He [Yeager] wrote with particular clarity about the much-discussed balance-of-payments deficit. After explaining the difference between the current account (the value of a country’s annual exports minus the value of its annual imports) and the capital account (the value of foreign investments in a country minus the value of the country’s annual investments elsewhere), Yeager wrote: “The balance of payments must balance.” If in one year, for example, the U.S. imports more than it exports—as Americans currently do—then it also attracts more foreign investment than other countries attract U.S. investment. (I’m simplifying a little: Foreigners’ holdings of dollars could also increase.) This is not rocket science, but what made Yeager rare was how clear his exposition was.
Just this March, Yeager pointed out that in a world of many nations, President Trump is mistaken to single out a gap between U.S. exports to China and Mexico and the larger U.S. imports from those two countries. Moreover, he called attention to Mr. Trump’s ignorance in considering “a country’s excess of imports over exports a measure of loss.” It’s actually a gain: The U.S. gets the goods.
Yes. Another name for “trade deficit” is “goods surplus.” (It should surprise no one that Leland Yeager was my teacher.)
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By the way, I’m delighted that David began his WSJ essay with praise of Leland’s crystal-clear writing. Leland had no tolerance for sloppy, overwrought, jargony, or unclear writing. And he taught his students this lesson, by instruction and by splendid example. Writing for an audience, above all, is a means of communicating; it is neither a process of taking notes for oneself nor an appropriate means of peacockery or other displays of vanity.
