Kyoto Conference on Classical Political Economy – March 7-8, 2018 Does J.S. Mill’s theory of comparative advantage prove the superiority of free trade? Philippe Gillig BETA (Bureau d’économie théorique et appliquée) Université de Strasbourg, CNRS
[email protected] -----WORK IN PROGRESS----- Abstract The theory of comparative advantage allegedly shows why free trade is beneficial for all. It is said to be both grounded on a competition hypothesis and to be applicable to any economic system. Does this view coincide with the presentation made by one of its major exponent, namely J.S. Mill? This contribution explores the complexity existing between Mill’s principles and practice on this topic. On the epistemological level, Mill defends the idea that the theory is based on decisions made by self-interested agents; however, he rejects clearly any pretension to universal applicability of the theory precisely because the maximising behaviour assumption has no universal relevance. Yet, we show that in practice, Mill’s presentation of the comparative advantage contains a macroeconomic explanation independent of any assumption concerning agents’ motivations. Indeed, the gains for countries highlighted by the theory are the result of specialisation, and not of free trade, contrary to what Mill and commentators traditionally claim. Further, this macro explanation appears to be of universal applicability, contrary to what Mill thought. Keywords J.S. Mill, comparative advantage, free trade, macroeconomics, economic methodology Kyoto Conference on Classical Political Economy – March 7-8, 2018 Introduction It is a commonplace to say that the principle of comparative advantage is the classical theoretical support for free trade.