An economic policy, to be effective, should analyze the law of comparative advantage and focus investment policy accordingly. We have become neither risk-averse nor overly cautious. What could be higher-risk than a faraway country whose language, politics, and society we neither understand nor fully trust? Rather, as in the past, we will invest for the greatest return, and that is no longer in the domestic market.
Capital is looking for greater returns in rapidly growing markets in places far from home. This is not caution; it is judgment. Neither tax cuts nor lower interest rates will create demand where there is no opportunity for return. The big lesson of 2002 is not corporate governance; it is the shift in economic roles in the global economy.
Ralph C. Deger
Menomonee Falls, Wis. As a professor of entrepreneurship, I applaud Susan Scherreik's refreshingly pragmatic "How efficient is that company?" ("The fine print," BusinessWeek Investor, Dec. 23). Using her "days" approach rather than ratios for managing cash enables the entrepreneur--and everyone else in the company--to consider the cash-flow implications of the decisions they make, whether they're in marketing, operations, or financing. A "days" analysis of the balance sheet should be on every entrepreneur's to-do list at the end of each and every month.
London Business School
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