Part III of III
A few notes:
- Earlier in the thread, I noticed a member mention comparative advantage. In discussing it, the member basically presented the idea accurately enough, but s/he conflated the notion/practice of comparative advantage analysis with buy-build analysis. (S/he may have done so for convenience's sake; I don't know.) Comparative advantage analysis to a nation corresponds to buy-build analysis on the firm level. (In business-speak, not economics-speak, comparative advantage is often called "distinctive competency.") One might ask why does that matter. It matters because comparative advantage analysis never applies to a profit maximization strategy/undertaking whereas buy-build analysis can apply to a revenue or profit maximization strategy/undertaking.
The two types of analysis are the same in that they answer the following question: Given that I can allocate my resources to produce thus sell a variety of things, of those things, which am I best at producing relative to the competition? (Note: That is not the same question as "which am I better at producing than are my competitors.")At the firm/individual level, the answer drives several decisions that are similar in nature but different in scale:
- Company level -- What business to enter in the first place, or, put another way, whether to enter "this" market or "that" one, or what mode of entry to use.
- Operations level -- Whether to develop internally the capacity and capability to produce a subcomponent that comprises a piece of the competed good or service a firm offers for sale.
On the nation state level, the questions moves from being positive, as are ones noted above, to the normative:
[*=1]Given the resources in our geography (human and material) and the things the firms/individuals in our country produce (have to offer), should we enact terms of exchange to protect any of them from the competitive pressures in the international marketplace?
[*=1]If yes, which of them and what should be the terms?
How is buy-build/comparative advantage analysis different from cost-benefit analysis? The former is qualitative and quantitative, whereas the latter is purely quantitative. Do people often conflate the two terms? They most certainly do, and in many instances it doesn't matter that they do. In conversations about economics and business, however, it often does matter because the terms (the two types of analysis) connote different types of activities happening, so in setting where nobody's predefined the scope of what's "on the table" of discourse, a lot of misapprehension can result from conflating the two.
Now while it's clear to me that the other member and I differ materially on certain economic theories' verity. As for how and where s/he and I differ on theory, discussion of those differences is outside the scope of this thread. What's relevant here is that we agree on the basic answer to the title question. Multiple approaches to economic theory and practice lead to the same answer: no, they're not the same.
- The other member wrote, "We should not blame enterprises or persons for acting in what they (usually correctly) believe to be to their own individual best interests." I just want to point out that that is an absolute normative statement/conclusion that derives from application of the member's moral philosophy to economic policy (decisions). On the same matter, my conclusion would say "In certain circumstances, we should not hold firms/individuals culpable for....and in others we should hold them culpable for...."
There again, however, explaining the rationale for how either of us arrived are our conclusions is outside this thread's topical scope. I felt it worth noting an extant difference, but, for here, that's it.
