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Popular myths about the world economy

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  • Norman S. Fieleke

Abstract

Many of us "know" things that are not true, and we sometimes act, or urge our representatives to act, on our mistaken beliefs. This article examines three common myths, or misconceptions, about the international economy. The author points out that, as with most myths, these embody grains of truth, but if accepted without qualification they could lead to grievous policy errors.> The author analyzes three common false assumptions: that global competition prevents inflation; that fair trade requires equal labor standards; and that small firms cannot profitably export. Global competition is a weak reed on which to rely for control of the overall price level, he finds. Far more important are U.S. monetary and exchange-rate policies, whose potency has been demonstrated many times over. He also argues that the failure to enforce certain core labor standards, such as a standard prohibiting forced labor, probably lowers a country's productivity rather than affording it an unfair competitive advantage. And the data on exporting show that relatively small as well as large firms can thrive while exporting.

Suggested Citation

  • Norman S. Fieleke, 1997. "Popular myths about the world economy," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 17-26.
  • Handle: RePEc:fip:fedbne:y:1997:i:jul:p:17-26
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    References listed on IDEAS

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    Cited by:

    1. Carlos Riojas & Alfonso Alarcon, 2004. "Regionalizacion y cambio institucional en Mexico a finales del siglo XX," EconoQuantum, Revista de Economia y Negocios, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 1(1), pages 93-115, Julio-Dic.

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    Keywords

    International trade;

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