Quotation of the Day…

by Don Boudreaux on November 11, 2012

in Adam Smith, Balance of Payments, Standard of Living, Trade

… is from page 511 of the 1982 Liberty Fund version of the 1978 Oxford University Press edition of Adam Smith’s wisdom-packed Lectures on Jurisprudence; although unusually long for a “Quotation of the Day,” it is also unusually concentrated with insight and good sense; moreover, it is a quotation that certain famous economist-pundits would do well to study before next pronouncing on Americans trading with people, including the Chinese, whose passports aren’t issued by Uncle Sam (emphasis added):

The idea of publick opulence consisting in money has been productive of other bad effects.  Upon this principle most pernicious regulations have been established.  These species of commerce which drain us of our money are thought dissadvantageous and these which increase it beneficial; therefore the former are prohibited and the latter encouraged.  As France is thought to produce more of the elegancies of life than this country, and as we take much from them and they need little from us, the balance of trade is against us, and therefore almost all our trade with France is prohibited by great taxes and duties on importation.  On the other hand, as Spain and Portugal take more of our commodities than we of theirs, the balance is in our favours, and this trade is not only allowed but encouraged.  The absurdity of these regulations will appear on the least reflection.

All commerce that is carried on betwixt any two countries must necessarily be advantageous to both.  The very intention of commerce is to exchange your own commodities for others which you think will be more convenient for you.  When two men trade between themselves it is undoubtedly for the advantage of both.  The one has perhaps more of one species of commodities than he has occasion for, he therefore exchanges a certain quantity of it with the other, for another commodity that will be more usefull to him.  The other agrees to the bargain on the same account, and in this manner the mutual commerce is advantageous to both.  The case is exactly the same betwixt any two nations.  The goods which the English merchants want to import from France are certainly more valuable to them than what they give for them.  Our very desire to purchase them shews that we have more use for them than either the money or the commodities which we give for them. It may be said indeed that money lasts for ever, but that claret and cambrics are soon consumed.  This is true.  But what is the intention of industry if it be not to produce these things which are capable of being used, and are conduceive to the convenience and comfort of human life?  Unless we use the produce of our industry, unless we can subsist more people in a better way, what avails it?  Besides, if we have money to spend upon forreign commodities, what purpose serves it to keep it in the country?

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