Comparison - H.O Theory Vs Ricardian Theory ↓
The payoff or superiority of Ohlin's Modern Theory over the Ricardian Classical Theory of international merchandise gets highlighted from the next of import points of comparison.
1. No departure alongside internal too international trade
According to the Classical economists, in that place is a take away for a dissever theory of international merchandise because of the differences betwixt internal too international trade.
But according to Ohlin, in that place is no take away for a dissever theory of international trade, as key regulation of both is same.
2. More variables
As against Ricardian Theory which is based on 2 countries, 2 commodities too 1 factor, Ohlin's Modern theory incorporates 2 countries 2 commodities too 2 factors.
3. Comparative cost theory
According to the classical theory, the regulation of comparative costs is a especial characteristic of international trade.
According to Ohlin, the regulation of comparative cost is applicable to all trade; whether internal or international.
4. Cost departure is expressed inwards terms of money
Superiority of H.O. theory lies inwards the fact that it calculates the cost differences inwards terms of money. Ricardo explains the departure inwards terms of labour theory of value of which is amount of defects too impracticable. Trade which involves central of goods too services has been carried inwards terms of money. H.O. theory renders the elbow grease of the merchandise slow to understand.
5. Supply of factors of production considered
The primary elbow grease of the international merchandise is the departure inwards constituent supplies betwixt the countries. Each province differs inwards constituent endowments i.e. inwards their abundance or scarcity. Difference inwards supply, given the demand, brings the departure inwards cost of constituent too finally, the departure inwards commodity prices. In Ricardian theory, departure inwards constituent (labour) efficiency is recognized only departure inwards constituent render is ignored. H.O. theory, hence provides a ameliorate explanation of cost departure of factors through the departure is their supplies.
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6. Contribution to positive economies
Ricardian theory which no doubtfulness explains the argue for internal merchandise is to a greater extent than concerned with the benefits of trade. For classical economists, the welfare facial expression of merchandise is to a greater extent than important. Ohlin has adapted a positive approach inwards explaining the elbow grease of international trade. His primary describe of piece of job concern was to respect out the elbow grease of merchandise too non too then much of its welfare aspect. Therefore, it is pointed out that Ohlin's analysis has contributed to positive economical analysis.
Briefly Compare - Ricardian Theory Vs HO Theory ↓
Conclusion - Ohlin's Theory Vs Ricardian Theory ↓
In the classical analysis, departure inwards the cost ratios betwixt countries are due to the departure inwards the science too efficiency of labour. It implies that in that place volition last no merchandise inwards time to come if the 2 countries accept mastered each other's technique too labour becomes as efficient inwards both.
But Ohlin's theory asserts that merchandise volition never destination fifty-fifty if cognition travels freely betwixt the countries too the best techniques of production are ever known to both countries. This is because, the modern theory states that the relative differences inwards constituent endowments are the relative causes for the differences inwards the prices of commodities.
Thus the modern theory is an improvement over the classical theory.
