In the link below there are a couple reasons mentioned why this form of economy is inferior to the more popular and realistic current global model of free trade. The main idea introduced is the idea of a Production Possibility Frontier, or PPF.
The PPF chart above shows a country that produces only guns and butter. In an autarky, if there are only guns and butter produced and there is no trade, then the country will be forced to use its resources and labor to produce guns, butter, or a mix of the two. This will essentially lead to an insufficient allocation of resources because they can't produce at 100% efficiency, because they cannot trade their surplus of guns and butter. In a free-trade economy we know that a country can allocate its labor and resources properly to maximize the GDP. Then a country would simply trade surplus for what they need. Obviously I want to stress that this is a VERY simplified model, but it gives you an idea of the challenges that an autarky would face, In the end, it really comes down to efficiency, and the fact that some countries are more efficient at producing certain goods than others. It explains why no one currently has an autarky, and why free-trade reigns supreme in our world today.
http://sites.psu.edu/ackermanciblog/2014/03/19/autarky-economy/
Great post, Drew. Your take on autarky has really help reinforce what we have learned over the past week. I knew we talked about how North Korea was the closest nation to an autarky today, but I had no idea their GDP was that low. I bet if they opened up to free trade their economy would be much better off.
ReplyDeleteThis is an interesting post, Drew. It really relates to what we have been talking about in class. I remember us briefly going over how North Korea is the closest thing to an autarky. This posts goes into a lot more depth though, bringing up some actual statistics like how small their economy really is. You do a good job showing how the autarky system has failed North Korea but I think it would have been cool if you compared them to South Korea to give us more of an idea of how inefficient an autarky really is. This would have worked well because North and South Korea are countries founded at the same time one using somewhat of an autarky and the other having free trade. If you could show how much better off South Korea was using free trade that would have been interesting. Overall, you still did a good job!!
ReplyDeleteI thought this was a very informative and interesting post, Drew. I liked the way you simplified the model of an Autarky down to just guns and butter. It makes things very clear that one country cannot rely solely on itself to produce everything they need as a country. This is obviously why free-trade has been and continues to be universally used by most countries. I agree with Jamie's earlier post. It would have been very interesting to see a comparison of North and South Korea, especially because they are two neighboring countries who each have their own very different economic systems. Very nice post with many good points.
ReplyDeleteYour post has really helped simplify what exactly the negatives of having an autarky economy can do. I never quite understood how weak an actual autarky economy could be until I looked at your comparison. However, I do agree with Jamie when she said you should have compared it to South Korea. That could of even gave us an even better understanding of how damaging an entirely self sufficient country could have on its economy. Other than that, great article Drew.
ReplyDeleteIt is hard to find a totally autarky economy nowadays, but there are a lot of examples in history, like Afghanistan under the Taliban, from 1996 to 2001 during the Civil war. Just as we can expect, the economy of Afghanistan turned out bad in those years.In my opinion,all the countries have comparative advantage in producing something therefore trading with other countries will raise the total utility of themselves. Autarky do no good but harm to the countries.
ReplyDeleteNorth Korea is the most known autarky country. There is no trade by individual or nation. There only few percent high rank people linked in other world product. It is unbelievable world but it is because the government forbids contact with outside world. This is how the North Korea Government controlled their nation.
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