Economic interdependence is a consequence of specialization, or the division of labor, and is almost universal. The participants in an economic system are dependent on others for the products they cannot produce efficiently for themselves. This physical interdependence implies corresponding linkages in the demands for products and the incomes of the participants. Economic interdependence was described as early as 1838, when A. A. Cournot wrote:

"...but in reality the economic system is a whole of which the parts are connected and react on each other. An increase in the incomes of the producers of commodity A will affect the demand for commodities B, C, etc., and the incomes of their producers, and, by its reaction will change the demand for commodity A."

Interdependence is not rigid because firms, individuals and nations may change from the production of one set of products to that of another. Its effects are evident in most general equilibrium theory models which usually require a computer to sort out the complex interactions. Economic interdependence may be a source of the aggregation problem

Aggregation problem

An aggregate in economics is a summary measure describing a market or economy. The aggregation problem refers to the difficulty of treating an empirical or theoretical aggregate as if it reacted like a less-aggregated measure, say, about behavior of an individual agent as described in general...

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The economic interdependence of nations and groups of nations is of special importance. It describes countries/nation-states and/or supranational states such as the European Union

European Union

The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

 (EU) or North American Free Trade Agreement

North American Free Trade Agreement

The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement...

(NAFTA) that are specialized because of climate, the availability of labor and capital, and a variety of historical and cultural factors. Such nations or groups may be dependent on one another for any (or all) of the following:

• food
• energy
• minerals
• manufactured goods
• multinational/transnational corporations
• financial institutions
• foreign debt