Editing David Ricardo (section)

=== Criticism of the Ricardian theory of trade ===
Ricardo himself was the first to recognize that comparative advantage is a domain-specific theory, meaning that it applies only when certain conditions are met. Ricardo noted that the theory applies only in situations where capital is immobile. Regarding his famous example, he wrote:
<blockquote>it would undoubtedly be advantageous to the capitalists [and consumers] of England... [that] the wine and cloth should both be made in Portugal [and that] the capital and labour of England employed in making cloth should be removed to Portugal for that purpose.<ref name="Ricardo 1821 7.19">{{Cite book |title=On the Principles of Political Economy and Taxation |url=https://archive.org/details/onprinciplespol00ricagoog |last=Ricardo |first=David |publisher=John Murray |year=1821 |pages=7.19 }}</ref>
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Ricardo recognized that applying his theory in situations where capital was mobile would result in [[offshoring]], and thereby economic decline and job loss. To correct for this, he argued that (i) "most men of property [will be] satisfied with a low rate of profits in their own country, rather than seek[ing] a more advantageous employment for their wealth in foreign nations", and (ii) capital was functionally immobile.<ref name="Ricardo 1821 7.19"/>

Ricardo's argument in favour of [[free trade]] has also been attacked by those who believe trade restriction can be necessary for the economic development of a nation. [[Utsa Patnaik]] claims that Ricardian theory of [[international trade]] contains a logical fallacy. Ricardo assumed that in both countries two goods are producible and actually are produced, but developed and underdeveloped countries often trade those goods which are not producible in their own country. In these cases, one cannot define which country has comparative advantage.<ref>{{cite book |first=Uta |last=Patnaik |year=2005 |chapter=Ricardo's Fallacy/ Mutual Benefit from Trade Based on Comparative Costs and Specialization? |editor-last=Jomo |editor-first=K. S. |title=The Pioneers of Development Economics: Great Economists on Development |publisher=Zed books |location=London and New York |pages=31–41 |isbn=81-85229-99-6}}</ref>

Critics also argue that Ricardo's theory of [[comparative advantage]] is flawed in that it assumes production is continuous and absolute. In the real world, events outside the realm of human control (e.g. natural disasters) can disrupt production. In this case, specialisation could cripple a country that depends on imports from foreign, naturally disrupted countries. For example, if an industrially based country trades its manufactured goods with an [[agrarian country]] in exchange for agricultural products, a natural disaster in the agricultural country (e.g. drought) may cause the industrially based country to starve.

As [[Joan Robinson]] pointed out, following the opening of free trade with England, Portugal endured centuries of economic underdevelopment: "the imposition of free trade on Portugal killed off a promising textile industry and left her with a slow-growing export market for wine, while for England, exports of cotton cloth led to accumulation, mechanisation and the whole spiralling growth of the industrial revolution". Robinson argued that Ricardo's example required that economies be in static equilibrium positions with full employment and that there could not be a trade deficit or a trade surplus. These conditions, she wrote, were not relevant to the real world. She also argued that Ricardo's math did not take into account that some countries may be at different levels of development and that this raised the prospect of 'unequal exchange' which might hamper a country's development, as we saw in the case of Portugal.<ref>{{cite book |last1=Robinson |first1=Joan |title=Aspects of Development and Underdevelopment |date=1979 |publisher=Cambridge University Press |location=Cambridge |isbn=0521226376 |page=[https://archive.org/details/aspectsofdevelop0000robi/page/103 103] |url=https://archive.org/details/aspectsofdevelop0000robi/page/103 }}</ref>

The development economist [[Ha-Joon Chang]] challenges the argument that free trade benefits every country:
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Ricardo’s theory is absolutely right—within its narrow confines. His theory correctly says that, ''accepting their current levels of technology as given'', it is better for countries to specialize in things that they are relatively better at. One cannot argue with that. His theory fails when a country wants to acquire more advanced technologies—that is, when it wants to develop its economy. It takes time and experience to absorb new technologies, so technologically backward producers need a period of protection from international competition during this period of learning. Such protection is costly, because the country is giving up the chance to import better and cheaper products. However, it is a price that has to be paid if it wants to develop advanced industries. Ricardo’s theory is, thus seen, for those who accept the ''status quo'' but not for those who want to change it.<ref>Chang, Ha-Joon (2007), "Bad Samaritans", Chapter 2, pp. 30–31.</ref>
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