The Impossible Trinity
Version 1.0.0 · Updated 2026-07-30
CORE DEFINITION
An "iron law" derived from the Mundell-Fleming model: under open economy conditions, a country cannot simultaneously achieve the following three goals: (1) fixed exchange rate regime, (2) independent monetary policy, and (3) free capital flow. At most, two can be achieved, and the third must be sacrificed. Scaffold role: cognitive constraint on policy. It is as inviolable as the "law of conservation of energy." Any policy that claims to achieve all three simultaneously is a "perpetual motion machine" fantasy. Understanding this allows one to see the difficult trade-offs behind various countries' economic policies.
SCAFFOLDING EFFECT
Reduce cognitive load
Cognitive constraint on policy. It is as inviolable as the "law of conservation of energy." Any policy that claims to achieve all three simultaneously is a "perpetual motion machine" fantasy. Understanding this allows one to see the difficult trade-offs behind various countries' economic policies.
Anchor fast decisions
Among three ideal goals, at most two can be achieved simultaneously; the third must be sacrificed, revealing a hard trade-off triangle in policy/design.
MINIMUM ACTION
In progress 0/1Practice this model in one real situation:
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Source support: Explicit
- zh.wikipedia.orghttps://zh.wikipedia.org/wiki/%E4%B8%89%E5%85%83%E6%82%96%E8%AE%BAverified
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