Question

Give an outline for the classical theory of international trade

Answer 1

Classical economists were oriented primarily toward growth economics, and their main concern was explaining how the “wealth of nations” was increased.

In explaining increased output, specialization and division of labour were given special attention. Adam Smith’s description of how a large number of pins could be produced when labour was specialized by detail functions as opposed to handicraft methods was widely quoted and generalized.

The extent of specialization and division of labour was dependent upon the size of the market; a larger market would encourage a greater degree of specialization and division of labour.