, as it stands, an unhelpful fudge. Or, if one will develop the idea, see the bale as a Rybcynski difference in production when two countries differ only in their relative supplies of labor. If demand functions and goods prices are the same in the two countries, trade will consist of bales so defined. Of course this is absolutely not Marshall, who neglected comparative cost theory rather than developing it.
At a time when...