Economics becomes a science · 1770s–1920s
1817
Comparative advantage
Ricardo shows why England and Portugal both gain from trading cloth for wine.
In his 1817 book, David Ricardo showed that even if Portugal made both cloth and wine more cheaply than England, both countries gain if each makes what it gives up least to produce, and they trade.
💡 Why it made sense then
Britain was arguing over free trade, and Ricardo showed trade helps both sides even when one is better at everything.
Ideas it gave us
- ⚖️ Comparative advantage
Comparative advantage is the ability to produce something at a lower opportunity cost than someone else. Trade makes both sides better off when each specialises in what they give up least to make.
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