Here's a letter that I sent yesterday to the American Prospect:
You boast that
your magazine is "the essential source for progressive ideas." And yet
your contributors, including recently Dean Baker in the blog that you host, are
forever lamenting the U.S. trade deficit ("China Knows It Will Take a
Beating on Its Treasury Investments," May 21). Alas, these laments
reveal no progress beyond the poor economic thinking and mercantilist
policy proposals of the late middle ages.
For example, in 1381
Richard Leicester, worried about England importing more than it exports
(and paying for these extra imports with money), could have been
featured in your pages when he wrote that "Wherefore the remedy seems
to me to be that each merchant bringing merchandise into England take
out of the commodities of the land as much as his merchandise aforesaid
shall amount to; and that none carry gold or silver beyond the sea, as
it is ordained by statute."*
True progress in understanding the
nature of trade and the absurdity of fretting about the "balance of
trade" – in understanding that wealth is access to goods and services
and not gold, silver, or currency per se – did not begin until the late
17th century, especially with Nicholas Barbon. Adam Smith capped this
progress when in 1776 he noted that "Nothing, however, can be more
absurd than this whole doctrine of the balance of trade."**
Sincerely,
Donald J. Boudreaux
* Quoted in Jacob Viner, Studies in the Theory of International Trade (1937), p. 6.
** Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (1776) Book IV, Chapter 3, paragraph 31.
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