The theory of
comparative costs has been criticized on the following grounds.
i. Unrealistic
nature of the labor immobility assumption:
The theory assumes that labor is mobile within the country but immobile between
countries. This is not realistic
assumption. The migration of labor from
one country to another has an important
bearing on the traded goods.
ii. Unrealistic
assumptions of constant cost: The
assumption of zero transport cost and constant cost is also not valid. It does
not accord with facts.
iii. Unrealistic
assumption of perfect competition: The theory assumes perfect competition.
But in the actual world, it is imperfect
competition which prevails. The theory thus has no practical utility.
iv. Labor
differs in efficiency: The theory assumes that all labor is of the same
quality. The fact however, is that the
efficiency of labor varies from person to person.
v. Based
on labor theory of value: The theory
of comparative cost was based in terms of labour theory of value, while in
reality labor is only one element of total cost.