Among the many strokes of unearned good fortune that make my life far richer than it would otherwise be is my having had as a teacher the great Leland Yeager. Although now 93, Leland remains as insightful, as informed, as scholarly, as clear, and as relevant as ever. Here he is on Trump’s deep misunderstanding of trade and of so-called “trade deficits.” (HT David Boaz and Jon Murphy) A slice (but do read the whole thing, which isn’t very long):
Nor does he understand how we gain in buying goods cheap from abroad. What difference does it make if steel and aluminum are cheap because of low foreign prices or because they grow cheaply on bushes at home? Money cost is a measure of opportunity cost, which means the loss of other goods when resources go instead to make the particular good in question. Opportunity cost reflects scarcity. Scarcity applies even to prosperous America, where we could enjoy still higher standards of living if food, clothing, shelter, entertainment, and other goods and services came costlessly and miraculously from heaven. Scarcity and how gains from domestic and foreign trade alleviate it are fundamentals of economics. The principle of comparative advantage goes far in explaining how.
