Who proposed the theory of competitive advantage ?

The correct answer is - David Ricardo

Key Points

• David Ricardo
  • David Ricardo was an influential classical economist who proposed the theory of comparative advantage.
  • This theory explains how countries benefit from specializing in the production of goods in which they have a comparative advantage and trading these goods with others.
  • Ricardo introduced this concept in his book, "On the Principles of Political Economy and Taxation", published in 1817.
  • The theory highlights the importance of specialization and free trade for mutual economic benefits among nations.

Additional Information

• Key Concepts Related to Comparative Advantage
  • Absolute Advantage
    • Proposed by Adam Smith, this concept focuses on the ability of a country to produce more of a good than another country using the same resources.
    • Unlike comparative advantage, absolute advantage does not necessarily lead to mutual benefits from trade.
  • Opportunity Cost
    • Central to Ricardo's theory, opportunity cost refers to the benefits foregone by choosing one production option over another.
    • A country has a comparative advantage if it produces a good at a lower opportunity cost than its trading partner.
  • Modern Relevance
    • Ricardo's theory remains foundational in international trade, influencing policies and agreements like the World Trade Organization (WTO) framework.
    • It is often used to justify free trade agreements and the reduction of trade barriers.
• Other Economists
  • Adam Smith - Known for the theory of absolute advantage and his seminal work The Wealth of Nations.
  • Bruce Kogur - Known for his work in international business strategy but not associated with comparative advantage.
  • Michael Gannon - Focused on cultural and organizational studies, not economic trade theories.