… is from pages 319-320 of Bob Higgs’s insightful essay “Against the Whole Concept and Construction of the Balance of International Payments,” which appears in the Fall 2018 issue of the Independent Review (citation omitted):
Separating the trading entities into national aggregates allows a variety of fallacious conclusions to be drawn by artful intriguers. Historically such intriguers formed practically an entire “school” of economic policy now known as mercantilism. In his classic work The Wealth of Nations (1776), Adam Smith exposed many of the errors and misconceptions of this school and argued forcefully for freedom of trade as the policy consistent with maximization of people’s wealth as a whole rather than augmentation of the intriguers’ wealth at the expense of the general public. As Smith concluded, “Nothing . . . can be more absurd than this whole doctrine of the balance of trade.”
A little later, David Ricardo, drawing on earlier analysis by James Mill, explained the logic of the Law of Comparative Advantage, demonstrating that even traders with “absolute advantage” in every type of production could still gain by obtaining certain products by trade rather than by their own production. This foundational principle of economics has debunked mercantilism and its evil policy spawn, protectionism, ever since. Yet given the public’s ignorance of economic principles, artful intriguers have never ceased to profit by bamboozling people into believing that protectionism and national self-sufficiency can enhance national prosperity. Today the U.S. government proudly pursues these fallacious and immoral policies, and many people support President Donald Trump and his advisers as they peddle these ancient mistakes.