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Quotation of the Day…

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… is from pages 476-477 of the 5th edition (2015) of Thomas Sowell’s Basic Economics [2]:

41DmJtOy2tL._UY250_The basic facts about international trade are not difficult to understand.  What is difficult to untangle are all the misconceptions and jargon which so often clutter up the discussion.  The great U.S. Supreme Court Justice Oliver Wendell Holmes said, “we need to think things instead of words.”  Nowhere is that more important than when discussing international trade, where there are so many misleading and emotional words used to describe and confuse things that are not very difficult to understand in themselves.

For example, the terminology used to describe an export surplus as a “favorable” balance of trade and an import surplus as an “unfavorable” balance of trade goes back for centuries.  At one time, it was widely believed that importing more than was exported impoverished a nation because the difference between imports and exports had to be paid in gold, and the loss of gold was seen as a loss of national wealth.  However, as early as 1776, Adam Smith’s classic The Wealth of Nations argued that the real wealth of a nation consists of its goods and services, not its gold supply.

Too many people have yet to grasp the full implications of that, even in the twenty-first century.  If the goods and services available to the American people are greater as a result of international trade, then Americans are wealthier, not poorer, regardless of whether there is a “deficit” or “surplus” in the international balance of trade.

DBx: (I disagree here with Sowell only in his assessment of Oliver Wendell Holmes, who I believe not to have been great.)

Let’s list some other familiar yet wholly misleading words and phrases used in discussions of international trade:

– “dumping” – as in “Foreigners are dumping goods on us!” (Meaning: foreigners are increasing Americans’ wealth by increasing our access to goods and services.)

– “flooding” – as in “Foreigners are flooding our market with too many of their goods!” (Meaning: foreigners are selling to Americans as much as Americans are willing to buy from foreigners.)

– “unfair trade practices” – as in “Foreigners are charging American consumers unfairly low prices!”  (Meaning: foreigners are successfully competing for the patronage of American consumers by offering these consumers attractively low prices.)

– “level the playing field” – as in “Our government should level the playing field of international trade by imposing higher tariffs on imports!”  (Meaning: our government should tilt the playing field of international trade by imposing higher tariffs on imports.)

– “our dollars” – as in “Foreigners are accumulating too many of our dollars!”  (Meaning: foreigners are earning lots of dollars from Americans, dollars that in fact do not belong to those who issue this complaint and who mask a core fallacy of their complaint by using a first-person plural possessive pronoun.)

– “invading our market” – as in “Foreigners are invading our market!”  (Meaning: foreigners are successfully competing for the dollars of many American consumers – dollars that, again, are not collectively owned by “us.”)

– “They’re killing us!” – as in “They’re killing us!”  (Meaning: they’re enriching us and, in doing so, pushing many American firms and workers to switch to more productive lines of work.)

This list can be lengthened.

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