This old article popped to the top of my results when looking for a summary of Ricardo’s trade theory, so I have to comment on why Ricardo was right.
200 Years of Ricardian Trade Theory: How Is This Still A Thing?
If this article was right, Brexit would have had a negative or beneficial impact to the United Kingdom’s economy. The truth has been the exact opposite.
Ricardo’s main ideas are the following:
- When countries are able to trade freely with each other, they will specialize in what they are best at and both countries will be better off by trading than producing everything at home. This is comparative advantage.
- Free trade does not have to be reciprocal to be beneficial to the country with low to no tariffs on imports. So even if the other country requires visas for your citizens, you are still better off allowing their citizens to travel to your country without a visa. Reciprocity is shooting your foot to spite your face.
Brexit is a near-perfect test of Ricardian trade theory, and Ricardo has been vindicated once again.
This is why he is still a major part of every economics education. Because his predictions work.