Link to the impious wiki page.

The title is a reference to Krugman's 1996 essay on Ricardo's theory, and next year will be the 200th anniversary of Principles of Political Economy and also of confusion over comparative advantage. For some reason, Wikipedia thinks this is some ongoing debate. I think it's important to R1 this, because even though it's a "theory," there has been consistent empirical evidence for it- to name a few: 1, 2, 3. You could even prax it out (don't). But most importantly:

(iii) Don't take simple things for granted: It is crucial, when trying to communicate Ricardo's idea to a broader audience, to stop and try to put yourself in the position of someone who does not know economics. Arguments must be built from the ground up -- don't assume that people understand why it is reasonable to assume constant employment, or a self-correcting trade balance, or even that similar workers tend to be paid similar wages in different industries.

R1.1

Ricardo's argument in favour of free trade has been attacked by those who believe trade restriction can be necessary for the economic development of a nation.

This is a misunderstanding of the analogy that Ricardo was making, and, more so, incorrect in modern times if we are talking about the production of literally anything.

Utsa Patnaik claims that Ricardian theory of international trade contains a logical fallacy. Ricardo assumed that in both countries two goods are producible and actually are produced, but developed and underdeveloped countries often trade those goods which are not producible in their own country. For example, many Northern countries do not produce tropical fruits. In these cases, one cannot define which country has comparative advantage.

Firstly, yes we can define who has the comparative advantage: countries who can produce tropical fruit have a comparative advantage over those who cannot. While absolute advantage may not imply comparative advantage, the case where one country cannot produce a good at all always implies a comparative disadvantage. In simpler terms, the opportunity cost of producing something that, by definition a country is unable to produce, is essentially undefined- no matter how many resources they redirect to the efforts of production, they are unable to produce any amount. But, comparative advantage is useful as an idea in that we care about relative production capabilities; what matters most is that we can put a <, >, or = when comparing the productive capabilities of two countries. This undefined value can be thought of as infinity; simply put, being completely unable to produce a product implies a comparative disadvantage. However, this special case has not taken away from the practical use of comparative advantage. The "logical fallacy" the author has pointed out is really a mathematical issue that Ricardo did not mention and has no significance in contradicting the validity of the theory.

However, let's consider whether this case, where a country is trading for a good they cannot supply themselves, is actually possible. Unless we have a product that is a natural resource and therefore may be geographically-restricted to a certain country, in which case it is actually impossible to get it from somewhere else, it is always possible to produce that product. Otherwise, generally speaking, if geographic conditions only permit in the production of a product in only one location, then importing such products is a benefit to the consumers of the importing country. Extending from David Friedman's analogy, Norwegians trading for products they cannot produce is equivalent to producing the products themselves but using a different set of skills. It would be ridiculous to say that we must put a tariff on pineapples only because we are unable to grow our own. All this would do is reduce the "productive capabilities" of the citizens themselves. For a real world example, consider steel. China demands massive amounts of iron ore, because they've become especially good at producing steel; however, there is only so much iron in the country itself, so it must import it. It cannot "produce" an infinite amount of iron ore, but it can convert its steel manufacturing into production of iron ore, and so it does.

It is not, therefore, in consequence of the extension of the market that the rate of profit is raised, although such extension may be equally efficacious in increasing the mass of commodities, and may thereby enable us to augment the funds destined for the maintenance of labour, and the materials on which labour may be employed. It is quite as important to the happiness of mankind, that our enjoyments should be increased by the better distribution of labour, by each country producing those commodities for which by its situation, its climate, and its other natural or artificial advantages, it is adapted, and by their exchanging them for the commodities of other countries, as that they should be augmented by a rise in the rate of profits. -Ricardo

The author makes another mistake stating that lack of quantity supplied is indicative of the inability to produce. That is, the lack of supply of tropical fruit in Norway does not imply the supply will always be non-existent. To approach it quite literally, yes you can grow tropical fruits in greenhouses with hydroponics or something like that in Norway. And, taking away free trade may not help Norwegians produce their own tropical fruit.

For example, you could have a situation like this where Norway does have the potential to supply the good, but banning trade would not result in it supplying any quantity above 0, since the supply curve implies it would cost more to make than it could sell for. Long story short, a country not producing a good does not imply it's comparative advantage is non-existent. It is still possible to use the world market price (P_w) a lower bound for the cost of producing a good, and then get a lower bound for the comparative advantage from there. For example, if the world price for tropical fruit is $15 and no Norwegian is willing to supply at that value, then the opportunity cost for producing it in Norway must be greater than $15. Generally, if a country's opportunity cost to produce a good is greater than the opportunity cost of another, then they lack a comparative advantage. So, this is enough information to say that other countries besides Norway have a comparative advantage in producing tropical fruit, thus clearly defining which country has the comparative advantage without explicit numbers.

R1.2

Critics also argue that Ricardo's theory of comparative advantage is flawed in that it assumes production is continuous and absolute. In the real world, events outside the realm of human control (e.g. natural disasters) can disrupt production. In this case, specialisation could cripple a country that depends on imports from foreign, naturally disrupted countries. For example, if an industrially based country trades its manufactured goods with an agrarian country in exchange for agricultural products, a natural disaster in the agricultural country (e.g. drought) may cause an industrially based country to starve.

It's quite the opposite. Here's a FT article and a United Nations report on the issue. Firstly, the example itself is quite loaded. In no realistic scenario has the world ever been restricted completely to two geopolitical entities: one agrarian and the other industrial. In a more realistic scenario, such as literally right now, we have a multitude of different countries producing different crops. We should also take into consideration the geographical separation of the countries and their size; this fact is what makes free trade promote food security.

Now, before the drought or flood or whatever causes the food supply drop to occur, we sit at the equilibrium price and quantity in a free trade scenario. Additionally, suppose we also know the potential productive capabilities of our own country. So, we're working with this. In the long term, an import restriction would quite literally restrict the quantity of food available, and the lack of competition would likely lead to a decline in the quality as Ricardo predicts:

If Portugal had no commercial connexion with other countries, instead of employing a great part of her capital and industry in the production of wines, with which she purchases for her own use the cloth and hardware of other countries, she would be obliged to devote a part of that capital to the manufacture of those commodities, which she would thus obtain probably inferior in quality as well as quantity.

That is, on the graph, we would move from Q_w down to Q_l. In such a scenario, we would, with no doubt, see a reduction in the quantity of food available. At most, this may limit the population by making food more scarce and thus the impact of food shortages. However, what happens if there's a drought? Well, consider the fact that countries are separated geographically along with climate events. In such a case, this country has actually become more food insecure rather than less. That is, free trade restrictions may reduce the diversification of food supply risk among different countries and make country self-reliant (a country is not a child, so this is not a good thing). It's like taking a portfolio of a bunch of low-correlation risky assets and then changing it to just one risky asset. Having sources of food from various locations means that even if one place has a drought, another may still produce enough. I'm not even sure how this criticism attacks comparative advantage. This is like nationalist risk management.

edit: formatting