Classical Economics - Ideas Regarding International Trade essays

Classical Economics - Ideas Regarding International Trade essays Adam Smith and the Classical Economists blasted merchants who lobbied for, and governments that surrendered to, demands for protection from foreign producers. They believed that international trade was an efficient mechanism for allocating resources and for increasing national welfare, regardless of the level of a country's economic development. Also, that any impediments to trade would detract from the gains from trade and therefore harm a country's economy. Adam Smith proved this by developing the theory of absolute advantage. In his greatest work, The Wealth of Nations, Smith uses the example of trade between England and France to show how absolute advantage works and how it benefits both countries in the process. He states that "England would gain from trade if it could buy a good from another country for less than the cost of producing that good in England." Smith proposes that the English might not like the French but if a bottle of French white wine costs one pound and a n English counterpart costs two pounds then England is foolish to produce wine. What he is trying to illustrate to the people is that since France has the absolute advantage in wine, England should buy wine from them because it is cheaper. It also works the other way because if England has an absolute advantage over France in something then the French should buy that product from England. His main point of the theory of absolute advantage is that nations should import only those products in which another country has an absolute advantage. Adam Smith and all Classical Economists opposed any kind of restrictions on international trade. They strongly believed that international trade effectively increased the size of the market for any given country, allowed for more refined specialization, created an international division of labor, and thereby benefited all countries by increasing the world's productivity and output. ...