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Here’s a letter to a sympathetic patron of Cafe Hayek:
Mr. Fulton:
Thanks for your e-mail.
I did indeed read in today’s Wall Street Journal [2] about the decline in U.S. manufacturing output, and I agree that this decline likely has much to do with Trump’s war on Americans who trade with foreigners.
But I’ll refrain from blogging on it. There’s a larger monster that lurks, one that I don’t wish to feed. Indeed, I want to do my part to slay this beast. This larger monster is the too-frequent misuse of economic statistics to stir up opposition to free trade.
Ultimately it matters not one whit how many things conventionally classified as “manufacturing output” are produced in the U.S. What ultimately matters is how many goods and services we Americans are able to acquire for our consumption, with much of this acquisition coming through peaceful commerce with foreigners.
If we produce nothing but outputs classified as services – as, by the way, the great majority have done for decades – and in exchange for our services acquire through trade whatever manufactured goods we chose, there’s no problem whatsoever. Yet this situation would be trumpeted loudly as evidence that the American economy is in decline and, as such, suffers a “problem” that must be “solved” with tariffs and other government interventions.
But any such conclusion is ridiculous. As far as economic policy goes, statistics on manufacturing output are no more relevant than are statistics on yellow-things output, on curvy-edged-things output, or on the output of people who are left-handed, have green eyes, and were born east of the Mississippi.
Earlier this week I was with Deirdre McCloskey and asked her why public resistance to the case for free trade seems today to be no weaker than it was when Adam Smith wrote An Inquiry Into the Nature and Causes of the Wealth of Nations. Deirdre immediately and wisely pointed to the misuse of economic statistics.
I don’t deny that much value is to be had from the careful gathering and study of some economic statistics. But I believe also that a great bulk of them – especially those that bear on international trade – unleash far more smoke, confusion, and devilment than light, insight, and sound policy.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030