The Trade Balance: Don't Worry, Be Happy
ARTHUR B. LAFFER
"The only label I willingly wear is 'made in America'."
Michael Dukakis, Democratic Candidate for President.
"We simply cannot allow this huge trade deficit to persist."
Clayton Yeutter, Special Trade Representative, Reagan administration.
At a time shortly after international trade accounting had its genesis, one distinguished between an "international balance of payments" and an "international balance of receipts." But, as time evolved, such an objective depiction of what was crumbled before the more emotive dichotomy of a "balance of payments deficit" and a "balance of payments surplus." At roughly an equivalent time, the words "debit" and "credit" were eclipsed by the words "worsen" and "improve." Who honestly could prefer worsening over improvement? With such linguistic devolution it is easy to comprehend the metastasis of bad theory and ultimately the proliferation of noxious policy.
The mercantilists of old quite deservedly were labeled as intellectually flawed by the likes of Adam Smith and other enlightened trade experts. However, the influence of accounting was far from crushed. Misnamed trade designations were