Picking winners - focusing on local or regional 'specialisation' is a familiar approach to economic regeneration. You'll know of those "cluster" strategies that regional development agencies promoted and will have seen any number of city plans (Bradford's emerging plan being a good example) that say, "we're good at making left-handed widgets and buttered almonds, so our strategy is to become the world centre in these sectors".
This approach is misplaced:
... the idea that cities, states, or countries should specialize in their current areas of comparative advantage is so dangerous. Focusing on the limited activities at which they currently excel would merely reduce the variety of capabilities...that they have. The challenge is not to pick a few winners among the existing industries, but rather to facilitate the emergence of more winners by broadening the business ecosystem and enabling it to nurture new activities.
This isn't to deny comparative advantage, more to observe that this advantage is consequential to trade and, in the real world, hard to pin down. Nor is comparative advantage the driver of these specialisation strategies, rather they are the result of that ridiculous mercantilist belief that cities, regions and countries "compete".
Picking winners doesn't just fail because bureaucrats are bad at picking, it fails because it excludes winners we don't yet know about (or have any chance of knowing about). Bradford has several pretty successful businesses that pimp cars - looking back 15 years ago would anyone have predicted this, let alone see selling fancy alloys and go-faster stripes (I know it's more complicated that this) as a growth sector?
....
This is why the idea that cities, states, or countries should
specialize in their current areas of comparative advantage is so
dangerous. Focusing on the limited activities at which they currently
excel would merely reduce the variety of capabilities – or “letters” –
that they have. The challenge is not to pick a few winners among the
existing industries, but rather to facilitate the emergence of more winners by broadening the business ecosystem and enabling it to nurture new activities.
Read more at http://www.project-syndicate.org/commentary/ricardo-hausmann-warns-that-advising-cities--states--and-countries-to-focus-on-their-economies--comparative-advantage-is-both-wrong-and-dangerous#U8ZldzUK0Gfog7xS.99
Read more at http://www.project-syndicate.org/commentary/ricardo-hausmann-warns-that-advising-cities--states--and-countries-to-focus-on-their-economies--comparative-advantage-is-both-wrong-and-dangerous#U8ZldzUK0Gfog7xS.99
This is why the idea that cities, states, or countries should
specialize in their current areas of comparative advantage is so
dangerous. Focusing on the limited activities at which they currently
excel would merely reduce the variety of capabilities – or “letters” –
that they have. The challenge is not to pick a few winners among the
existing industries, but rather to facilitate the emergence of more winners by broadening the business ecosystem and enabling it to nurture new activities.
Read more at http://www.project-syndicate.org/commentary/ricardo-hausmann-warns-that-advising-cities--states--and-countries-to-focus-on-their-economies--comparative-advantage-is-both-wrong-and-dangerous#U8ZldzUK0Gfog7xS.99
Read more at http://www.project-syndicate.org/commentary/ricardo-hausmann-warns-that-advising-cities--states--and-countries-to-focus-on-their-economies--comparative-advantage-is-both-wrong-and-dangerous#U8ZldzUK0Gfog7xS.99
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