Theory of Absolute Advantage:

Adam Smith postulated that each country should specialize in those commodities she can produce. At the lower absolute cist than other countries. He made this assertion when he was writing about Division of labour and specialization in international trade in his "Wealth of Nations" in 1776.

Adam Smith above argued for free trade by comparing nations to households.

Since every household finds it prudent to produce only some of its needs and to buy others with products it can sell, the same should apply to nations.

Adams Smith, assuming a two (2) good and a two (2) country world, concluded that trade is mutually beneficial if one nation has an absolute advantage in the production of one good and the other nation has absolute advantage in the production of the second good.