The Specialization Myth

31. December 2013

Date: 30-12-2013Hausmann CC
Source: Project Syndicate

RICARDO HAUSMANN

Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist of the Inter-American Development Bank, is a professor of economics at Harvard University, where he is also Director of the Center for International Development.

CAMBRIDGE – Some ideas are intuitive. Others sound so obvious after they are expressed that it is hard to deny their truth. They are powerful, because they have many nonobvious implications. They put one in a different frame of mind when looking at the world and deciding how to act on it.

One such idea is the notion that cities, regions, and countries should specialize. Because they cannot be good at everything, they must concentrate on what they are best at – that is, on their comparative advantage. They should make a few things very well and exchange them for other goods that are made better elsewhere, thus exploiting the gains from trade. Read the rest of this entry »