The disadvantage of misunderstanding comparative advantage

A response to Sherman Xie

Originally published in Economic Affairs

Haberler’s complaint about attempts to discredit the principle of comparative advantage (what Haberler called the ‘Law of Comparative Cost’) is as valid and relevant today as when he first issued it. Correctly perceived to be a key component of economists’ positive analysis of international trade – and, hence, central to economists’ normative case for free trade – the principle of comparative advantage has been regularly battered by those who wish to promote protectionist policies.

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