Adam Smith was a well-known Scottish economist and philosopher of his time. He contributed to what became known as the Scottish Enlightenment (which peaked during the 18th and early 19th century). This era was defined by an effluence of scientific and intellectual accomplishments. Some argue this created a “ripple” effect throughout Europe and indeed the world.
Often, Smith himself is referred to as “The Father of Economics,” in part for his book and magnum opus, “An Inquiry into the Nature and Causes of The Wealth of Nations” (also known simply as “The Wealth of Nations”) which was first published in 1776 (1).
Adam Smith’s theories and philosophy created numerous economical concepts. These led to the creation of absolute advantage and comparative advantage as we know them today.
His arguments on international trade, the division of labor, and the specialization of production, led to far more efficient policies being enacted throughout history.
Most countries in existence today, have heeded Smith’s advice. Specialized economics are now common-practice. Any absence of goods or services can be easily compensated for by actively trading with others nations.
In point of fact, our heavily globalized economy now operates more like a singular organism, rather than the nationalistic economies of the past. According to Statista.com the global trade value of goods was estimated to be over 19 trillion U.S dollars in 2019 (nearly tripling since 2000).
This staggering growth -rooted in Smith’s economic revelations- has proven the methodology of absolute advantage vs comparative advantage to be a sound foundation for modern economical theorem.
Today, any country that fails to diversify its goods and services without considering absolute advantage vs comparative advantage, will render themselves deficient in an increasingly hyper-efficient globalized economy.