One thing strikes me though: the description of the "Dutch disease" - one high-yield activity substituting for one or more others - seems on the surface to be analogous to what's supposed to happen within a trading country according to the theory of comparative advantage. The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
I know that Schumpeter style economists will say untrammeled creative destruction is a good thing, but I think that's more contentious.
But isn't the inevitable effect of comparative advantage that someone goes to the wall in the medium term (albeit everyone will ultimately be better off when used as directed)?
IANAE, but it just seemed to me from the way Jerome described it that the "Dutch disease" triggered the same mechanisms one would expect to see when transitioning to a comparative advantage scenario. The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
This takes on real-world proportions when applied to rain-forest clearance for monocultures. Yet we're still being told, in the name of comparative advantage, that the Doha Round is the way to go.
http://guerby.org/blog/index.php/2006/04/23/65-salades-et-tomates
Not true - at least if you speak about economists the way we (economists) define our profession, not the way people like Klaus think of themselves. Even a simplest Schumpeterian model can generate a lot of waste, when someone else creatively destroys your business because your investment doesn't enter his profit function.
