Prices As The Great Equalizer & Trade Deficits

Economist Don Boudreaux has two very informative blogs.

The first one deals with prices and how they are the true equalizer. In direct contradiction to those who use the poor as an excuse for price controls. He writes,

Any practical, realistic method apart from rationing by price hikes will involve arbitrariness at least as great (I think greater) than whatever arbitrariness there is in income distribution.


One great advantage of rationing by market prices is that they reduce to a minimum the role of arbitrariness. Price are, in other words, a great equalizer. Anyone who is willing to pay the market price for a good or service is just as likely to get that good or service as is the seller’s mother, neighbor, or bowling buddy.


The second one addresses the often misunderstood 'trade deficit'. He writes,

But the trade deficit is no cause for concern. It reflects foreigners’ preference to invest in American assets rather than to cash out all of their dollar holdings immediately for goods and services. This fact means not only that more investment than otherwise takes place in the U.S., but also that more foreigners have real reasons to wish the American economy well.


Your newspaper would help to end this needless fretting by referring not to the "trade deficit" but to the "capital-account surplus." The two are the same thing, except that the former sounds oh so very ominous.



Two blogs worth reading.

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