… is from pages 162-163 of my old international-trade professor Fritz Machlup‘s 1964 collection, International Payments, Debts, and Gold; specifically, it’s from Machlup’s chapter – written exclusively for inclusion in this volume – “The Mysterious Numbers Game of Balance-of-Payments Statistics” (original emphasis):
Definitely “out,” relegated to the scrap heap, is the notion that there is such a thing as “the” balance of payments. Even if full and accurate information were available about each and every transaction, “the” balance would always be an arbitrary number. There are many ways of entering the many items into the various accounts, of organizing the accounts, of interpreting the resulting figures; and there is no way of arranging the data so that they can tell a true story of the causal interrelations.
One of the most consistent errors that mar discussions of international trade is the assertion that reported results of accounting conventions are causes for concern. I refer here specifically to the concern that is fomented whenever a country runs a monthly or annual reported “trade deficit” or current-account deficit. Most people who fret over, say, the U.S. trade deficit don’t know what it is – and far too many of the few who do know what it is treat the conventional ways in which various economic transactions are recorded in international accounts as possessing an economic significance that they simply do not possess.
