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...

Economic Theory Comparison
Introduction
The report aims to describe the smith theory and views of Palley about the modern theory of
comparative advantages. It illustrates important elements of both theirs and identified the
usefulness of theirs in terms in international trade.
Adam Smith theory
Adam smith propounded the labour division as a basis for his theory. According to him the
division of labour leads to greater productivity. He also proposes the gains for countries in
international trade. He states that international trade is beneficial in terms of satisfying a need
and want in exchange of something that is in abundance in one country. It provides
convenience, fun and other benefits to country and society. Adam smith proposes that
opening an extensive market may exceed the home spending and therefore encouragement is
offered by him to improve the productive powers of company. Here smith is trying to
establish the extension of division of labour. International trade is valuable according to smith
because it enhances the division of labour that leads to increase in the value of produce.
Smith offers argument that free competition is always beneficial for the public. He mentions
another benefit such as transfer of knowledge and technology that leads to productivity
growth and economic development. He states that benefits to the countries will be according
to the proportions of trade. A rich country will be benefitted more than a poor country in
international trade.
But Thomas Palley does not agree with the proposition of absolute advantage. According to
him, trade on international basis, does not result in better propositions for poorer countries.
The post of Thomas Palley explains about the Smith model of trade is irrelevant due to
modern corporation ability to move technology and capital. Therefore he suggests some
radical changes in the economic theory currently practiced. He considers classical theory of
comparative advantage driven the trade policy of USA for past fifty years. The policy, in
practice is not irrelevant due to the technical innovation that lowered...