Reassessing the Theory of Comparative Advantage

Revisiting the Relevance of International Trade Theory

“…16 Still, Culbertson's work has not gone totally unnoticed. So, for example, in an oft-cited paper, Robert Prasch (1996) refers to Culbertson in his critique of comparative advantage, particularly the assumptions of "balanced barter-like trade" and capital immobility. Others have also started to question the relevance of trade theory, given the enormous degree of international capital mobility, but they do so without any reference to the pioneering work of Culbertson.…”

The Local Economy Movement: An Alternative to Neoliberalism?

“…Sen (2005) notes that despite decades of effort, empirical validation of the theory remains conspicuously thin. Prasch (1996) points out a more fundamental problem: Countries are not simply endowed by nature with resources, particularly resources such as skilled labor. Countries can strategically develop resources in order to build wealth.…”

“…Although the essential logic of comparative advantage has never been refuted, several of its assumptions may not apply in the real world. Robert Prasch (1996) has outlined a dozen assumptions of comparative advantage with tenuous connections to the modern economy, including the assumption of balanced trade, the lack of capital mobility, full employment of labor and capital and lack of externalities. Milberg (2002) points out that the assumption of balanced trade was the basis for Keynes's critique of free trade.…”

New trade theory versus old trade policy: a continuing enigma

“…As reported in Prasch (1996), support for free trade amongst academic economists in the United States is astonishingly high at 97%! It has enabled Anne Krueger (1997), 1 Chief Economist at the World Bank during the 1980s and chief promoter of the neo-liberal Washington consensus, to engage in a history of economic thought in which the central question becomes one of explaining why economists should have resisted the charms of free trade for so long given both its virtues in practice and its centrality within standard theory of comparative advantage.…”