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points

1 year ago

| 3 comments

> You want to google concept called "Dutch Disease", an economic phenomenon where a resource boom (like oil) causes currency appreciation and decline in other sectors. Norway and the Netherlands faced this issue.

Isn't this just the downside of comparative advantage?

Like you have the classic example of island 1 can make 5 apples or 15 oranges and island 2 can make 15 apples or 5 oranges so island 1 makes 15 oranges and island 2 makes 15 apples. What happens to the apple industry of island 1? It gets destroyed as they only focus on making oranges.

The only way you avoid dutch disease (Natural Resource Curse nowendays) is to intentionally have an inefficient economy.

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jcgl

1 year ago

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I think that that’s the crux of the issue—efficiency is very often in tension with resilience. In an economic system that optimizes for efficiency above all, you end up with fragility. Not only do you have fragility, but because the system is complex, the fragility shows up in unpredictable places.

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franktankbank

1 year ago

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Red Queen races are also terribly inefficient and that's a big part of our economy today. Unfortunately Red Queen races are net positive on GDP.

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deltarholamda

1 year ago

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>intentionally have an inefficient economy

Yes, but the economy should serve the people. The people do not serve the economy. Or at least that's the way it should work. Wall Street tends to disagree with this sentiment.