Economic Nationalism, once more
By Arnold Kling
Now consider a slightly different example in which I live, not in Virginia, but in Maine on the U.S. side of the Canada-U.S. border. My neighbor is a Canadian living in Canada. He mows my lawn; I pay him 25 U.S. dollars.
…statisticians count my purchase of his lawn-mowing services as a U.S. import but, because my neighbor doesn’t spend his earnings on goods or services made in the U.S., these statisticians find no U.S. exports to “balance” my imports.
So we cheer when the American saves and invests in America, but quake with anxiety when the Canadian does so, fretting about the “imbalance” in American trade. But no economically significant differences separate these two scenarios.
In the 1970’s, Freddie Mac was created in order to let savings outside of California be used to fund mortgages issued in California. In a sense, the point was to finance a California trade deficit with the rest of the United States.
Actually, I do not know whether or not California ran a trade deficit with the rest of the United States. We measure international trade statistics, but we do not measure interstate trade statistics. Nobody thinks that interstate trade statistics matter.
For Discussion. Why do international trade statistics matter?