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If 5-2=3, How Can 5+2=3?

Here’s a letter to the Wall Street Journal:


With China’s (re)turn to totalitarianism, knotty questions about trade policy are in America’s future. Regrettably, our ability to grapple with these challenges is weakened by economically uninformed analyses of the sort offered by Greg Ip in “As Chinese Trade Surpluses Persist, So Will Risk of Trade Wars” (July 8).

The flaws with this column are inadvertently summarized in its nonsensical sub-heading: “By suppressing consumption, China imposes a production glut on the world, to the detriment of its own workers and trading partners.”

Beijing’s restriction of the Chinese people’s ability to consume does indeed harm the Chinese people: they have less to consume. But any resulting “glut” of output on global markets which increases the amounts of goods available for consumption by us Americans and others outside of China is, to us, not a detriment but an economic benefit. We have more to consume – meaning that Beijing’s policy makes us richer.

It’s impossible not to scratch one’s head at a columnist who, after correctly noting that a people are harmed when their access to goods and services shrinks, insists also that a people are harmed when their access to goods and services expands.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030