Autarky
Topic: International Trade Policy, WTO and Intellectual Property · NCERT: Beyond NCERT
Meaning
Autarky is a state of full economic self-sufficiency. The country does not trade with the outside world, so it can consume only what it produces itself. Its consumption can never go beyond its own production possibility frontier, which is the limit of what it can produce with its own resources. Economists use autarky as the starting point for measuring how much a country gains when it opens up to trade.
Example
Take David Ricardo's two-country case. In autarky, England and Portugal must each make both cloth and wine for themselves. If they specialise and trade instead, both can consume more of each good than they could alone.
Don't confuse with
- Import substitution: India's policy from 1951 to 1990 replaced imports with home production behind tariffs and quotas, but India still traded. Autarky means no trade at all.
Related concepts
- Absolute advantage
- Comparative advantage
- Gains from trade
- Heckscher-Ohlin theory
- Stolper-Samuelson theorem
- Leontief paradox
- Intra-industry trade
- New trade theory
- Gravity model of trade
- Entrepot trade