Unbalanced Thinking

by Don Boudreaux on July 29, 2009

Here’s a letter that I sent yesterday to NPR reporter Tom Gjelten:

Reporting Monday on trade between the U.S. and China, you interviewed University of Maryland economist Peter Morici. Mr. Morici is concerned that trade between these two countries is "imbalanced." His concern is utterly inappropriate.

Trade between the University of Maryland and Mr. Morici is also imbalanced: the University imports more from the Morici household (namely, Mr. Morici’s services as a faculty member) than the Morici household imports from the University. Yet I doubt seriously that Mr. Morici would claim that the University is getting a raw deal.

I challenge Mr. Morici to search throughout economic theory for any doctrine that suggests that even the most ideally functioning markets will result in any two economic entities – including any two countries – having "balanced" trade with each other. He’ll search in vain.

Sincerely,
Donald J. Boudreaux

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ArrowSmith

First!

vikingvista

Wasn't there a whole thread here about an hour ago? This web site is changing faster than a politician with plummeting poles.

Mercatus

You may notice some comments from the old site slowly trickle in over the next 24 hours.

vikingvista

Many great improvements to this site. Better than I thought it would be. The increased functionality of the comments section seems to reflect the value R&B place on the discussions.

Daniel Kuehn

I like it! I especially like the "like" and "report" options. Is there any chance you can make it blue, though? It just doesn't feel like Cafe Hayek with a white background :)

martinbrock

The bilateral trade deficit with China isn't so alarming, but the perpetual trade deficit with everyone could be. I understand the Laffer argument, but I also know that statesmen engineer all sorts of forcible propriety that can encourage proprietors to impose rents on me and mine. Selling entitlement to U.S. tax revenue to Chinese monetary authorities fixing exchange rates is only the most obvious example. There must be many others. Maybe the perpetual current account deficit is all about the insatiable appetite for foreign investment in the U.S., or maybe it's about the willingness of our own statesmen to sell us out.

I do know that the entire world can't retire on entitlement to U.S. tax revenue, not even the entire Chinese population. I'd like to see a deeper analysis of these deficits than "trade is good". Sure trade is good, but trade deficits are about a lot more than trade.

The Javelineer

Don, isn't there a problem though? The Chinese make all kinds of useful stuff for us. I think everything in my kitchen is made in China. The MacBook I'm typing on was assembled in China. Cool.

But what are the Chinese getting in return for all this stuff? The dollar? That's just a promise to the Chinese that they can come here and get stuff from our economy. (bad usage, 'our economy' but you get the idea)

But what stuff can they get? What are we making for the Chinese? Jack.

Eventually the Chinese are going to realize that they can consume their own products. We have nothing to sell them. The dollar is an empty promise. We're going to be screwed.

Does any of this conflict with your claims in that latter to NPR? Am I wrong?

mesaeconoguy

NPR consistently has the best sound quality.

And offensively worst content.

Seriously. I can listen for about 20 mins max, excusing the economic and/or market errors.

Even anticipation of Russ Roberts’ commentary is not enough to keep me on the dial.

Russ, why must you contribute to National Socialist Radio?