RTT
cloth and wine. In case 1, the one assumed in Ricardo’s example, outputs can be immediately solved for from labor endowments, with prices then determined by demand. In the second two, relative prices are given by the relative labor requirements in the incompletely specialized country, with demand then determining outputs. At the intro level, the lesson from his sort of example is that gains from trade are possible, although we can only put bounds on what the gains are. At a more advanced level, students are told to solve for the equilibrium outcome by assuming one case and then checking that it satisfifies the requirement that prices don’t exceed costs or that labor is fully employed. Already the model has to confront a clumsy taxonomy. International trade is a fifield rich in data. United Nations COMTRADE, currently the major source of statistics on merchandise trade, reports the annual value of bilateral trade between over 242 countries (maki...