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Home / Carpe Diem / Video of the day: Why trade deficits, the most misunderstood economic statistic, don’t matter. At all! – Publications – AEI

Video of the day: Why trade deficits, the most misunderstood economic statistic, don’t matter. At all! – Publications – AEI

Summary:
AEI Video of the day: Why trade deficits, the most misunderstood economic statistic, don’t matter. At all! In the video above (and in the accompanying article), economist Dan Mitchell explains the simple, but frequently misunderstood, economic reality that trade deficits don’t matter. At. All. Related: As economist Timothy Taylor (of the Conversable Economics blog) wrote back in 1999 for National Affairs (“Untangling the trade deficit“): The competition for most misunderstood economic statistic is hard-fought, but there is a clear winner: the trade deficit. No other number is interpreted so differently by professional economists and the general public.  Common reactions to the U.S. trade deficit range from belligerence to dejectedness: It is thought that America’s trade deficit exists

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AEI
Video of the day: Why trade deficits, the most misunderstood economic statistic, don’t matter. At all!

In the video above (and in the accompanying article), economist Dan Mitchell explains the simple, but frequently misunderstood, economic reality that trade deficits don’t matter. At. All.

Related: As economist Timothy Taylor (of the Conversable Economics blog) wrote back in 1999 for National Affairs (“Untangling the trade deficit“):

The competition for most misunderstood economic statistic is hard-fought, but there is a clear winner: the trade deficit. No other number is interpreted so differently by professional economists and the general public.  Common reactions to the U.S. trade deficit range from belligerence to dejectedness: It is thought that Americas trade deficit exists either because of the skullduggery and unfair trade practices of countries that shut out U.S. products, or because American companies are failing to compete against their global competitors. In either case, the preferred solution is often to get tough in trade negotiations for the sake of protecting U.S. jobs. But, according to most economists, cutting across partisan and ideological lines, such mainstream beliefs about cause, effect, and solution are wrong. Even more bothersome, these popular beliefs are wrong not simply because the evidence is against them—although it is—but because they reflect fundamental misunderstandings of what the trade deficit is and how it interacts with the rest of the economy.

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Video of the day: Why trade deficits, the most misunderstood economic statistic, don’t matter. At all!
Mark Perry

Mark Perry
Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan’s Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

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