Doug Irwin on Trade Deficits and the Wealth of Nations
The Wisdom of Adam Smith and the Economics of Tariffs and Trade
In a recent episode of EconTalk, titled “The Economics of Tariffs and Trade (with Doug Irwin)”, Russ Roberts sits down with renowned trade economist Doug Irwin to discuss the complexities of tariffs and trade. Irwin, who recently contributed an entry on “Tariffs” for the Concise Encyclopedia of Economics, shares his insights on various economic issues.
One of the key topics addressed early in the interview is the concept of trade deficits. Both Roberts and Irwin, in line with the majority of economists, agree that trade deficits are not necessarily a cause for concern. Irwin offers a unique perspective on this, stating:
“Sometimes when I’m telling my students… 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.”
This perspective highlights the often abstract nature of economic indicators like trade deficits and their limited impact on individual consumers.
Irwin also praises the timeless wisdom of Adam Smith, particularly referencing Smith’s seminal work, The Wealth of Nations. He notes:
“Every time I pull the book down from my shelf, I learn something again… It’s just a true book of wisdom. Here’s a guy… he knew so much and he interpreted things so well. And, it’s so relevant for today in so many dimensions.”
Irwin’s admiration for Smith’s insights underscores the enduring relevance of classical economic theories in today’s global economy.
Reflecting on my own experience, I can relate to the continuous learning that comes from revisiting classic economic texts like The Wealth of Nations. While I may have skipped over certain sections, such as Smith’s discussions on taxes, the foundational principles laid out by economists like Smith continue to shape our understanding of economic phenomena.
