First it should be clearly understood that despite its wide and time-honored use, the “balance of trade” is an arbitrary and fearfully vague notion.
Morgenstern goes on in the chapter from which this quotation is drawn to detail the countless details about trade that are necessarily missed by even the most careful and apolitical attempt to measure flows of imports, exports, capital, gold, and currencies.
And so the “balance of trade” is not only a dubious theoretical concept – as it treats each country as if that country is a unitary economic entity, more akin to a business firm than to a spontaneous economic order – it is a concept for which it is practically impossible to gather reliable, precise, and detailed data. Therefore, to draw conclusions from any report on a country’s “balance of trade” about the likes of that country’s rate of savings or other countries’ trade practices is a foolish practice. Yet such foolishness persists because nothing is easier for protectionists to demagogue than is the “balance of trade.”
See also this earlier Quotation of the Day .