Making Sense of the Competitiveness Debate

Paul Krugman

Oxford Review of Economic Policy, 1996, vol. 12, issue 3, 17-25

Abstract: The debate over national competitiveness is marked by some basic misperceptions. With few exceptions, those who use the term have a crude, essentially mercantilist view of world trade, in which competition among nations is just like competition between corporations. Not only do the authors and readers of reports on national competitiveness usually not understand comparative advantage, they are unaware of the most basic adding-up constraints. Economists, however, find it hard to believe that seemingly well-informed people can really be this naive, and assume that there must be more sophisticated ideas lying behind what they say. The rationales offered by economists, in turn, offer false comfort to the would-be sophisticates who like the term "competitiveness"; they believe that they have transcended conventional economic theory, when the fact is that they have failed to comprehend it. In short, the actual level of discussion is lower than any of the participants imagines. Copyright 1996 by Oxford University Press.

Date: 1996
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