Flashcards in Trade Theories & Competitivness Deck (8)
Classical trade theories (2)
New trade theory
- Critical factor of determining international trade patterns is the economies of scale and networks effects that can occur in key industries
- Secialization increases output and the ability to enhance economies of scale
- World demand will support few competitors
- First mover advantage, competitors may emerge of "the got there first"
- First mover could scale up very fast
- Role of government is very important: policies/governance, institution etc, infrastrucre, education
- Importance of location economy
A country will gain wealth when exports exceed imports
Goals of mercantilism (5)
-To earn gold & silver
-Gain wealth = store of government's gold and silver
-Have a trade surplus
-Maximize exports through subsidies
-Limits imports through tariffs and quotas, or other methods.
David Hume on Mercantilism: 1752 (4)
-Increased wealth(gold) and increased exports ultimately leads to growth and inflation.
-Imports keep inflation low
-Results: A country initially exporting ultimately becomes importer because of changes in relative prices.
-In the long run, no one can keep a trade surplus
Is the mercantilist theory still valid? Where?
A qualified yes.
Especially in the court of public opinion.