ABSTRACT
All decisions involving the allocation of resources have an opportunity cost, and this applies as much to export growth and foreign investment as to other economic variables. Rational policy involves maximization of both subject to relevant constraints. To foster export growth unconstrained by any objective function is mercantilism, discredited by Adam Smith over two centuries ago. Similarly, a policy regime that seeks to maximize foreign direct investment flows as if these were costless is non-rational. The basic strategy issue is what policy framework is likely to maximize the benefits of each.
