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Theories and Major Difference of Viewpoints of Adam Smith and David Ricardo

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Comparative costs were important in international trade as the costs of goods imported declined and then rose over time with respect to domestic goods. The "invisible hand" of Adam Smith and Say's Law was prevalent in Ricardo's theory, and this, indeed, was another expression of Hume's Law. " (1977, 231) However, Ricardo's consideration of foreign markets within the same theoretical context as domestic markets was invalid, in spite of the significant contribution he made to economic theory. This could be attributed to the fact that when he wrote, the Industrial Revolution had not developed to the extent that it had during John Stuart Mill's time so that tariffs and banking systems had not developed to the extent that they had during Mill's time.

David Ricardo was certainly one of the pillars of economics on which Mill and other great economists have stood to expand their vision. Ricardo’ s approach to economics differed significantly from that of Adam Smith. Ricardo only introduced the theories from which he made conclusions described in the previous parts of the paper. His most imperative assumption was that economic growth must decline an end due to the scarcity of land and its falling marginal productivity.

Meanwhile, Adam Smith's theory argues that foreign trade vents surplus products are necessary to maintain or generate a full utilization of a country's resources. Smith contribution to the theory of international trade is laid in his book Wealth of Nations where the author advocates a system of the natural liberty of markets to allocate resources freely across the countries. Otherwise, “ without such exportation, a part of the productive labor of the country must cease, and the value of its annual produce diminish".

Mercantilism was strictly a British approach to economic wealth and differed radically and indeed contrasted with its French counterpart of physiocracy. In the cool rationalism for which French thinking is traditionally famous, physiocracy was a philosophical-cum-economic theory that maintained that a country's wealth stems from the productivity of its soil.

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