The Ricardian model is the simplest and most basic general equilibrium model of international trade that we have. It is usually featured in an early chapter of any textbook on international economics. Historically, it is the earliest model of trade to have appeared in the writings of classical economists, at least among models that are still considered useful today. It is indeed still useful. In spite of being superseded over the years by models with much more complexity (more factors of production, increasing returns to scale, imperfect competition), the Ricardian model often provides the platform for the introduction of today’s new ideas. Dornbusch, Fischer, and Samuelson (1977) examined a continuum of goods first in a Ricardian model. Eaton and Kortum (2002) incorporated an ingenious and elegant treatment of geography into a Ricardian model. Melitz (2003) started a small revolution in trade theory by modeling heterogeneous firms within what was essentially a Ricardian model.The Ricardian model itself, as a new idea, came many years after Ricardo. David Ricardo, in 1816 according to Ruffin (2002), introduced only a portion of the model that now bears his name, focusing primarily on the amounts of labor used to produce traded goods and, from that, the concept of comparative advantage. The first appearance of the Ricardian model, according to Ruffin again, was in Mill (1844). In this essay, I will first describe the simplest Ricardian Model as it is understood today, including its assumptions, its main implications, and the mode of analysis most commonly used to illustrate it. I will then, with much less detail, describe various extensions to the simple model.The Simple Ricardian ModelThe simple Ricardian model depicts a world of two countries, A and B, each using a single factor of production, labor L, to produce two goods, X and Y. Technologies display constant returns to scale, meaning that a fixed amount of labor, is needed to produce a unit of output of each good, g=X,Y, in each country, c=A,B, regardless of how much is produced in total. All markets are perfectly competitive, so that goods are priced at cost in countries that produce them, , where is the competitive wage in country c. Labor is available in fixed supply in each country, ; it is immobile between countries but perfectly mobile within each. The Ricardian Model typically leaves demands for goods much less fully specified than supplies, though a modern formulation might specify for each country a utility function, , which the representative consumer maximizes subject to a budget constraint. Utility functions might, or might not, be assumed in addition to be identical across countries, homothetic, or even Cobb-Douglas, although most properties of the model’s solution do not require any of these assumptions.The most basic use of the model compares the equilibria in autarky with those of free and frictionless trade. In autarky, since both goods must be produced in each country, prices are given immediately by the costs stated above, and further analysis is needed only if one wants to know quantities produced and consumed. If so, the linear technology implies a linear production possibility frontier (PPF) that also serves as the budget line for consumers in autarky. The autarky equilibrium is as shown in Figure 1, where “ ˜ ” indicates autarky and Q represents production.Comparison of the two countries in autarky depends primarily on their relative costs of producing the two goods, which in this model defines their comparative advantage. For concreteness, assume that country A has comparative advantage in good X: , so that . Without further assumptions about preferences, little more can be said about autarky, but if preferences are identical and homothetic, with positive elasticity of substitution, then one can infer that With free and frictionless trade, prices must be the same in both countries. Two kinds of equilibrium are possible, depending on the supplies and demands for goods in the two countries. One kind of equilibrium has world relative prices, denoted here by “ ˘ ”, strictly between the relative prices of the two countries in autarky: . In that case, each country must specialize in producing only the good for which its relative cost is lower than the world relative price, thus the good in which it has comparative advantage. Each must necessarily export that good.With such complete specialization, outputs of the goods are determined by labor endowments and productivities, so equality of world supply and demand must be achieved from the demand side. That is, world prices are determined such that the two countries’ demands sum to the quantity produced in one of them. These demands derive from the expanded budget constraints of each country’s consumers, reflecting the value at world prices of the single good that the country produces. Consumers can now, unless they wish to consume only that single good, consume more of both goods than they did in autarky. Whether they choose to do so or not depends on the extent to which they substitute toward the cheaper good now imported from abroad, but in any case they reach a higher indifference curve and are better off. All of this is shown in Figure 2. For this to be an equilibrium, the quantity of each good exported by one country must equal the quantity imported by the other, so the heavy arrows showing net trade in each panel of the figure must be equal and opposite.Such an equilibrium with specialization will arise only if the two countries’ capacities to produce their respective comparative-advantage goods correspond sufficiently closely to world demands for the goods. If this is not the case – if one country’s labor endowment is too low and/or its labor requirement for producing its comparative-advantage good is too high for it to satisfy world demand – then while that country will specialize, the other country (call it the larger one, although that is not strictly necessary) will not. Instead of world relative prices settling between the two autarky levels as above, prices will exactly equal the autarky prices of the larger country, and that country will produce both goods. At those prices, producers in the larger country will be indifferent among all output combinations on the PPF, and output in the large country will be determined instead by the need to fill whatever demand is not satisfied by