24 
LL. 
eg 
INTERNATIONAL TRADE 
They are two forms of comparative advantage, each the comple- 
ment of the other. 
Looking again at the figures of our case, it is obvious that in the 
United States 10 wheat would exchange for 10 linen if both 
articles were produced within the United States. In Germany 10 
wheat would exchange for 15 linen if both were produced in that 
country. At any rates between, both countries would gain from 
an exchange. At an exchange of 10 wheat for 14 linen the United 
States would gain 4 of linen, since the 5 days’ labor entailed by 
producing the 10 of wheat would produce in the United States not 
14 of linen, but only 10. At the rate of 14 linen for 10 wheat, 
Germany too would gain, but not so much; her gain would be 1 
of liner. If on the other hand the terms of trade were 10 wheat 
for 11 linen, the United States would gain 1 linen and Germany 
4 linen. At any rate of 10 wheat for more than 10 linen and less 
than 15 linen, both would gain. And at any such intermediate 
rate, each would confine itself to that commodity in which it had 
a comparative advantage. The United States would produce 
only wheat, and would get all her linen by sending wheat to Ger- 
many, exchanging it for linen; she would confine herself to the 
industry in which she had the superior advantage. Germany 
would produce only linen, and would get all her wheat by sending 
linen to the United States and getting wheat in exchange; she 
would confine herself to the industry in which she had the inferior 
disadvantage. of 
Turn now from this supposition to that of a money régime. 
Suppose that wages in the United States are $1.50 a day; wages 
in Germany are $1.00 a day. These figures, be it noted again, are 
merely illustrative; they do not stand for a necessary or definitive 
outcome. Assuming them for purposes of illustration, we have 
further : 
In the U. S. 10 days’ labor 
)) » i S. 10 2) )) 
” Germany 10 ” » 
"” Germanv 10 7 
WAGES 
PER DAY 
$1.50 
$1.50 
$1.00 
21.00 
TorAL 
WAGES 
$15 
$15 
$10 
£10 
Probits DowmEesric 
SuppLy PRICE 
20 linen $0.75 
20 wheat $0.75 
15 linen $0.662 
10 wheat £1.00