What Is the Difference Between Absolute Advantage and Comparative Advantage?

Absolute advantage is also called "absolute benefit". In the production of a certain commodity, the labor cost consumed by one country is definitely lower than the advantage in the production of that product produced by another country. Proposed by the British classical economist Adam Smith in the theory of absolute advantage. ^[1]

Absolute advantage

In 1776, Adam

Adam

If a country is absolutely inferior to another country in the production of all commodities, then according to Smith's theory, these two countries cannot carry out international division of labor and trade, and cannot obtain professional benefits.

The absolute cost theory is a mixture of scientific and non-scientific components. Its correct aspect is that it points out the great significance of division of labor to improve labor productivity. The division of labor among countries according to their respective advantages enables countries to benefit from international trade. The main mistake is that it thinks that exchange causes division of labor, and exchange is determined by human nature. In fact, the exchange is premised on the division of labor. Historically, the division of labor precedes the exchange. At the same time, exchange is not a product of human nature, but a result of the development of social production methods and division of labor.

The absolute cost theory solves the rationality of division of labor and exchanges between countries with different advantages. However, this is only a special case in international trade. If one country is in an absolute advantage in all aspects and another country is in a disadvantage, then what should they do? In this regard, Smith's theory cannot answer, and the solution to this problem is the credit of David Ricardo. ^[2]