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Unformatted text preview: Notes on International Trade 21/01/2010 19:07:00 Lecture 1------------ [Type up first lecture notes] 21/01/2010 19:07:00 Lecture 2 ----------- For the mercantilist read: Mun, VanHornet, (Ignore mistledin), Stewart, Smith From previous lecture: Adam Smith attacking mercantilist view of thought, creating law of absolute advantage, etc. If you have a competitive market, then by acting in your best interest you act in the best interest of the economy as a whole [Draws the graph where US has absolute advantage in all productions] Law of Comparative Advantage, David Ricardo (Based on the Labor Theory of Value). All factors of production have value Good of Comparative Advantage will be the production good of the country that is most efficient. A nations comparative advantage lies in that in which the absolute disadvantage is smallest. . Same thing as advantage being greatest Seven Assumptions which David Ricardo has based his work: Two nations, Two commodities Free Trade Assumes perfect mobility of resources within each nation but not between them. Constant costs of production No transportation costs No Technological change Labor Theory of value Using a punnett square: US/UK Wheat 6/1...
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- Spring '08