In the latest EconTalk, “The Economics of Tariffs and Trade (with Doug Irwin)“, May 5, 2025, Russ Roberts interviews one of the top trade economists in the world, Doug Irwin. Doug recently completed an entry titled “Tariffs” for my Concise Encyclopedia of Economics.
Early in the interview, he and Russ talk about trade deficits. Like almost all economists, Russ and Doug don’t see those as a problem. But Doug had a refreshing way of putting it. He stated:
And so, the way I put it is–sometimes when I’m telling my students–you know, let’s say the government didn’t produce statistics, economic statistics. If we had inflation, would you know it? Absolutely you’d know it. Every time you go to the grocery store or someplace, you’d see it. If we’re in a recession, would you know it? Absolutely. You’d see people around you losing their jobs, maybe you yourself. If we’re running a trade surplus or a deficit, would you know it? No, it is to an abstraction. It’s not something that personally affects you directly.
Nicely done.
Also, Doug pointed out how Adam Smith nailed the issue almost 250 years ago. Doug said:
Every time I pull the book down from my shelf, The Wealth of Nations, I learn something again. I’ve read it, but I find there’s some sentence I missed or insight. And, it’s just a true book of wisdom. Here’s a guy–he didn’t have the Internet; limited to Britain and a little bit of time in France, but he knew so much and he interpreted things so well. And, it’s so relevant for today in so many dimensions.
I have the same experience. I confess, though, that I haven’t read the whole thing cover to cover. I’ve especially jumped over Smith’s discussion of taxes.
