World Economic Trilemma

While reading yesterday [hat tip to naked capitalism] I followed a link to Dani Rodrik’s blog post on The inescapable trilemma of the world economy. Dani has an interesting take on the problems of globalization and economic integration which I returned to in my post on the Eurozone’s woes. Dani says:

Sometimes simple and bold ideas help us see more clearly a complex reality that requires nuanced approaches.  I have an “impossibility theorem” for the global economy that is like that. It says that democracy, national sovereignty and global economic integration are mutually incompatible: we can combine any two of the three, but never have all three simultaneously and in full.

Here is what the theorem looks like in a picture:

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