Trade is Made of Win

That's a phrase my intrepid Mere Economics co-author likes to use.

In our two most recent pieces for The Independent Institute, Scott Burns and I explain why it's therefore unfortunate that a word with negative connotations-deficit-got involved.

Here's an excerpt from our piece on the bilateral trade deficit:

Why the collective apoplexy? When it comes to analyzing trade, economists universally believe that bilateral trade deficits are meaningless. There is nothing inherently good or bad about a bilateral trade deficit. The easiest way to see this is to think about something a lot easier to wrap our heads around than multibillion-dollar trading networks between nations: our balance of trade as individuals. 

Each year, we economists run a $500 trade deficit with our barber (apologies to our follically-challenged colleagues). We buy $500 worth of haircuts from them ($50 per visit times 10 visits per year = $500). They, in turn, buy none of our economic lectures. 

Is there anything “bad” or “exploitative” about this so-called “trade deficit?” Should we abstain from visiting the barber shop and instead cut our own hair (á la President Trump)? 

And here's a snippet from our discussion of the overall trade deficit:

If a genie granted economists one wish, arguably the first thing we’d request is to strike the term “trade deficit” from our vocabulary (ok, fair, eliminating poverty may be a better choice, but capitalism is already doing a great job of that). The term has a negative connotation. Saying that our trade is in a “deficit” sounds scary, even if it’s just an arbitrary term for describing the net result of a series of win-win transactions between people in different countries in a global accounting ledger.