and by government policy than was previously thought. Thus, what is
obsolete is the belief that a country’s current pattern of comparative
advantage, and hence its current pattern of imports and exports, must be
accepted as given and unchangeable.
The theory that comparative advantage is a major influence on trade flows is not obsolete, but
the theory that comparative advantage is completely determined by forces beyond the reach of
decisions made by private firms and by public policy has been discredited.One caveat should be noted. It is one thing to observe that it is possible
for governments to influence a country’s pattern of comparative
advantage. It is quite another to conclude that it is advisable for them to
try. The case in support of a specific government intervention requires
that (1) there is scope for governments to improve on the results achieved
by the free market, (2) the costs of the intervention be less than the value
of the improvement to be achieved, and (3) governments will actually be
able to carry out the required interventionist policies (without, for
example, being sidetracked by considerations of electoral advantage).
In many cases, governments have succeeded in creating important
comparative advantages. For example, the Taiwanese government
virtually created that nation’s electronics industry and then passed it over
to private hands in which it became a world leader. The government of
Singapore created a computer-parts industry that became a major world
supplier. However, there are also many examples in which governments
failed in their attempts to create comparative advantage. The government
of the United Kingdom tried to create a comparative advantage in