A Critical Analysis of the Comparative Advantage Doctrine (CAD) Theory

Abstract

International trade theories include trade doctrines like the Comparative Advantage Doctrine (CAD) formulated by David Ricardo. According to this doctrine, countries should engage in trade even if one of the countries does not have the capacity of producing the other. The doctrine says that if one country is most capable of producing the commodities in question, then that country should specialize in that commodities. The objective of this essay is to examine CAD's theory based on the present global economy in relation to the theoretical economy, historical evolution, and possible empirical applications. The evaluation of CAD's theory will include contemporary paradigms in globalization, technological evolution, and market failure. The study describes qualitative analysis of theory and secondary data CAD's applicability in present global economy. The rigid structures of CAD only confines the theory in present context which is an apparent phenomenon through the analysis.