Read the required journal articles by Schumacher XXXXXXXXXXand Palley XXXXXXXXXXregarding the theory of comparative advantage. In a critical essay, compare and contrast Smith's original theory as...

Overview of the Articles
According to Reinhard Schumacher (2012) in the journal article Adam Smith’s Theory of
absolute Advantage and the use of doxography in the history of economics” he argues that the
theory of International Trade given by Adam Smith is relevant in today’s context to a greater
extent. He also states that there has been opinion building in the historiography of international
trade theory to fit Adam Smith as a forerunner of International Trade theory. In totality,
Schumacher argues that the original ideas of Smith have been misinterpreted and modern
classical theory can learn from the original ideas of Smith and also from the way his views have
been wrongly represented.
According to Smith division of labour has been the core driving factors for the development of
international trade because of specialization, skill development and industrial development
leading to more and more production of goods with substantial improvements. This enables
increased output, technical advancement and also skill development. The major limitation of this
theory is the extent to which the goods produced can be exchanged and thus comes the concept
of International trade. The more and more market gets expanded, the more and more division of
labour will occur leading to increase in economic growth and overall wealth. The additional
benefit mentioned by Smith that there are transfer of knowledge and skills amongst the trading
nations leading to an overall economic development. Thus it can be seen that the original ideas
of Smith about the division of labour and benefits derived from international trade can “ is
closely interwoven with the theory of economic development” (Myint 1977, 233).
According to smith, nation should produce goods that can have absolute advantage over the other
country when all the costs involved including transportation is being considered. This will itself
specialize nation in production of certain commodities. This specialization leads to division of
labour and hence economic development. Thus the price advantage of a nation will increase
competitiveness in the international market and boost international trade. However, later
economists have emphasized more on the comparative advantage for international trade rather
than absolute advantage postulated by Smith. Comparative advantage “ has been the bedrock on
which all subsequent development in the theory of international trade have rested” (Maneschi
1998,10).
Schumacher argues that the explanation provided for the development of trade as suggested by
the Smith only includes one factor to make it a specialized case of comparative advantage. The
technological gained economic development are not considered at all. This has been purposely
done to fit the neoclassical formulation of theory of comparative advantage which dominates the
international economics. Historically, Ricardo worked upon the idea of Smith which was further
improved by neoclassical economist ultimately leading from theory of absolute advantage to
theory of comparative advantage in development of international trade.
On the other hand if we compare this with the views expressed by Thomas I. Palley in
“Institutionalism and New Trade Theory: rethinking...