comparative advantage

Syllable breakdown

Dictionary meaning

the economic principle, developed by David Ricardo in 1817, holding that a country benefits from specialising in and exporting goods it can produce at a lower opportunity cost relative to other goods, even if another country can produce everything more efficiently in absolute terms; comparative advantage is the theoretical foundation of the case for free trade, demonstrating that mutual gains from exchange arise not from absolute productive superiority but from relative efficiency differentials; the principle has been refined and contested through the Heckscher-Ohlin model, new trade theory, and strategic trade policy debates, but remains the cornerstone of international trade economics and the intellectual basis for multilateral trade liberalisation efforts