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The Anglo Disease - Financiers worried about end of great bull run | 42 comments (42 topical, editorial, 0 hidden)
Re: Anglo Disease (4.00 / 2)
This is very good. I'm going to have to come back and read it again.

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

by dvx (dvx.clt ät gmail dotcom) on Mon Jun 18th, 2007 at 05:14:26 PM EST
[ Parent ]
Re: Anglo Disease (4.00 / 3)
Agreed, but that doesn't stop it being a train wreck if you pick an unsustainable "comparative advantage."

I know that Schumpeter style economists will say untrammeled creative destruction is a good thing, but I think that's more contentious.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Jun 18th, 2007 at 05:42:42 PM EST
[ Parent ]
Re: Anglo Disease (none / 1)
I'm with you on the sustainability and lack thereof.

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

by dvx (dvx.clt ät gmail dotcom) on Mon Jun 18th, 2007 at 05:58:51 PM EST
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Re: Anglo Disease (none / 1)
As I understand it, we're never supposed to pick comparative advantages that are as potentially unsustainable as some of the financial instruments Mig has referred us to... it's not something the theory seems to consider, but then, IANAE either...
by Metatone (metatone [a|t] gmail (dot) com) on Tue Jun 19th, 2007 at 12:57:39 AM EST
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Re: Anglo Disease (none / 0)
Since, as not-economists (ie dummies), the kind of analogies we are offered by way of explanation of comparative advantage generally concern Bob and Alice who grow tomatoes and lettuces, or some such agricultural object lesson, it's interesting to note that the theory never takes into account that it might be a more sustainable practise to rotate the cultures of tomatoes and lettuces rather than specialise.

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.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Jun 19th, 2007 at 09:34:02 AM EST
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Tomatoes (none / 0)
My own ricardo gardening version has specialisation risk mentionned and then discussed in the comments :)

http://guerby.org/blog/index.php/2006/04/23/65-salades-et-tomates

by Laurent GUERBY on Tue Jun 19th, 2007 at 03:39:16 PM EST
[ Parent ]
Re: Anglo Disease (none / 0)
I know that Schumpeter style economists will say untrammeled creative destruction is a good thing, but I think that's more contentious.

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.

by Sargon on Mon Jun 18th, 2007 at 08:13:59 PM EST
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Re: Anglo Disease (none / 0)
For once I didn't actually mean to tar all economists with the same brush, there's a small sub-sect who are really devoted to creative destruction, who see it as the main means of "progress." They are the only ones I was referring to in this case.
by Metatone (metatone [a|t] gmail (dot) com) on Tue Jun 19th, 2007 at 12:55:38 AM EST
[ Parent ]

The Anglo Disease - Financiers worried about end of great bull run | 42 comments (42 topical, 0 editorial, 0 hidden)
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