‘Comparative advantage’ is an outdated principle
Letter by Prof Peter A. Victor to the Financial Times
11 February 2022
Letter to the FT Editor
The “law” of comparative advantage was a keen insight two centuries ago, but to use it today to justify free trade, let alone a panoply of regressive environmental and social policies unrelated to trade, comes down to basing too much on too little.
In reply to a recent Opinion piece in the Financial Times, CUSP co-investigator Prof Peter A. Victor challenges the relevance of David Ricardo’s principle of comparative advantage in today’s world of mobile capital, arguing that profit-maximisation, not comparative advantage, drives global trade. He warns against using this outdated principle to justify regressive environmental and social policies, such as relaxing carbon reduction targets or absolving corporations of accountability for harm caused by their products.
The letter appeared on 20 November 2024 and can be accessed via theFinancial Times website.
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