ABSTRACT
The first systematic thinking on trade issues was that of the mercantilists. Mercantilist ideas were developed between the sixteenth and nineteenth centuries by a number of pamphleteers, philosophers, and government officials. The mercantilists were strong nationalists for whom the interests of the nation were primary. Classical economic theories developed out of a critique of mercantilist ideas. Adam Smith devoted a large portion of his 1776 book, The Wealth of Nations, to an attack on what he called "the mercantile system". Early twentieth-century economists found Ricardo's explanation of comparative advantage based on comparisons of relative labor costs too simple. Led by Swedish economists Eli Heckscher and Bertil Ohlin, they developed a new theory to explain comparative advantage and thus to account for the fundamental question of why countries specialize in particular products for exports. Traditional theories of comparative advantage imply that free trade is the most beneficial policy for a nation's consumers in the aggregate.
