Jeff Jacoby’s attempt to calm people’s fears of a U.S. trade deficit is informed and eloquent (“The trade deficit is up again. No worries.” May 11). Applause would come even from Adam Smith, who wrote that “[n]othing, however, can be more absurd than this whole doctrine of the balance of trade.”*
Unfortunately, it’s also true that nothing can be more serviceable for politicians itching to transform economic ignorance into votes than this whole doctrine of the balance of trade. Bellowing about “the trade deficit” is a sure-fire way to incite the economically uninformed to support protectionist restrictions that artificially enrich political powerful producers at the larger expense of the public. This cronyist transfer of wealth will end only when we eliminate a deficit that we should truly fear, namely, the deficit of economic understanding. Fortunately, Jacoby is on the job.
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
* Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (1776), Book IV, chapter 3, paragraph 31.