Internationally Integrated or Isolated economy, which is better?

[–] Justintoxicated 2 points (+2|-0)

Integrated, total output is maximized when economies concentrate on areas of comparative advantage/expertise producing more at lower resource cost. However a symptom of this is competitiveness which means constant innovation, which as a whole is generally better for the world (more cheaper output increases total wealth and fuels real wage growth) however individual populations will suffer when their skillsets become irrelevant (i.e. the argument of Luddite movement).

Economics is often referred to as "the dismal science" as it is heavily observational (like most social sciences), basic economics principles translate universally; they can be applied in areas like physics (most energy related topics also follow economic principles) to biology (biology is all about resources and their transfer). Other economic principles can range from being as dismal as sociology (limited in scope and poorly observed with weak/no design of experiment, sometimes even just made up) to huffpost caliber clickbait (there are some pretty easy tells to identify total bullshit).

[–] InnocentBystander [OP] 1 points (+1|-0)

total output is maximized

Why is that necessary or beneficial?

However a symptom of this is competitiveness which means constant innovation,

I don't think that is correct. High entry barriers prevent competition except among a few. It usually comes down to one, or a small group operating in collusion. Monopolies stifle innovation.
Economic unions result in larger and more efficient companies, but far fewer of them.

Integrating north american economies lead to fewer competitive entities, and a significant reduction of small business.
The wealthy are even wealthier than before. So it is a 'success' when you tally up all the numbers. If you consider eradicating small business and the middle-class to be a win, anyway.
Every year since Nafta the median average wage has gone down when cost of living is factored in.
For 20 consecutive years the middle class has had its wages chipped away. While the country is generating more wealth than ever before, thanks to integration, and other factors.

however individual populations will suffer when their skillsets become irrelevant (i.e. the argument of Luddite movement).

I'm not sure how that's related to economics. It seems more of a technological progress issue.
Tech will still grow under either system.

[–] Justintoxicated 1 points (+1|-0)

Why is that necessary or beneficial?

Because it means we have gotten the maximum potential out of our resources, for example Florida is great at growing oranges but not so great at growing wheat, Nebraska is great at wheat not so great at oranges. If Nebraska dedicates half its land to growing oranges and Florida half of it's land to wheat each will have substantially overall output of their products (meaning less wheat and less oranges for all, shortages). If output is maximized it means less time/effort/resource must be dedicated to creating higher levels of a product.

I don't think that is correct. High entry barriers prevent competition except among a few. It usually comes down to one, or a small group operating in collusion. Monopolies stifle innovation.

Monopolies and High entry barriers (depending on why the barrier exists) would a caveat of competitiveness, you can be competitive by innovating your business/disrupting current models (as most new industry attempts) or by adopting an anti-competitive measures to protect a current business model, however even monopolies are forced to compete eventually (introduction of disruptors, loss of advantage, preference changes, etc..)

Every year since Nafta the median average wage has gone down when cost of living is factored in.

Real wage is not to be confused with actual wages, real wages are essentially the amount of goods that can be purchased given the same amount of money, for example: in 2014 $100 bought 100 pounds of wheat (not a real figure) then Nebraska stopped growing oranges and maximized wheat output which meant that in 2015 $100 could buy 150 pounds of wheat, that's real wage growth (of course to be truly real wage growth it must be adjusted for inflation).

I'm not sure how that's related to economics. It seems more of a technological progress issue.

Economics (the movement/creation of resources) is a driver of technology and it's proliferation, if those with the resources to patronize it see the value in investing in technology/research they will devote resources that would not be readily available slowing down the process.

Tech will still grow under either system.

It would but the rate of growth and proliferation would be vastly slower with less available resources that are harder acquire which is what tends to happen under isolationism (Japan isolationist phase was a good example of stifled technological development).

If you consider eradicating small business and the middle-class to be a win

First of all I would not consider destruction of small business to be a win, I've worked and participated in the creation of quite a few. Small business will always exist, most operate because they have qualities that are preferential to the consumer, many offer convenience, have found a niche, or are simply not scalable. Think about it this way, McDonald's makes a $1 cheeseburger, they've been around for over half a century and can undercut any small restaurant selling cheeseburgers, however small restaurants selling cheeseburgers a $8 a pop still thrive because they offer things MCDonald's can't. Same goes for local dentists, plumbers, mechanics etc.. some of them could even become big businesses if they can get a large enough investment and can scale what makes them unique. In fact if you look at China, India, and most emerging markets economic stimulation brought on by large business leads to a greater rate of small business creation (if more people can suddenly afford to eat in restaurants more people are going to start restaurants, etc..)

>Why is that necessary or beneficial? Because it means we have gotten the maximum potential out of our resources, for example Florida is great at growing oranges but not so great at growing wheat, Nebraska is great at wheat not so great at oranges. If Nebraska dedicates half its land to growing oranges and Florida half of it's land to wheat each will have substantially overall output of their products (meaning less wheat and less oranges for all, shortages). If output is maximized it means less time/effort/resource must be dedicated to creating higher levels of a product. >I don't think that is correct. High entry barriers prevent competition except among a few. It usually comes down to one, or a small group operating in collusion. Monopolies stifle innovation. Monopolies and High entry barriers (depending on why the barrier exists) would a caveat of competitiveness, you can be competitive by innovating your business/disrupting current models (as most new industry attempts) or by adopting an anti-competitive measures to protect a current business model, however even monopolies are forced to compete eventually (introduction of disruptors, loss of advantage, preference changes, etc..) >Every year since Nafta the median average wage has gone down when cost of living is factored in. Real wage is not to be confused with actual wages, real wages are essentially the amount of goods that can be purchased given the same amount of money, for example: in 2014 $100 bought 100 pounds of wheat (not a real figure) then Nebraska stopped growing oranges and maximized wheat output which meant that in 2015 $100 could buy 150 pounds of wheat, that's real wage growth (of course to be truly real wage growth it must be adjusted for inflation). >I'm not sure how that's related to economics. It seems more of a technological progress issue. Economics (the movement/creation of resources) is a driver of technology and it's proliferation, if those with the resources to patronize it see the value in investing in technology/research they will devote resources that would not be readily available slowing down the process. >Tech will still grow under either system. It would but the rate of growth and proliferation would be vastly slower with less available resources that are harder acquire which is what tends to happen under isolationism (Japan isolationist phase was a good example of stifled technological development). >If you consider eradicating small business and the middle-class to be a win First of all I would not consider destruction of small business to be a win, I've worked and participated in the creation of quite a few. Small business will always exist, most operate because they have qualities that are preferential to the consumer, many offer convenience, have found a niche, or are simply not scalable. Think about it this way, McDonald's makes a $1 cheeseburger, they've been around for over half a century and can undercut any small restaurant selling cheeseburgers, however small restaurants selling cheeseburgers a $8 a pop still thrive because they offer things MCDonald's can't. Same goes for local dentists, plumbers, mechanics etc.. some of them could even become big businesses if they can get a large enough investment and can scale what makes them unique. In fact if you look at China, India, and most emerging markets economic stimulation brought on by large business leads to a greater rate of small business creation (if more people can suddenly afford to eat in restaurants more people are going to start restaurants, etc..)

[–] InnocentBystander [OP] 1 points (+1|-0)

If output is maximized it means less time/effort/resource must be dedicated to creating higher levels of a product.

It's more efficient, I agree. But why would that be a priority in an age of surplus?
I think stability and sustainability are more important.

..however even monopolies are forced to compete eventually..

Sure. They can also make (slower) progress. Monopolies are still shit in every way except efficiency.
They incentivize stagnation.

Real wage is not to be confused with actual wages..

Good, I'm glad you understand the difference. So you know that means wages for the middle class in Canada have been in free fall since Nafta.
Real wages.

It would but the rate of growth and proliferation would be vastly slower with less available resources that are harder acquire

Which is why integrated economies would fail to produce tech as quickly. Having to order custom parts from other continents, in minimum lots of 1000 or more puts a damper on research and innovation.
When resources can only be found in select and isolated locations, only a comparatively small number of interests have access. On top of that, they have far less incentive to invest in research if there is no effective ability for competition.

Competition breeds invention and innovation.
Monopolies stifle both.

Japan isolationist phase was a good example of stifled technological development

Yes, but it is irrelevant as an example of economics stiffing development. Except to demonstrate that when one entity controls the tech, it doesn't go well.

still thrive because they offer things MCDonald's can't.

Sure, the 'service' industry that is going to keep the economy afloat. I remember the promises.
Turns out, that's not how it works. Not everyone wants to trade in their current jobs to serve burgers.

Same goes for local dentists, plumbers, mechanics

No, no it does not. I have a few decades of experience in this industry and have watched the transition. People don't pay a plumber or builder more because they enjoy the ambiance.

some of them could even become big businesses

What if they don't want to? What's wrong with a small business staying small? That used to be normal.
In an integrated market every small business has to compete on an even field with every other. That is bad for sustainability of small business.

emerging markets economic stimulation brought on by large business leads to a greater rate of small business creation

That is a stretch.
Big business does not create small business. An influx of wealth into a 3rd world does. That is not a characteristic of big business. It is an effect that any source of wealth would have on the region.

> If output is maximized it means less time/effort/resource must be dedicated to creating higher levels of a product. It's more efficient, I agree. But why would that be a priority in an age of surplus? I think stability and sustainability are more important. > ..however even monopolies are forced to compete eventually.. Sure. They *can* also make (slower) progress. Monopolies are still shit in every way except efficiency. They incentivize stagnation. > Real wage is not to be confused with actual wages.. Good, I'm glad you understand the difference. So you know that means wages for the middle class in Canada have been in free fall since Nafta. *Real* wages. > It would but the rate of growth and proliferation would be vastly slower with less available resources that are harder acquire Which is why integrated economies would **fail** to produce tech as quickly. Having to order custom parts from other continents, in minimum lots of 1000 or more puts a damper on research and innovation. When resources can only be found in select and isolated locations, only a comparatively small number of interests have access. On top of that, they have far less incentive to invest in research if there is no effective ability for competition. Competition breeds invention and innovation. Monopolies stifle both. > Japan isolationist phase was a good example of stifled technological development Yes, but it is irrelevant as an example of economics stiffing development. Except to demonstrate that when one entity controls the tech, it doesn't go well. > still thrive because they offer things MCDonald's can't. Sure, the 'service' industry that is going to keep the economy afloat. I remember the promises. Turns out, that's not how it works. Not everyone wants to trade in their current jobs to serve burgers. > Same goes for local dentists, plumbers, mechanics No, no it does not. I have a few decades of experience in this industry and have watched the transition. People don't pay a plumber or builder more because they enjoy the ambiance. > some of them could even become big businesses What if they don't want to? What's wrong with a small business staying small? That used to be normal. In an integrated market every small business has to compete on an even field with every other. That is bad for sustainability of small business. > emerging markets economic stimulation brought on by large business leads to a greater rate of small business creation That is a stretch. Big business does not create small business. An influx of wealth into a 3rd world does. That is not a characteristic of big business. It is an effect that any source of wealth would have on the region.

Internationally Integrated or Isolated economy, which is better?

7 comments

/s/AskPhuks