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The realities of global trade: Adam Smith, David Ricardo, and Hecksher Ohlin, and Michael Porter

Of the theorists (Adam Smith, David Ricardo, Heckscher-Ohlin, Michael Porter) who in your opinion most accurately describes the realities of global trade?

1. Are the classicists still relevant?
2. What aspects of trade are not adequately addressed in these theories?

Solution Preview

This is a question of opinion (at least, the first part of the problem is). So I'll explain my opinion and I'll include a little information on each theorist. I believe Adam Smith best described global trade. He is the father of economics, and most people directly define classical theory as theory based on (and including) his work. A lot people would disagree with me on this choice, because there is a sentiment that newer or more complicated necessarily equals "better". However, Smith's explanation of trade in terms of maximizing utility on a selfish basis, proves most accurate. If not inclusive of every special situation that's arisen in the past 200+ years, it still highly accurately describes the utility maximizing import/export decisions, and the need for trade barriers to be removed in order for this natural maximization to create optimal social surplus ...

Solution Summary

This solution provides an in-depth opinion-based explanation on which theorist (out of Smith, Ricardo, Ohlin, and Porter) most accurately describes the realities of global trade. The solution also explains whether or not the classic thinkers are still relevant, and what aspects of trade are not adequately addressed in these theories.

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