Economics Questions

Re: No Response on Imports Constitute Exports?

Bogart — Thu, 15 Jan 2009 18:59:29 GMT

I forget who said this but it is a relevant little Austrian Economics Proverb:

"If you don't like the balance of paymets then stop computing it."

The same extends for all this import-export nonsence. Individuals trade across borders for the same reasons they trade within borders, because they desire to do so. It is meaningless to say city, county, state, country... A has an advantage in balance of payments wtih city, state, country .... B because ultimately there are two individuals who are better off because the trade took place.

Re: No Response on Imports Constitute Exports?

Jon Irenicus — Thu, 15 Jan 2009 18:47:04 GMT

Rothbard indicated as much in MES IIRC.

Re: No Response on Imports Constitute Exports?

Sage — Thu, 15 Jan 2009 17:28:49 GMT

I've also been thinking about this. Looking at trade between two countries, I don't see any reason why imports have to equal exports.

Lyle D. Riggs:
Other answer, that is more consistent with Austrian principles, is to disregard the artificially boundary lines that define states and countries. For example, if Arizona exports more goods to California, then it imports, no alarms are raised. Arizona will import from other states more than it exports. So, when all trades are considered between the states in the US, there is a balance between exports and imports, but not necessarily between each state. It works the same way when countries are considered. I have only read a few articles from Austrian Economists regarding the "balance of trade" concerns. My take is that at least some Austrians do not worry about "balance of trade" issues.

This seems correct. There is no reason for "balanced trade" between two nations, but on a global scale trade would be balanced (in equilibrium?).

Re: No Response on Imports Constitute Exports?

Bostwick — Sun, 04 Jan 2009 02:09:18 GMT

Lyle D. Riggs:
It seems that if the dollar is widely used as secondary currency as it is in Central and South America that this would only delay the time between import and export. Ultimately, there would still be an export for each import. Is this correct?

This hypothetical dollar is actually involved in several isolated import/exports during its life, each in line with what Hazlitt said.

US--><--France
Dollar --><--Wine

France--><---UAE
Dollar --><--Oil

UAE --><--US
Dollar --><-- Stocks

Re: No Response on Imports Constitute Exports?

Jon Irenicus — Sat, 03 Jan 2009 14:41:06 GMT

I guess if more than one countries used the dollar, one would just refer to a dollar zone, where imports would constitute exports for that particular region? Countries are just arbitrary geographic markers for the most part.

Re: No Response on Imports Constitute Exports?

Lyle D. Riggs — Sat, 03 Jan 2009 02:48:31 GMT

I understand what you are saying. Argentina even tried for a short period to use the US Dollar as its primary currency. But, how does this change the answer? It seems that if the dollar is widely used as secondary currency as it is in Central and South America that this would only delay the time between import and export. Ultimately, there would still be an export for each import. Is this correct?

Re: No Response on Imports Constitute Exports?

Luis Buenaventura — Thu, 01 Jan 2009 04:09:08 GMT

Lyle D. Riggs:
Finally, while lots of international trades use US dollars as payments, most countries do not use dollars for domestic purchases. So, the dollars will most likely be used to purchase goods from another country that allows international trades to use dollars for payment. So, there was an export for which dollars were used and then an import for which dollars were used. So, exports begat imports.

Just responding, you made a good answer, but in fact most Central and South American countries do use the US Dollar as a secondary currency because much of their economy revolves around tourism with the US, hence nearly everybody accepts the dollar.

Re: No Response on Imports Constitute Exports?

Lyle D. Riggs — Wed, 31 Dec 2008 09:26:47 GMT

The theory works this way: Imports to the US are paid for with US dollars. Eventually, the dollars will be used to purchase goods from the United Staes, i.e., exports. This may take some time. Suppose the US and Country A both produce the same good X. A merchant from Country B sells good Y to the United States, i.e., an import. The Country B merchant now holds dollars. This merchant initially purchases good X from Country A because it costs less that good X from the US. Other merchants follow suit and buy good X from Country A. The price of good X from Country A will be bid up. If this bidding up process raises the price above the price of good X from the US, then the merchant will purchase good X from the US and the dollars will return home. So, while the dollars may pass through several hands, eventually they come home.

Other answer, that is more consistent with Austrian principles, is to disregard the artificially boundary lines that define states and countries. For example, if Arizona exports more goods to California, then it imports, no alarms are raised. Arizona will import from other states more than it exports. So, when all trades are considered between the states in the US, there is a balance between exports and imports, but not necessarily between each state. It works the same way when countries are considered. I have only read a few articles from Austrian Economists regarding the "balance of trade" concerns. My take is that at least some Austrians do not worry about "balance of trade" issues.

Finally, while lots of international trades use US dollars as payments, most countries do not use dollars for domestic purchases. So, the dollars will most likely be used to purchase goods from another country that allows international trades to use dollars for payment. So, there was an export for which dollars were used and then an import for which dollars were used. So, exports begat imports.

Re: No Response on Imports Constitute Exports?

Bostwick — Wed, 31 Dec 2008 06:41:35 GMT

Luis Buenaventura:
a nation would never have to actually buy from you, but instead with any other that accepts the currency.

That's correct. But it doesn't effect what Hazlitt said.

If France gets existing US Dollars from Germany then the US's imports and exports are not effected.

No Response on Imports Constitute Exports?

Luis Buenaventura — Wed, 31 Dec 2008 06:07:11 GMT

About a week ago I had posted on Mises.org a question, that question being (from the previous post):

In Hazlitt's Economics in One Lesson, he states that imports constitute exports (I know that you all know why), but if a currency is used and accepted by many nations (i.e. like how the Dollar is accepted universally by nearly all nations as a way to trade petroleum) a nation would never have to actually buy from you, but instead with any other that accepts the currency. Obviously, I am assuming that there would be a state in this post. Is there anybody that can dissprove my simple logic (I know you can, and it probably won't be difficult).

I only got one response, yet it didn't answer my question, so can anybody answer it?