Friday, March 02, 2007

Problems of the Transition Made Worse by Populist Remedies

Andrew Roth (March 2) on ‘The Club for Growth’ Blog quotes the paragraph that Don Bourdreaux is quoted from on Red State (earlier today), headed “Adam Smith on the Trade Deficit”:

From the Wealth of Nations:

Nothing, however, can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce are founded. When two places trade with one another, this doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses, and the other gains in proportion to its declension from the exact equilibrium. Both suppositions are false. A trade which is forced by means of bounties and monopolies, may be, and commonly is disadvantageous to the country in whose favor it is meant to be established...But that trade which, without force or constraint, is naturally and regularly carried on between any two places, is always advantageous, though not always equally so, to both.”
[WM IV.iii.c: pp 488-9]

I agree whole heartedly. What different laws have been discovered that refute these words. Of course there are none.

What appears to be a problem of the transition, which Smith drew close attention to, is escalated into a crisis of imbalance, for which the politicians remedies are worse than the problems of the transition.


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