Home Midterm ECO54 Spring 2008 Research Paper

Length: 9 pages Sources: 1+ Subject: Economics Type: Research Paper Paper: #83856237 Related Topics: Home, John Stuart Mill, Monopoly, Economists
Excerpt from Research Paper :

Smith believed this would lead to inefficiency.

However, unlike Plato, Smith did not believe that the ideal republic should decide from birth what occupation an individual should follow, rather that the individual must freely choose by his or her own will, how to direct his or her energies and labor in the most efficient and self-interested fashion, which would ultimately result in the advancement of the nation as a whole. Plato's social structure, although not based upon birth, was still based upon a monopoly of philosophers dictating the lives of others according to their state-generated power, unlike Smith's more democratic ideals. Smith's analysis more perfectly echoes that of William Petty, who stressed how breaking down tasks, like Smith's pin-manufacturing plant, could generate higher levels of efficiency in economic production. Petty also placed a strong emphasis, as did Smith, upon the vital need of a nation to practice free trade.


Discuss David Ricardo's 'Theory of Comparative Costs,' its history, and its strengths and weaknesses as a theory of international trade.

David Ricardo argued that a nation should do best, what it can do best, and most cheaply, and because economics is a study in scarcity. For a nation to be entirely self-sufficient, the mercantilists argued, is militarily and economically foolish, leaving it vulnerable to dependency and attack. But Ricardo countered that obtain its goods a nation should trade with other powers that could produce such goods more efficiently relative to the other goods produced within each nation's respective borders. Thus, a nation should specialize in certain types of production. "Using his famous example of two nations (Portugal and England) and two commodities (wine and cloth), Ricardo argued that trade would be beneficial even if Portugal held an absolute cost advantage over England in both commodities. Ricardo's argument was that there are gains from trade if each nation specializes completely in the production of the good in which it has a 'comparative' cost advantage in producing, and then trades with the other nation for the other good" ("David Ricardo," the New School, 2008). In other words, even if a nation can produce everything more efficiently than any other nation, it...


"Ricardo's simple analysis demonstrated that even when one country is technologically superior in both goods; it could still be advantageous for countries to trade. In this circumstance, a comparative advantage is present for those products that the country can produce most-best in comparison to other countries, even if the most best product is produced less productively than in the other country. For example, suppose the U.S. is 10X more productive in corn and only 2X more productive in watches compared to Switzerland. In this case the U.S. is clearly most-best at producing corn (10x > 2x). At the same time though, Switzerland is 1/2X as productive in watches and (1/10) X as productive in corn. Thus, [watchers are] Switzerland's most-best product and hence its comparative advantage" (Suranovic, 2007).

What did John Stuart Mill later add to Ricardo's trade theory?

In his famous work the Principles of Political Economy, Mill wrote that to prohibit imports or impose heavy duties upon imported goods creates waste both for the labor of the manufacturer and also for the laborers of the home nation, who must make more goods of the same kind, and thus protectionist tariffs conspire to "render the labor and capital of the country less efficient in production than they would otherwise be; and compel a waste of the difference between the labor and capital necessary for the home production of the commodity and that which is required for producing the things with which it can be purchased from abroad" (V.X).

The result is in a national loss "measured by the excess of the price at which the commodity is produced, over that at which it could be imported. In the case of manufactured goods, the whole difference between the two prices is absorbed in indemnifying the producers for waste of labor, or of the capital which supports that labor. Those who are supposed to be benefited, namely, the makers of the protected articles, (unless they form an exclusive company, and have a monopoly against their own countrymen as well as against foreigners,) do not obtain higher profits than other people. All is sheer loss, to the country as well as to the consumer" (V.10.5).

Works Cited

Adam Smith (1723-90)." The Concise Encyclopedia of Economics. 1999. 8 Mar 2008. http://www.econlib.org/library/Enc/bios/Smith.html

David Ricardo." The New School. 8 Mar 2008. http://cepa.newschool.edu/het/profiles/ricardo.htm

Economics." Microsoft® Encarta® Online Encyclopedia. 2007. 8 Mar 2008. http://encarta.msn.com.

Mill, John Stuart. Principles of Political Economy. Library of Economics and Liberty.

2005. 8 Mar 2008.

E-text http://www.econlib.org/library/Mill/mlP.html

Rempel, G. "Louis XIV." Western New England College. 8 Mar 2008. http://mars.wnec.edu/~grempel/courses/wc2/lectures/louisxiv.html

Suranovic, Steve. "Lesson on Comparative Advantage." George Washington University. Oct 2007. 8 Mar 2008. http://stevesuranovic.blogspot.com/2007/10/lesson-on-comparative-advantage.html

Sources Used in Documents:

Works Cited

Adam Smith (1723-90)." The Concise Encyclopedia of Economics. 1999. 8 Mar 2008. http://www.econlib.org/library/Enc/bios/Smith.html

David Ricardo." The New School. 8 Mar 2008. http://cepa.newschool.edu/het/profiles/ricardo.htm

Economics." Microsoft® Encarta® Online Encyclopedia. 2007. 8 Mar 2008. http://encarta.msn.com.

Mill, John Stuart. Principles of Political Economy. Library of Economics and Liberty.

Cite this Document:

"Home Midterm ECO54 Spring 2008" (2008, March 08) Retrieved October 24, 2021, from

"Home Midterm ECO54 Spring 2008" 08 March 2008. Web.24 October. 2021. <

"Home Midterm ECO54 Spring 2008", 08 March 2008, Accessed.24 October. 2021,

Related Documents
Louis XIV the Conduct of
Words: 641 Length: 2 Pages Topic: Government Paper #: 99542749

Magistrates of Parlement established uniform procedural codes for each of the royal courts and along with this, the importance of judicial responsibilities increased among Parlement members. Regard for legislative, administrative and judicial power became more about loyalty to the crown and interests expressed by the monarch rather than about serving local interests. Through this compliance with centralization of power, the actions of Parlement can be viewed as efforts made

Louis XIV Absolutism the Fronde Was Enabled
Words: 944 Length: 3 Pages Topic: Government Paper #: 41097651

Louis XIV Absolutism The Fronde was enabled by a number of government conditions, not the least of which was that created by the ravages of the 30 Years War in which large sets of the population, particularly those engaged in martial affairs, became used to a degree of autonomy and near lawlessness. Furthermore, this sentiment was fueled by an increasing feeling of dissatisfaction in regards to the centralized power which

Louis XIV's Economic and Political Impact on
Words: 2831 Length: 8 Pages Topic: Government Paper #: 79721121

Louis XIV's economic and political impact on the lower class with that of William and Mary European societies in the late seventeenth century were stratified and hierarchical. Society was viewed as being structured into orders, with each social order fulfilling a particular function in society as a whole, and the entire system being understood as a reflection of a divinely-ordered harmony that pervaded the universe. At the top of this hierarchical

Louis XIV's Versailles a Symbol
Words: 1671 Length: 4 Pages Topic: Literature Paper #: 48919538

9. How did the new psychology influenced the birth of key movements in the arts: expressionism, dada, and surrealism? Surrealism, dada, and expressionism represent three generations of avante garde protest against "rational" modernism and the meaningless, war and violence filled society that it brought about. They were a reaction against modernism and their great grandchild, postmodernism continues this tradition of social protest. The new psychology of individuals such as Freud

Absolutism, Louis XIV, and Versailles
Words: 1943 Length: 6 Pages Topic: Government Paper #: 34806391

The king of France was more than just a simple leader, as he claimed that he was entitled to the country's throne through divine right. Louis XIV was able to make laws, to increase or decrease taxes, to administrate the state and justice, and to determine whether or not France would express interest in allying itself with other countries. All influential individuals in France were practically forced to check with

Limitations of Louis XIV's Absolutist
Words: 2772 Length: 7 Pages Topic: Economics Paper #: 18274324

Beik underlines the fact that collecting a huge amount of data required much more personnel and a far better way of communicating with the city and the village representatives, than Colbert could have ever dreamed of at that time. Nevertheless his achievements in collecting this date are remarkable. Based on these gatherings and his intuition and economic knowledge, Colbert was able to prepare and present to the king reforms