What is comparative advantage?

In economic terms, a comparative advantage is the ability of a country to produce certain consumer goods with the lowest opportunity cost compared to other countries, which, although they could produce the same good, would do so using greater resources.

This concept is therefore based on each country specializing in the production of those goods over which it has a comparative advantage, that is, those that it can produce with fewer resources, which favors a growth in total production. Furthermore, by applying comparative advantage to production, countries that trade with each other also gain a greater benefit from marketing products in which they are specialized.

History of the comparative advantage concept

Comparative advantage is the basis for the growth of international trade, and it is a term that has its origin in the financial theories of the economist and philosopher Adam Smith.

In his workThe Wealth of Nations Adam Smith outlines the theories of the classical division of labor, outlining the general lines about the advisability of countries to specialize their production in those goods with which they obtain a high productivity, obtaining through the commercialization with other countries those goods whose production is not highly competitive. In this way, a double benefit and greater growth are generated, both in production and in marketing.

This theory therefore alluded to a division of labor based on the training of workers, resources and capital. This view on the specialization of production is what was later called comparative advantage, a term that was actually coined by the London economist David Ricardo after the criticism he made of Smith's work in his bookOn the principles of political economy and taxes.

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