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In this way we might raise the well being of all individuals despite differences in relative productivities. In this description, we do not predict that a result will carry over to the complex real world. Instead we carry the logic of comparative advantage to the real world and ask how things would have to look to achieve a certain result (maximum output and benefits). In the end we should not say that the model of comparative advantage tells us anything about what will happen when two countries begin to trade, instead we should say that the theory tells us some things that can happen.

Comparative advantage is important as a rebuttal to naive zero-sum thinking, not as a predictor of performance in a free-trade scenario which does not conform to the assumptions.

by Colman (colman at eurotrib.com) on Mon Jun 12th, 2006 at 01:30:50 PM EST
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There are still lots of people who think that free-trade is necessarily bad for you. This isn't true, as the theory clearly indicates. It's just not necessarily good either, which is how the theory is generally interpreted.
by Colman (colman at eurotrib.com) on Mon Jun 12th, 2006 at 01:37:33 PM EST
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