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The trade balance chimera in two sentences – Publications – AEI

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AEI The trade balance chimera in two sentences That’s the title of this post by Pierre Lemieux: Charles H. Carroll (1799-1890) was a Maryland and Massachusetts merchant who wrote on economics often with surprising insights. In a 1862 article reproduced in his book Organization of Debt into Currency and Other Papers, he destroyed the myth of the unfavorable balance of trade in two sentences (emphasis in original): The balance of trade, that has occupied so extensively the thoughts of politicians, is a chimera. The balance of profit is in our favor only when our return cargoes exceed the outward in value; in other words, when our imports exceed our exports. It can be argued that the only way of escaping Carroll’s conclusion is to realize that the balance of trade is meaningless in an

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The trade balance chimera in two sentences

That’s the title of this post by Pierre Lemieux:

Charles H. Carroll (1799-1890) was a Maryland and Massachusetts merchant who wrote on economics often with surprising insights. In a 1862 article reproduced in his book Organization of Debt into Currency and Other Papers, he destroyed the myth of the unfavorable balance of trade in two sentences (emphasis in original):

The balance of trade, that has occupied so extensively the thoughts of politicians, is a chimera. The balance of profit is in our favor only when our return cargoes exceed the outward in value; in other words, when our imports exceed our exports.

It can be argued that the only way of escaping Carroll’s conclusion is to realize that the balance of trade is meaningless in an individualist (political or methodological) approach to society. Each individual or corporate body takes care of his own balance of trade, and whatever collective balance of trade emerges has no more economic significance than if we discovered a deficit in the trade balance of the group of individuals shorter than average vis-à-vis the taller ones.

MP: You might be a protectionist….. if you send a vessel loaded with domestic goods out on the water, and pray that it comes back empty.

The trade balance chimera in two sentences
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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