How Crazy is Trump? Part 1 (and counting…)

Yesterday, Andrew Coyne wrote the following:

Whether a country has a trade deficit or a trade surplus, that is — with the world in general, let alone with individual countries — does not make the slightest difference to its welfare. It is a primitive fallacy to think that it does…

Where did Trump (and others) get the idea that the purpose of trade was to run a surplus? Perhaps, as a businessman, he equates a country’s trade balance with a company’s profit and loss statement. More likely, it is a matter of mistaking accounting for economics. Every first-year economics student is taught that national income equals consumption plus investment plus government spending plus the difference between exports and imports: the trade balance.

I’ve found that being charitable, when it comes to assessing people’s understanding of basic economics, is a habit seldom rewarded.

This afternoon, President Trump’s spokesman announced that they may impose a 20% tariff on Mexican imports as a way of making Mexico “pay” for the border wall. Which of Coyne’s two theories is this consistent with? The “primitive fallacy,” or the “mistaking accounting for economics”? Methinks the primitive fallacy.

As many economists will no doubt be keen to point out, imposing a tariff on imports from Mexico is actually a way of making Americans pay for the wall with Mexico. In the real world, that is…


How Crazy is Trump? Part 1 (and counting…) — 4 Comments

  1. I suspect that thinking that reasoning behind the 20% tariff is something as complex as a view — even a mistaken view — about trade deficits is also being too charitable. I suspect it’s simpler still: ‘there’s a flow of money, and we could grab some.’

  2. You have to hand it to Trump. He keeps signing repulsive executive orders, which will probably never be implemented while still playing to his supporters (Trumpeteers?), while burying social media in nonsensical sound bites about crowd sizes or list of crimes by immigrants or illegal voters, to which the media predictably responds with time-wasting outrage. It’s not even a good con, but people fall for it anyway.

  3. Trump may or may not be crazy, but this is hardly evidence of it. A lot of high up politicians have dubious views on economics. Remember the crew that gave the world the euro. None of them were named Trump.

  4. The Euro analogy is inapt. In fact, almost all analogies are inapt and constitute a far inferior mode of explanation than is provided by careful reasoning through the logical and normative merits of discrete choices. Mr. Heath’s book Enlightenment 2.0 should be required reading. It analyzes today’s political and policy disputes using a rubric contrasting rationality against craziness, and disarming most of the prevailing paradigms, like the left-wing/right-wing division, or theories of the fall of globalism and the rise of clash of civilizations (e.g., John Mearshiemer). The U.S. made a huge mistake in Vietnam (60s-70s), China (40s), Russia (10s-20s), and so many other countries by negligently downplaying the role nationalism played in those fundamental conflicts. And here we go again, throwing the nation-state under the bus just because we have smartphones!