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Dismissing history’s most recognized economist out-of-hand seems like you have already decided the answer before hearing the arguments. Edit to add: Michael Po

Dismissing history’s most recognized economist out-of-hand seems like you have already decided the answer before hearing the arguments. Edit to add: Michael Porter (one of the most influential living economists) made is career studying the economic theory of competitive advantage. "clusters: critical masses—in one place—of unusual competitive success in particular fields." Link: https://hbr.org/1998/11/clusters-and-the-new-economics-of-competition https://hbr.org/1998/11/clusters-and-the-new-economics-of-co...

mcguire 8y ago
"...but The Wealth of Nations by Adam Smith states that all country will have certain expertise they are just good at." Weird that Porter doesn't cite Smith.
- moorhosj 8y ago
  In fact, in this HBR article [1], he does the opposite of citing Smith: == According to standard economic theory, factors of production—labor, land, natural resources, capital, infrastructure—will determine the flow of trade. A nation will export those goods that make most use of the factors with which it is relatively well endowed. This doctrine, whose origins date back to Adam Smith and David Ricardo and that is embedded in classical economics, is at best incomplete and at worst incorrect. In the sophisticated industries that form the backbone of any advanced economy, a nation does not inherit but instead creates the most important factors of production—such as skilled human resources or a scientific base. Moreover, the stock of factors that a nation enjoys at a particular time is less important than the rate and efficiency with which it creates, upgrades, and deploys them in particular industries. == Their disagreements aside, the two theories line up fairly well. Smith argues that competitive advantage is inherent based on natural factors, Porter says that it is a by-product of investment. I would argue that the reality falls somewhere in the middle. Take the Chicago region, we have a commodities cluster. It includes institutions like CBOE, CME and the University of Chicago and companies like ADM, State Farm, John Deere and Caterpillar. Porter would say the cluster exists due to all of these institutions and knowledge. Smith might argue that those only exist in Chicago due to the natural factors of fertile land, centralized location, fresh water and navigable rivers. In this way, both Smith and Porter are correct. [1] https://hbr.org/1990/03/the-competitive-advantage-of-nations https://hbr.org/1990/03/the-competitive-advantage-of-nations

mcguire 8y ago

"...but The Wealth of Nations by Adam Smith states that all country will have certain expertise they are just good at." Weird that Porter doesn't cite Smith.

moorhosj 8y ago
In fact, in this HBR article [1], he does the opposite of citing Smith: == According to standard economic theory, factors of production—labor, land, natural resources, capital, infrastructure—will determine the flow of trade. A nation will export those goods that make most use of the factors with which it is relatively well endowed. This doctrine, whose origins date back to Adam Smith and David Ricardo and that is embedded in classical economics, is at best incomplete and at worst incorrect. In the sophisticated industries that form the backbone of any advanced economy, a nation does not inherit but instead creates the most important factors of production—such as skilled human resources or a scientific base. Moreover, the stock of factors that a nation enjoys at a particular time is less important than the rate and efficiency with which it creates, upgrades, and deploys them in particular industries. == Their disagreements aside, the two theories line up fairly well. Smith argues that competitive advantage is inherent based on natural factors, Porter says that it is a by-product of investment. I would argue that the reality falls somewhere in the middle. Take the Chicago region, we have a commodities cluster. It includes institutions like CBOE, CME and the University of Chicago and companies like ADM, State Farm, John Deere and Caterpillar. Porter would say the cluster exists due to all of these institutions and knowledge. Smith might argue that those only exist in Chicago due to the natural factors of fertile land, centralized location, fresh water and navigable rivers. In this way, both Smith and Porter are correct. [1] https://hbr.org/1990/03/the-competitive-advantage-of-nations https://hbr.org/1990/03/the-competitive-advantage-of-nations