Adam Smith and David Ricardo Had More Similarities Than Differences in Their Ideas

Only available on StudyMode
  • Download(s) : 2527
  • Published : October 17, 2012
Open Document
Text Preview
Which policy is better between protectionism and free trade policies? This debate is long-running but still some of the most pressing economic question of today. The history of this row stretches back 18th century. At that time, there were two brilliant protagonists in the free trade camp, Adam Smith and David Ricardo. Adam Smith established cornerstone of free trade and David Ricardo put a stepping stone on it. Since Ricardo read the wealth of nations, Smith’s masterpiece, and developed his theory, most of his thinking has a lot of similarities with that of Smith. Division of labor and free trade took deep root in their mind. When it comes to object of nation’s free trade, however, their opinion showed dissentience with absolute advantage and comparative advantage. Division of labor is the most basic building-block in their law. Smith argued that specializing and dividing tasks increased output dramatically. Furthermore, division of labor can take place among towns, not just among worker in a factory. In this manner, some countries or towns come to develop their strengths. When they trade their own advantage with others, the general good grow in both parties. In other words, the benefit of free trade fundamentally bases on specialized strengths in countries or towns caused form division of labor. As Ricardo also supports free trade, it is suffice to say that he also sit in same position at division of labor with Smith. The difference between ideas of the two economists indicates in choosing of the target of free trade. According to Smith, nations should import only those products in which another country has an absolute advantage. On the other hand, the point of Ricardo’s analysis is that free trade makes it possible for households to consume more goods regardless of whether trading partners are more or less economically advanced. The reason why their principles are distinct is that Smith focuses on using the amount of resources but Ricardo concentrates...
tracking img