Abstract
In this text, the authors explain the theory elaborated by Ricardo in order to explain that countries which do not necessarily have absolute advantages can however trade if they specialize. This is the theory of comparative advantages. This theory is fundamental to understand economic international relations. It is different from what Smith thought: he considered than countries should produce each good for which it has absolute advantages. In this vision, a country which has a lot of absolute advantages will dominate every other country in terms of trade. So countries which do not have any absolute advantages (or only a few) would not benefit from trade. In Ricardo's theory, everyone can benefit from trade because every country has comparative advantages.
The authors try to simplify a lot this pattern to make it easier to understand (as Ricardo did it) take this example of two countries: Brazil and the USA. If we consider that these countries produce only two goods (shoes and computers), every country has incentives to specialize its production in only one of both goods. For example, Brazil should choose to produce only shoes and not to produce computers. On the other side, the USA will prefer to produce only computers. Then, both countries can exchange: the USA will sell computers to Brazil and buy shoes from this same country. Although the USA has absolute advantages for both goods, it has incentives to specialize and to trade in order to get shoes produced by Brazil. This is not explained by Ricardo in terms of absolute costs but in terms of relative ones. If we consider that workers are able to produce both shoes and computers, increasing the number of computers will decrease the number of shoes for each country.
