Here’s a letter to the Wall Street Journal.
Editor:
Anthony deBarros and Peter Santilli report on “the countries fueling America’s $1.2 trillion goods trade deficit” (March 1).
With respect, what’s the point of such a report? Eighty percent of U.S. GDP is produced by the service sector – implying that the vast majority of Americans have a comparative advantage at producing services. Given this reality, it would be bizarre if America did not have a large so-called “goods trade deficit.”
I write “so-called goods trade deficit” because, in fact, this accounting artifact is no more an economically meaningful concept than is Taylor Swift’s “goods trade deficit” with the merchants from whom she – a service provider – acquires her lipstick, clothing, houses, and private jet.
Just as Ms. Swift would make herself much poorer if she adjusted her economic activities to reduce her “goods trade deficit,” so too would we Americans be made poorer if our government – misled into thinking that a “goods trade deficit” run by a country highly specialized in services is a problem requiring correction – forced us to adjust our economic activities to reduce America’s so-called “goods trade deficit.”
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
