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Here’s a letter to Yahoo!Finance:


May I plead with you to improve the economic literacy of your reporting on international trade? A few days ago your reporter Enda Curran opened a story with this line: “The US goods-trade deficit with China shrank to the smallest total since 2010 last year” (“US Trade Deficit With China Narrows to Lowest Since 2010,” Feb 7)

Can I ask you, or Mr. Curran, what is so significant about trade in tangible things (that is, in goods)? As signaled by the fact that approximately three-quarters of the value of U.S. economic output is intangible things (that is, services), we Americans overwhelmingly have comparative advantages at producing intangible economic outputs. It’s only natural, then, that we import more tangible things than we export, and export more intangible things than we import. (In 2023 we Americans exported more than $288 billion in services than we imported.)

More fundamentally, the tangibility or intangibility of things traded is as economically irrelevant as is the color of things traded or the number of syllables used to describe the things traded. The opening of Mr. Curran’s report, therefore, makes no more sense than if it had instead read “The US three-syllable-things trade deficit with China shrank to the smallest level since 2010 last year.”

I recognize that reporting on a country’s “goods-trade deficit” or “goods-trade surplus” is commonplace. But so, too, was it once commonplace to believe in ghosts. It’s long past time to bury the silly economic superstition that economic meaning resides in the tangibility or intangibility of things traded.

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

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