• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

How important are comparative advantage and absolute gainsto Liberal approaches to IPE?

Extracts from this document...


How important are comparative advantage and absolute gains to Liberal approaches to IPE? Introduction Since the ideas of comparative advantage and absolute gains were adapted to Liberal approaches, these two notions turned out to be the central focus of all Liberal approaches, including not only classical liberalism but also neoliberalism and neoliberal institutionism. The concept of absolute gains or absolute advantage was supported by the Scottish political economist Adam Smith (1723-1790) in his brilliant masterpiece of 1776, An Inquiry in to the Nature and Causes of the Wealth of Nations (Moon 2000:33). In addition, the concept of comparative advantage was a focal point for classical theorists, especially David Ricardo (Jones 1988: 34). In this essay, the first section will clarify and map the issue, and will consist of a sketch of the ideas and the key characteristics of absolute gain comparative advantage and Liberalism. After that, the importance of comparative advantage and absolute gains to Liberal approaches to IPE will be criticised and analysed. Following this will be the final section, which will comprise a conclusion of this work. I Liberalism Absolute gains According to "The Wealth of Nations" (1776) by Adam Smith, benefit from trade between two nations is based on the absolute advantage theory, which can be simply described in the following terms: country A has absolute advantage in producing one commodity over country ...read more.


Furthermore, it has been added that comparative advantage is essential for any review of a liberal political economy (loc.cit.). Second, the two notions encourage people to formulate clear-cut definitions of mutual interests. This may be simply cited by any Liberal IPE; for instance, one of the Neoliberal institutionalist perspectives which is germane to an international system, maintaining that the actors must have some mutual interests which can be explained that they must potentially gain from their cooperation (Keohane 1989: 2) is a result of absolute advantage or comparative advantage. Because when one state trades with another, both of them will gain mutual benefits in following the law of absolute gains or comparative advantages. Third, in accordance with the principles of comparative advantage and absolute advantage, the state must locate where it has the greatest comparative or absolute gains so that it can specialize in the commodity that it is more productive than the other. Hence, if countries agree to produce merchandise which they profit from, resources will be less used because the specializing countries know how to use it efficiently. As Liberal IPE is concerned with the scarcity of resources, the exchange of products between countries can help reduce input units for each commodity. It can be deduced that people are able to consume more while the world's resources are less used. ...read more.


III Conclusion To sum up, comparative advantage and absolute gains, which are concerned as one of the central concepts of Liberal schemes, are suggested by Paul Krugman to be the everyday concern of states (Sinclair 2002). Because these two ideas can be easily assimilated and adapted to Liberal IPE approaches. These two notions formulate the idea of economic cooperation between nation-states, help to create more mutual benefits between or among nations and make world's resources efficiently exploited Moreover, comparative advantage and absolute gains give a new perspective to IPE about domestic issues because IPE generally focuses on international matters. Furthermore, as there is no comprehensive world government to cope with monetary stability and open international trading order (Sinclair 2002), the cooperation between nations can assist in preventing the war and unrest which would be caused from the seeking of power by states. And lastly, complex and mulitlayered relations which are now the focus of IPE can also be regarded as a result of comparative advantage and absolute gains. However, liberal ideas under comparative advantage and absolute gains cannot explain the real situations which cheating in cooperation ,many gaps between developed and developing countries, misperception of leaders and inequality of mutual interests have still been major problems. 1 This idea was referred to as the mechanism which intervenes between the motives of the individual and 'end' of society as a whole (Dunne 2001:166). 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level UK, European & Global Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level UK, European & Global Economics essays

  1. 'Anarchy is what states make of it' (A Wendt) Do you agree?

    When Constructivists speak about diffusion, they highlight two important issues. One of these is institutional isomorphism, which observes how actors and institutions that are subjected to the same environment will often acquire identical forms or structures.5 For example there used to be various different ways of organizing the state and

  2. Distribution of Income and Wealth HSC Notes

    gap between pay for high skilled ad unskilled work has widened. * This problem was recognised in Far Work Act 2009 ? it included special provisions to help low paid workers engage in enterprise bargaining. * The minimum wage decisions of Fair Work Australia ? impact on income inequality ?

  1. Robert Keohane and Joseph Nye have described international relations as exhibiting 'complex interdependence'. What ...

    This is a slightly contradictory statement in that by its very nature it is highly unlikely that a clear issue of complex interdependence will take place. The point being made is that complex interdependence theory endeavours to facilitate the exploration of all other options before force is used.

  2. Free essay

    Adam Smith "invisible hands"

    Alteration in the commodity' price causes a movement along the demand curve (Figure 1). It generally applies to normal goods that a lower price will increase the quantity demanded, which is called as an extension of demand (Q1�Q3); whereas the decrease in the quantity demanded due to higher price is called as a contraction of demand (Q1�Q2).

  1. Essay on Adam Smith

    By doing this theory tells us that the production will be of much larger volume and this is evidently true just by looking at the world around us: huge multinational firms that turn over billions of pounds have a huge structure of different workers doing different tasks.

  2. Free essay

    Globalisation and changing career patterns

    these decisions were that these emerging countries offered huge labour cost savings to the organisation, as labour in an emerging market was significantly cheaper than in the UK. Such migrations led to the prediction of the end of the UK call centre industry, with speculation based on the fact that

  1. Will trading fairly reduce world poverty?

    However, no one questioned said that 'Fair-trade is the best' and is helping resolve global inequality. Despite this I still think Fair-trade is doing a lot to help resolve Global poverty. My results prove that Fairtrade are doing well in terms of awareness.

  2. David Ricardo theory of comparative advantage

    Secondly the model is a general equilibrium model in which all markets (i.e., goods and factors) are perfectly competitive. Third the goods produced are assumed to be homogeneous across countries and firms within an industry. Fourth the shipping fee must be very cheap between countries (i.e., there are no transportation costs).

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work