Competitive vs comparative advantage

Some business leaders in New Zealand have decided to lay bare the reasons why we shouldn’t manage the economy like a company. They think

A successful business needs a competitive advantage. A successful country is no different.

Actually, it is very different. As the WTO says:

…it is meaningless to say a country has a comparative advantage in nothing. The term is one of the most misunderstood ideas in economics, and is often wrongly assumed to mean an absolute advantage compared with other countries.

Which is, I think, exactly the mistake that the Pure Advantage group are making.

Also, Bill Kaye-Blake appears to agree and all but suggests that the entire scheme is an elaborate way to secure government funding for their organisations. I’m not ready to join the conspiracy theory quite yet so I’ll stick to harping on about the dangers of management thinking in economics.

6 replies
  1. Matt Nolan
    Matt Nolan says:

    Well OBVIOUSLY the problem is that the country isn’t enough like a corporation – don’t worry, I’ve used the internet to find a solution:

    You can thank me once New Zealand has finished its first couple of 5 year plans.  Catch those Aussies no sweat IMO.

    Note:  For anyone who reads this comment and doesn’t get the sarcasm, I feel for you.

  2. Miguel Sanchez
    Miguel Sanchez says:

    True to form, it seems, from the group that produced the most bizarre campaign launch in recent memory: those ads with the blurry photos of dour-looking businessmen, plastered with words along the lines of: “Climate change may not be real, but there’s money to be made from it.”  I couldn’t help but imagine a blurry photo of Bernie Madoff with the words: “It may be a Ponzi scheme, but there’s money to be made from it.”

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