The classical law of comparative advantage sought to demonstrate that productive resources in all countries could be more efficiently employed if each country, through the exchange of goods and raw materials, specialized in producing the few goods and raw materials that it could produce most proficiently. A more neutral way of thinking about the concept of comparative advantage is that it describes the array of social, economic, and political forces that account for the general export and import patterns prevailing between nations. In this sense, all the other bodies of theory discussed in this and subsequent chapters contribute to an understanding of comparative advantage.

Although much of its original elegance has been muddled as a result of empirical testing, the theory of comparative advantage put forth by Eli Heckscher and Bertil Ohlin remains the highest level of generality in explaining patterns of world trade. In essence, the Heckscher-Ohlin theory holds that differences in comparative advantage among countries are explained by different relative costs for the separate factors of production; these relative factor costs are determined by how well endowed each nation is with those factors. Because different goods require different factor proportions in their manufacture, countries will tend to export those goods that use large portions of their more abundant factors and import those that depend upon their scarce factors of production.