Thus, a balance should be struck between economic arguments of efficiency and the need for varied local industry. In an apparent shift from earlier writings, Keynes (1944) stated the following:.
I sympathize, therefore, with those who would minimize rather than with those who would maximize, economic entanglements between nations. Ideas, knowledge, art, hospitality, travel -- these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and above all, let finance be primarily national.
Keynes' ambiguous stance on the topic can be attributed to his belief that "it is better to be roughly right than to be precisely wrong- - A policy that has paid off. Keynesian theory is widely accepted in modern economics, with renowned economist Milton Friedman having stated that "we are all Keynesians now-.
Far less ambiguous was Keynes' archrival, Austrian economist Joseph Schumpeter (1883-1950) who rejected protectionist policies, and argued that since all industries are mutually dependent, regulation of a single industry leads to what he termed "creeping socialism-, with government essentiality assuming a managerial role throughout the entire economy (Schumpeter, 1942). He also argued that free trade and open markets bring about innovation in the form of "gales of creative destruction".
Keynes' acceptance of the need of localised trade and Schumpeter's concept of interdependency as well as the role of innovation in an economy may be considered to have seminal elements in modern day cluster theory. Despite this, classical economics of specialisation and comparative advantages stands in contrast to neoclassical economics of localisation leading to a competitive advantage. .
The dominant view in the post-World War II period rested on endowments of generic factors of production (e.g., natural resources, capital, labour).
