{"id":43163,"date":"2018-04-22T03:00:21","date_gmt":"2018-04-22T07:00:21","guid":{"rendered":"http:\/\/quotulatiousness.ca\/blog\/?p=43163"},"modified":"2018-04-20T16:06:33","modified_gmt":"2018-04-20T20:06:33","slug":"the-balance-of-trade-hobbyhorse","status":"publish","type":"post","link":"https:\/\/quotulatiousness.ca\/blog\/2018\/04\/22\/the-balance-of-trade-hobbyhorse\/","title":{"rendered":"The balance-of-trade hobbyhorse"},"content":{"rendered":"

Don Boudreaux<\/a> doesn’t have much sympathy with people who agonize over or — worse — set their national economic policies based on the balance of trade:<\/p>\n

No concept in economics is responsible for more confusion and policy mischief than is the so-called \u201cbalance of trade.\u201d The many fallacious beliefs about a trade deficit include the notion that \u2013<\/p>\n

\u2013 aggregate demand drains from each economy that runs a trade (or current-account) deficit, thus causing overall employment to fall in each country that runs a trade deficit;<\/p>\n

\u2013 the GDP of a country that runs a trade deficit is lowered by that trade deficit;<\/p>\n

\u2013 the denizens of a country that runs a trade deficit spend too much on consumption and save too little;<\/p>\n

\u2013 a trade deficit is evidence of poor policy in any country that runs such a deficit;<\/p>\n

\u2013 a country\u2019s trade deficit would be \u2018cured\u2019 if only the people of that country were to save more or to buy fewer imports;<\/p>\n

\u2013 a trade deficit in the home economy is evidence of \u2018unfair\u2019 trade practices by that country\u2019s trading partners;<\/p>\n

\u2013 a trade deficit means that each country that runs one is \u201closing,\u201d and that to \u201cwin\u201d at trade means running a trade surplus (or, at least, to not run a trade deficit);<\/p>\n

\u2013 a trade deficit run by the home economy means that that economy\u2019s trading partners who have trade surpluses are being enriched at the expense of the people in the home economy;<\/p>\n

\u2013 a trade deficit necessarily makes the citizens of any country that runs one more indebted to foreigners;<\/p>\n

\u2013 a trade deficit involves a net transfer of capital or asset ownership from citizens of each country that runs a trade deficit to citizens of countries that run trade surpluses;<\/p>\n

\u2013 each dollar (or each yen, or each euro, or each peso, or each pound, or each you-name-the-currency) of a country\u2019s trade deficit today means that the people of that country must sacrifice that much consumption sometime in the future;<\/p>\n

\u2013 bilateral trade deficits have economic meaning and relevance;<\/p>\n

\u2013 a trade deficit is something that should be \u201cfixed\u201d \u2013 that is, reduced or eliminated \u2013 through government policy, including especially through trade restrictions.<\/p>\n

None of the above-listed beliefs about trade deficits is supportable. None. Not one. Not in the least. Each and every one of these beliefs is easily refuted with either basic economics or, in many cases, with simply a clarification of the definitions of terms and concepts used in national-income accounting. And yet these \u2013 and no doubt other \u2013 false beliefs about trade deficits (and about the so-called \u201cbalance-of-payments\u201d generally) are widespread and spill daily from the mouths and keyboards of politicians, pundits, professors, and propagandists.<\/p>\n

The belief that trade deficits cause economic problems in countries that run them \u2013 and that trade deficits necessarily reflect poor policies or profligacy by the people of those countries \u2013 is the economic equivalent of, say, the belief that the world is ruled by sorcerers who ride fire-breathing dragons and who marry their daughters off to centaurs. Both sets of beliefs are pure madness, yet one of them serves as the basis for real-world policies.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Don Boudreaux doesn’t have much sympathy with people who agonize over or — worse — set their national economic policies based on the balance of trade: No concept in economics is responsible for more confusion and policy mischief than is the so-called \u201cbalance of trade.\u201d The many fallacious beliefs about a trade deficit include the […]<\/p>\n","protected":false},"author":1,"featured_media":35193,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[25,84,28],"tags":[320,1093,213,266,101],"class_list":["post-43163","post","type-post","status-publish","format-standard","hentry","category-economics","category-government","category-media","tag-freetrade","tag-macroeconomics","tag-newspapers","tag-protectionism","tag-tv"],"jetpack_featured_media_url":"https:\/\/quotulatiousness.ca\/blog\/wp-content\/uploads\/2016\/06\/favicon.png","jetpack_shortlink":"https:\/\/wp.me\/p2hpV6-beb","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/43163","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/comments?post=43163"}],"version-history":[{"count":1,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/43163\/revisions"}],"predecessor-version":[{"id":43164,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/43163\/revisions\/43164"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media\/35193"}],"wp:attachment":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media?parent=43163"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/categories?post=43163"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/tags?post=43163"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}