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Wednesday, December 21, 2005

12 Myths Of Econ From Boudreaux

Don Boudreaux at Cafe Hayek lists the 12 myths ("pernicious" he calls them) commonly considered true by non-economists. Read the all here.

Some are:

11. A trade deficit is bad.

8. Prices and wages are arbitrarily set by businesses.

5. More people necessarily means a level of per-capita well-being that is lower than it would otherwise be.

3. Democratically chosen government officials generally act with the intention of promoting the public interest, and they are uniquely positioned and qualified to determine what the details of the public interest are and to know best how to promote that interest.

In an e-mail, he once wrote "I just love economics!" Boudreaux is weird. I'm getting weirder every day.


At 7:13 AM, Blogger francois said...

Good one, although I hope that either you or he will explain a couple of them in more detail, especially the stuff about the trade deficit. I don't quite have my head around that one.

At 3:28 PM, Blogger neal phenes said...

I have done my research and will do a post soon on the economic argument that the trade deficit means close to nothing.

The short and sweet is that there really is no such thing as a trade deficit because goods, services or money are always exchanged for goods, services or money. But everything is bought and paid for somehow.

We run this scorecard to see what hard goods have gone where. Did more come in or more go out. The hard goods score card shows more came into the borders of the old US of A than went out of the old US of A. Thus, the deficit.

But the outsiders with greenbacks put them somewhere and it wasn't under their mattresses in China or wherever (China). The green came back into the old US of A invested into buildings, corporate stocks and federal debt investments. If you live outside of the US, you want those US green things. Then you can park them back into the US for safety and growth. So long as we remain a safe place to keep wealth, it will remain here.

There is no better alternative for the rest of the world. And we help drive their prosperity while paying smaller amounts of green for those hard goods we want. Have any Americans been waiting long to pay bargain prices on anything lately?

BTW they purchase a lot of our services for which we have a trade surplus, as I recall reading somewhere. I know we provide services to certain countries on a surplus basis anyway.

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