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Quotation of the Day…

… is from pages 549-550 of Douglas Irwin’s splendid essay “Adam Smith and Free Trade,” which is chapter 32 in the 2016 volume, edited by Ryan Patrick Hanley, Adam Smith: His Life, Thought, and Legacy; Doug is here writing about Adam Smith’s views on trade policy (citations deleted; links added):

In Smith’s day, governments often sought to increase exports and reduce imports so that the country would have a trade surplus. Smith was dismissive of such government attempts to improve the balance of trade. In fact, Smith wrote that nothing could be more absurd than the balance of trade doctrine. If the value of a country’s exports exceeded the value of its imports, the country would receive an inflow of gold and bullion from the rest of the world. Smith did not think that this inflow was inherently desirable because it confused money with national wealth. Furthermore, having a trade surplus did not necessarily mean that the country would flourish, just as having a trade deficit did not necessarily mean that the economy would suffer. Smith argued that there is no country in which “the approaching ruin has not frequently been foretold” by an unfavorable balance of trade. Yet despite all the anxiety and the vain attempts by policy makers to turn the balance of trade in their favor, Smith did not believe any country had been impoverished because of this cause. Instead, he maintained, “in proportion as they have opened their ports to all nations; instead of being ruined by this free trade, as the principles of the commercial [that is, mercantilist] system would lead us to expect, have been enriched by it.”