Adam Smith - “locked in” even if they are not the best possible outcome Krugman points out the adoption of the QWERTY keyboard as an example of

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Adam Smith: a strong critic of mercantilism. Argued that the free market creates the greatest good through the invisible hand. The common good is served through every individual acting in his own self-interest. The aggregate of these self-interests creates benefits for all. A positive sum game. In general, liberals argue that free trade represents the best way for a state to insure its growth. Realists: Tend to advocate more mercantilist approach, in the sense that government can play a role in increasing the competitiveness of national firms. In essence, views economic competition in zero-sum terms, where economics is part of the power of the state. One policy that many realists advocate is strategic trade. Strategic trade theory: Based on an underlying assumption that markets do not foster perfect competition and that, in many cases, choice within the market will lead to certain standards becoming
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Unformatted text preview: “locked in”, even if they are not the best possible outcome. Krugman points out the adoption of the QWERTY keyboard as an example of this – here we see a standard that has been locked in, even though, with computers, it isn’t necessarily the most efficient or best technology. It emerged from an accident of the market – with manual typewriters, it works, because it prevents keys from locking. However, as typewriters become electric and then with computers, this is no longer a problem. However, the common practice was to use the QWERTY keyboard, so it became an industry standard. Similarly, the VHS/BetaMax VCRs – Beta was a superior technology, but VHS tapes were more available – it therefore became the industry standard. Thus, strategic trade theory assumes that markets alone do not insure maximum efficiency or that the best products are those that are available....
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This note was uploaded on 11/25/2011 for the course POLISCI 1003 taught by Professor Olson during the Fall '11 term at GWU.

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