Question

Patrick J. Buchanan, a former presidential candidate, argues in his book on the global economy2 that there is a flaw in David Ricardo's theory of comparative advantage3: "Classical free trade theory fails the test of common sense. According to Ricardo's law of comparative advantage. . . if America makes better computers and textiles than China does, but our advantage in computers is greater than our advantage in textiles, we should (1) focus on computers, (2) let China make textiles, and (3) trade U.S. computers for Chinese textiles . . . 4 The doctrine begs a question. If Americans are more efficient than Chinese in making clothes . . . why surrender the more efficient American industry? Why shift to a reliance on a Chinese textile industry that will take years to catch up to where American factories are today?"

Answer 1

Answer: The law of Comparative Advantage explains its all.

Explanation: One country Cannot have it all in resources, so there is need for dependence on another country that can give optimal result as regards production of goods and services .