Autarky

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Autarky refers to two separate, but related, ideas in macroeconomics: that a country can be self-sustaining (a positive statement) and that it should (a normative statement).

An autarkic country does not participate in international trade. No country has been able to produce the full range of goods demanded by its population at competitive prices. Indeed, those that have tried to do so have condemned themselves to inefficiency and comparative poverty, compared with countries that engage in international trade. This results from the fact that countries have comparative advantage in different areas; for example, the United States has a comparative advantage in producing capital-intensive goods, whereas China has a comparative advantage in producing labor-intensive goods; it is thus more efficient for the United States to produce capital-intensive goods cheaply and trade them for Chinese labor-intensive goods than to produce all types of goods domestically.

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