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MiltonFriedmanfree s o c i e t y has b e e n t h e A u s t r i a n s c h o o l , l e d b y L u d w i gand theC h i c a g o S c h o o l ofEconomicsatively h i g h c o r r e l a t i o n b e t w e e n s o m e m e a s u r e m e n t o fv o n M i s e s a n d F. A . H a y e k . T h e A u s t r i a n s h a v e alsot h e m o n e y s u p p l y a n d n a t i o n a l i n c o m e , has b e c o m e aforcefully d e m o n s t r a t e d t h e s u p e r i o r i t y o f t h e free m a r h o t l y d e b a t e d issue i n m a c r o e c o n o m i c s a g a i n , as t h e def k e t a n d t h e h a z a r d s f r o m all f o r m s o f socialist p l a n n i n gi n i t i o n o f t h e m o n e y s u p p l y has b e c o m e m o r e u n c e r t a i nandand the correlations have b e c o m e m o r e unstable.governmentintervention. A n dtheytoohaveemphasized the uniqueness of the individual andtheF u r t h e r m o r e , by insisting o n a p r i m a r i l yvalue o f liberty.statisticalanalysis o f m a c r o e c o n o m i c e v e n t s , t h e d a t a available h a v eB u t t h e i r s t a r t i n g p o i n t s h a v e b e e n r a d i c a l l y differentt e n d e d t o b e h i g h l y a g g r e g a t e d , w i t h t h e focus o n s u c hi n r e a c h i n g t h e i r p r o - m a r k e t c o n c l u s i o n s . I n his f a m o u st h i n g s as o u t p u t a n d e m p l o y m e n t as a w h o l e a n d t h eessay o n " T h e M e t h o d o l o g yEconomics"g e n e r a l p r i c e level. T h i s m e a n s t h e s u p p l y - a n d - d e m a n d(1953), F r i e d m a n argued that the goal of science wasof Positivedetails a n d t h e i n t e r c o n n e c t i o n s b e t w e e n v a r i o u s p r i c e s ,successful q u a n t i t a t i v e p r e d i c t i o n a n d t h a t a n y h y p o t h e w h i c h r e p r e s e n t t h e a c t u a l causal r e l a t i o n s h i p s i nsis, n o m a t t e r h o w u n r e a l i s t i c its a s s u m p t i o n s , w a s g o o de c o n o m y , are lost b e n e a t h t h e m a c r o - a g g r e g a t e surface.if it r e s u l t e d i n b e t t e r p r e d i c t i o n s . T h u s , as o n ecriticYetthesemicroeconomicrelationships, andthehowp o i n t e d o u t , if a s t r o n g c o r r e l a t i o n w a s f o u n d b e t w e e nchanges in the m o n e y supply influence and potentiallyt h e a n c h o v y c a t c h off t h e c o a s t o f P e r u a n d b u s i n e s s -distort t h e m , have b e e n the very essence of the alterna cycletive A u s t r i a nfluctuationsi n t h e U n i t e d S t a t e s , this w o u l d b eapproachto understandinginflationaryc o n s i d e r e d a g o o d p r e d i c t i v e t h e o r y , regardless o f a n yprocesses that e n d in recessions a n d depressions. T h u s ,real c a u s a l i t y b e t w e e n t h e s e t w o m e a s u r e d e v e n t s .for e x a m p l e , w h e n F r i e d m a n l o o k e d at F e d e r a l R e s e r v ep o l i c y i n t h e 1 9 2 0 s a n d s a w t h a t t h e g e n e r a l p r i c e levelCausal Relationshipsh a d r e m a i n e d relatively stable, h e c o n c l u d e d t h a t F e dApolicy had d o n e nothing wrong. T h e only error by theu s t r i a n s also b e l i e v e t h a t s c i e n c e s h o u l d t r y t o " p r e d i c t , " if b y p r e d i c t i o n w e m e a n u n d e r s t a n d i n g t h eF e d w a s i n t h e e a r l y 1 9 3 0 s , w h e n it d i d n o t p r i n t m o r ecausal r e l a t i o n s h i p s i n s o c i e t y a n d t h e m a r k e t . B u t A u s m o n e y to counteract the price deflation that was o c c u r t r i a n s e m p h a s i z e t h a t t h e u n i q u e c h a r a c t e r i s t i c o f socialr i n g at t h a t t i m e .and(anT h e Austrians, o n the other hand, looking b e l o w thea p p r o a c h , b y t h e way, t h a t w a s also s t r o n g l y d e f e n d e d b ymarketphenomenais m a n ' s p u r p o s e f u l n e s sstable p r i c e level, c o n c l u d e d t h a t F e d m o n e t a r y p o l i c yone of the older Chicago economists, Frank Knight).h a d actually b e e n highly "activist" and h a dimbalances betweenM a k i n g sense o f t h e m a r k e t requires l o o k i n g b e n e a t havailable savings a n dgeneratedinvestmentstatistical r e l a t i o n s h i p s . W h a t is a c o n s u m e r g o o d o r at h a t finally r e s u l t e d i n t h e e c o n o m i c d o w n t u r n o f t h ecapital g o o d ? W h e nand1930s. W h e r e a s the C h i c a g o economists o f that time,w h e n is it " c o e r c e d " ? W h a t is a " c o m p e t i t i v e " m a r k e ta n d F r i e d m a n later, b e l i e v e d t h a t t h e F e d s h o u l d h a v eis a t r a n s a c t i o n " v o l u n t a r y "s i t u a t i o n a n d w h e n is a s i t u a t i o n " m o n o p o l i s t i c " ? W h e n" r e f l a t e d " t h e p r i c e level t h r o u g h m o n e t a r yis a " p r o f i t " e a r n e d a n d w h e n is a " l o s s " suffered? W h a tin these years, the Austrians reasoned that the distortionsexpansionis it t h a t e n t r e p r e n e u r s d o a n d h o w d o t h e y a n d o t h e r scaused by t h e earlier inflation w o u l din t h e m a r k e t f o r m expectations a b o u t t h e future?w o r s e t h r o u g h any n e w r o u n d of inflation. O n c eonly bemadetheonrelative p r i c e a n d p r o d u c t i o n r e l a t i o n s h i p s h a d b e e n d i s actionst o r t e d by t h e earlier inflation, t h e o n l y w a y to r e t u r n toand to the objects and actions of o t h e r h u m a n beingsstability w a s t h r o u g h a n a d j u s t m e n t o f p r i c e s , w a g e s , a n da r o u n d t h e m . T h e y are n o t r e d u c i b l e to m e a s u r a b l e cat p r o d u c t i o n r e f l e c t i n g t h e n e w p o s t - b o o m reality.T h e s e c o n c e p t s a n d r e l a t i o n s h i p s are d e p e n d e n th o w i n d i v i d u a l s assign m e a n i n g s t o t h e i r o w ne g o r i e s t o w h i c h statistical m e t h o d s o f c o r r e l a t i o n m a yN e v e r t h e l e s s , i n t h e face o f K e y n e s i a nbe applied.dominationafter 1 9 4 5 , M i l t o n F r i e d m a n , w i t h c o u r a g e , d e t e r m i n a I n a d d i t i o n , t h e f u t u r e is n o t as q u a n t i t a t i v e l y p r e tion, a n d intellectual integrity, w e n t against t h e tide and,d i c t a b l e as t o o m a n y C h i c a g o e c o n o m i s t s h a v e l i k e d t oalong w i t h only a few others, succeeded in stopping theb e l i e v e . I n d e e d , o n e h y p o t h e s i s for w h i c h F r i e d m a n w a sadvance toward ever-increasing g o v e r n m e n t control ofm o s t f a m o u s i n t h e 1 9 6 0 s a n d 1 9 7 0 s , t h a t t h e r e is a r e l society.3@DECEMBER2006

PerspectiveTHEFMANj L i l V l lEconomists AgainstEconomicsJlJL NPublished byFT h e F o u n d a t i o n for E c o n o m i c E d u c a t i o nI r v i n g t o n - o n - H u d s o n , N Y 10533P h o n e : (914) 5 9 1 - 7 2 3 0 ; E - m a i l : f r e e m a n @ f e e . o r gwww.fee.orgive e c o n o m i s t s w h o e i t h e r w o n t h e N o b e l P r i z e i neconomicsor w h oservedas p r e s i d e n tAmerican Economic Association—andof thethree w h odid b o t h — r e c e n t l y j o i n e d over 6 0 0 other economists inPresidentEditorManaging EditorBook Review EditorRichard M . Ebelingu r g i n g t h e federal g o v e r n m e n t t o i n c r e a s e t h e m i n i m u mSheldon R i c h m a nwage. T h e signatures w e r e gathered by t h e u n i o n - b a c k e dB e t h A. H o f f m a nEconomicG e o r g e C . LeefsupportsColumnistsCharles BairdDavid R . HendersonR o b e r t HiggsD o n a l d J. B o u d r e a u xL a w r e n c e W. R e e dS t e p h e n DaviesT h o m a s SzaszRichard M . EbelingWalter E. WilliamsB u r t o n W. F o l s o m , Jr.PolicyInstitutesubstantial(EPI), w h i c I guess this is s u p p o s e d t o m a k e us t h i n k m o r e o f t h eminimumw a g e . I n s t e a d , it m a k e s m e t h i n k less o f t h eN o b e l Prize in economics and the AmericanEconomicAssociation.T h e economistsContributing EditorsN o r m a n BarryD w i g h t R . LeePeter J. B o e t t k eWendy McElroyJ a m e s BovardTibor MachanT h o m a s J. D i L o r e n z oA n d r e w P. M o r r i s sJ o s e p h S. FuldaJames L. PayneBettina Bien GreavesWilliam H . PetersonJohn HospersJ a n e S. S h a wR a y m o n d J. K e a t i n gRichard H.TimberlakeD a n i e l B. K l e i nLawrence H . W h i t eonthe principlec l a i m t h e m i n i m u m w a g e "is b a s e dof valuingworkb y establishinganh o u r l y w a g e floor b e n e a t h w h i c h employers c a n n o t paytheir workers."T h a t ' s g i b b e r i s h . L e g i s l a t i n g a w a g e floor is n o t a p r i n ciple o f valuing w o r k . W e value w o r k according to t h eu t i l i t y it p r o d u c e s . N o l a w c a n c h a n g e t h a t . All t h e m i n i m u m w a g e d o e s is d e c r e e : If y o u are g o i n g t o b u y l a b o rs e r v i c e s (a b i g i f ) , y o u c a n ' t p a y less t h a n t h e l a w m a n dates.F o u n d a t i o n for E c o n o m i c E d u c a t i o nBoard of Trustees, 2006-2007I n a free m a r k e t a w a g e is a g r e e d o n t h r o u g hDan Grossman, C h a i r m a nSally v o n B e h r e nLloyd B u c h a n a nEdward M . KopkoWalter L e C r o ybargain i n g b e t w e e n a n e m p l o y e r , w h o w a n t s t o p a y as little as h em u s t t o o b t a i n t h e labor's e x p e c t e d v a l u e , a n d a p o t e n t i a lWayne OlsonT o m G. Palmere m p l o y e e , w h o w a n t s t o b e p a i d as m u c h as h e c a n g e tRoger Reamfor his s e r v i c e s . W h a t t h e y are w i l l i n g t o offer a n d a c c e p tDonald SmithdependsFrayda LevinG u i l l e r m o M.YeattsPaige K. M o o r eo n theirexpectationsand otheroptions. A nunskilled worker's options can b e expanded t h r o u g h thea c q u i s i t i o n o f skills, b u t also t h r o u g h c o m p e t i t i o n for hisT h e F o u n d a t i o n for E c o n o m i c E d u c a t i o n (FEE) is apresent services.non-political, non-profit educational champion of indi vidual liberty, private property, t h e free market, a n dUltimately,constitutionally limited g o v e r n m e n t .an employer'sabilityto pay thewagedepends o n c o n s u m e r s ' willingness t o b u y t h e g o o d thatThe Freeman is published m o n t h l y , except for c o m e m e r g e s f r o m t h e p r o d u c t i o n p r o c e s s at a p r i c e t h a t c o v b i n e d J a n u a r y - F e b r u a r y a n d J u l y - A u g u s t issues. To receive a s a m ple copy, o r t o have The Freeman c o m e regularly to y o u r door, callers t h e ( o p p o r t u n i t y )8 0 0 - 9 6 0 - 4 3 3 3 , o r e-mail b h o f f m a n @ f e e . o r g .p r i c e o f t h e g o o d d o e s n ' t c o v e r all t h e costs, n o w a g e sThe Freeman is available o n microfilm from University Microfilmcosts o f m a k i n g it. If t h e m a r k e tw i l l b e p a i d for l o n g .International, 3 0 0 N o r t h Z e e b R o a d , A n n Arbor, M I 4 8 1 0 6 .A w a g e , t h e n , is t h e result o f a t r a n s a c t i o n . If c o m p e C o p y r i g h t 2 0 0 6 F o u n d a t i o n for E c o n o m i c E d u c a t i o n . Allrights reserved. R e p r o d u c t i o n o r use, w i t h o u t p e r m i s s i o n , o ftitionis freeo f politicalimpediments,wagestendeditorial o r g r a p h i c c o n t e n t is p r o h i b i t e d .reveal t h e d i s c o u n t e d m a r g i n a l v a l u e o f p a r t i c u l a rtolabors e r v i c e s i n t h e m a r k e t . I n d e e d , c o m p e t i t i v e b i d d i n g is t h eTHEFREEMAN:Ideas onLiberty4

PERSPECTIVE:Economists AgainstEconomicso n l y w a y t o d i s c o v e r t h a t v a l u e , w h i c h has m e a n i n g o n l yc o n s u l t e d w h e t h e r t o establish a N o b e l P r i z e i n e c o t h r o u g h t h e m a r k e t p r o c e s s . T h e r e is n o e x t e r n a l s t a n n o m i c s , I s h o u l d h a v e d e c i d e d l y a d v i s e d a g a i n s t it. . . .dard against w h i c h a m a r k e t - s e t w a g e can b e j u d g e d .[T]he N o b e l Prize confers o n an individual an a u t h o r i M o r e o v e r , if t h e p a r t i e s are (politically) f r e e — t h a t is, t h et y w h i c h i n e c o n o m i c s n o m a n o u g h t t o possess. . . .s y s t e m is v o i d o f p h y s i c a l f o r c e — t h e o u t c o m e satisfiesT h e r e is n o r e a s o n w h y a m a n w h o has m a d e a d i s t i n c t h e c r i t e r i a o f j u s t i c e a n d fairness.tive c o n t r i b u t i o n t o e c o n o m i c s c i e n c e s h o u l d b e o m n i T r u e , w e d o n ' t h a v e a fully free m a r k e t , b u t t h e p r o p c o m p e t e n t o n all p r o b l e m s o f s o c i e t y — a s t h e press t e n d se r r e s p o n s e s h o u l d b e t o r e p e a l t h e s u b s i d i e s , taxes, r e g t o t r e a t h i m till i n t h e e n d h e m a y h i m s e l f b e p e r s u a d e dulations, a n d o t h e r privileges that suppress c o m p e t i t i o n ,to believe."c a p i t a l i n v e s t m e n t , a n d h e n c e t h e d e m a n d forlabor. R e p l a c i n g the rotten school system w i t h a competitivee d u c a t i o n m a r k e t w o u l d also h e l p . T i n k e r i n g w i t h t h eU n i v e r s a l h e a l t h c a r e is all t h e r a g e , b u t c o u l d it m e a nm i n i m u m w a g e distracts us f r o m t h e real task at h a n d .t h a t o n l y t h e h e a l t h y w i l l g e t care? J a n e O r i e n t takes aT h e e c o n o m i s t s also say " t h e m i n i m u m w a g e h e l p s t oclose l o o k .equalize the imbalance in bargaining p o w e r that l o w -Aw a g e w o r k e r s face i n t h e l a b o r m a r k e t . "William Pike.b e c a u s e t h e i r p r o d u c t i v i t y is p e r c e i v e d t o b e b e l o w t h eS o m u c h g o o d c o u l d b e d o n e at s u c h a small c o s t p e rminimump e r s o n if o n l y g o v e r n m e n t w o u l d p u t t h e m o n e y i n t h ew a g e c a n n o t b e , as t h e s t a t e m e n t c l a i m s , " a n i m p o r t a n ttool in fightingpoverty." E c o n o m i ctheoryCarol is r o u t i n e l y h e l d u p t o illustrateC h a r l e s D i c k e n s ' s a n i m o s i t y t o b u s i n e s s . N o t so fast, saysB u t it d o e s n ' t d o t h a t for w o r k e r s w h o are d i s m i s s e dm a n d a t e d wage. For the same reason, theChristmasr i g h t p l a c e . P a u l C w i k has a m o d e s t p r o p o s a l .demon Oneof thebest-knownpubliceconomists, J o h ns t r a t e s — a n d e n d l e s s s t u d i e s i l l u s t r a t e — t h a t if y o u raiseK e n n e t h G a l b r a i t h , d i e d this year. N o f r i e n d o f t h e freet h e p r i c e o f s o m e t h i n g , o t h e r t h i n g s e q u a l , less o f it w i l lmarket, Galbraith, yet D a v i db e b o u g h t . W h e n anti-smoking advocates w a n t peoplethings w o r t h saying a b o u t h i m .Hendersonfindssomet o b u y f e w e r c i g a r e t t e s , t h e y call for h i g h e r taxes soM a n y p e o p l e h a v e p e a c e o n t h e i r m i n d s this t i m e o ft o b a c c o will cost m o r e . H o w can d e m a n d curves slopeyear, a n d for J i m P e r o n t h e f r e e d o m p h i l o s o p h y is u l t i d o w n w a r d for e v e r y t h i n g b u t u n s k i l l e d l a b o r ?mately about peace.T h e e c o n o m i s t s g o o n t o state, " W e b e l i e v e t h a t aMiltonFriedmandied in N o v e m b e r , a greatlossm o d e s t increase in the m i n i m u m w a g e w o u l d improveto t h e f r e e d o m m o v e m e n t . R i c h a r d E b e l i n g a n d I paythe well-being of l o w - w a g e workers and w o u l d n o t havetribute.t h e a d v e r s e effects t h a t c r i t i c s h a v e c l a i m e d . "Theunskilledadverseeffectsworkersandreferredlesst o are j o bentry-level j o bHere's what's in the c o l u m nlossesbydepartment:RichardE b e l i n g assesses M i l t o n F r i e d m a n ' s w o r k . L a w r e n c e R e e dcreation.d e s c r i b e s s o m e h e r o e s . T h o m a s Szasz discusses p s y c h i a O t h e r a d v e r s e effects are p o s s i b l e . A f i r m m a y c u t o t h e rt r y as a b r a n c h o f law. R o b e r t H i g g s r e t r a c e s t h e j o u r n e ycosts i n o r d e r t o p a y t h e h i g h e r m i n i m u m , b u t t h a t c o s t -f r o m A r m i s t i c e t o D e p r e s s i o n . C h a r l e s B a i r d l o o k s atc u t t i n g m a y m a k e t h i n g s less p l e a s a n t for w o r k e r s . F o rF. A . H a y e k ' s v i e w s o n u n i o n s . A n d D o n a l d B o u d r e a u x ,example, hours may be cut back or on-the-job-trainingh e a r i n g for t h e u m p t e e n t h t i m e t h a t t h e t r a d e deficit iscould be canceled. T h e 650 economists might think thedebt, responds, "It Just Ain't So!"costs are w o r t h t h e b e n e f i t s , b u t s h o u l d t h e y b e m a k i n gO u r b o o k reviewers consider works o n themoralthat decision? W h a t will they do personally to help thosebasis o f f r e e d o m , e c o n o m i c s d u r i n g t h e N e w D e a l , c a p w h o a c t u a l l y b e a r t h e costs?italist p h i l o s o p h e r s , a n d r a c e .T h e e c o n o m i s t s ' s t a t e m e n t illustrates a p r o b l e m i d e n tified b y F. A . H a y e k . A t t h e b a n q u e t h e l d t h eB e i n g D e c e m b e r , t h e issue w r a p s u p w i t h t h e 2 0 0 6nightindex, prepared by managing editor Bethbefore h e was presented the 1974 N o b e l Prize in e c o Hoffman.—Sheldonn o m i c s , H a y e k said: " I m u s t confess t h a t if I h a d b e e nRichmansrichman @fee. org5DECEMBER2006

The Trade Deficit Is Debt?It Just Ain't So!BY DONALD J . B O U D R E A U XWriting in theNobelOctoberlaureate4 NewYorkeconomist Josepht i o n a l flows o f i n t e r e s t , d i v i d e n d s , a n d u n i l a t e r a l transferTimes,p a y m e n t s ( s u c h as f o r e i g n a i d ) .StiglitzWew o r r i e s a b o u t " g l o b a l i m b a l a n c e s . " Stiglitz'sc a n simplify b y i g n o r i n g all b u texportsandc o n c e r n s are r e v e a l e d in his o p e n i n g p a r a g r a p h : " T h ei m p o r t s . If t h e d o l l a r v a l u e o f e x p o r t s d u r i n g t h e y e a rI n t e r n a t i o n a l M o n e t a r y F u n d m e e t i n g i n S i n g a p o r e lastexceeds the dollar value of i m p o r t s , that c o u n t r y runs am o n t h c a m e at a t i m e o f i n c r e a s i n g w o r r y a b o u t t h e s u s -c u r r e n t - a c c o u n t s u r p l u s . If t h e d o l l a r v a l u e o f i m p o r t stainability o f global financial i m b a l a n c e s : F o r h o w l o n ge x c e e d s t h a t o f e x p o r t s , t h e r e s u l t is a c u r r e n t - a c c o u n tcantheglobaleconomyAmerica's e n o r m o u stradedeficits—t h e U n i t e d States b o r r o w s close t o 3billionaday—orChina'sgrowingtrade surplus of almost 500 million aday?"Borrowing 3billioneachm e a n s t h a t t h e U n i t e d Statesdaywouldannually accumulate debt of approxi mately 1.1 trillion.W h i l e S t i g l i t z gives n o s o u r c e forhis f i g u r e , it's l i k e l y a n e s t i m a t e o f t h es u m o f U n c l e Sam's p r o j e c t e d b u d g e tdeficit for this fiscal y e a r ( 2 9 0 b i l l i o n )and the projected 2006 U.S. currentaccount("trade")deficitdeficit.endure( 864bil l i o n ) . If so, Stiglitz's c l a i m is m i s l e a d i n gon two counts.First, h e d o u b l e - c o u n t s . W h e n e v e ra f o r e i g n e r sells a p r o d u c t t o a n A m e r i c a n a n d t h e n invests t h e d o l l a r sIf we applaud w h e ncitizens of Wisconsinsave and invest insoftware firms inCalifornia or orangegroves in Florida,why should we notbe equally pleasedw h e n citizens ofShanghai save andinvest in these sameAmerican firms?S u p p o s e A m e r i c a n s this y e a r s p e n d 9 0 0 b i l l i o n o n i m p o r t s a n d sell 2 0 0billion in exports. T h a t m e a n s w e r u na 7 0 0 b i l l i o n c u r r e n t - a c c o u n t deficit;w e i m p o r t e d 700 billion m o r ewe exported. But why? W h ythanwouldf o r e i g n e r s s h i p us 9 0 0 b i l l i o n w o r t hof things they sweated to produce andd e m a n d in return only 200billionw o r t h o f t h i n g s f r o m us? T h eansweris t h a t t h e y w a n t t o s p e n d t h ebilliononthingsotherthan 700Amer i c a n - m a d e g o o d s a n d services: A m e r i c a n assets. T h e y w a n t t o invest it i nAmerica.LikeAmericans,foreignerscaninvest t h e i r d o l l a r s i n A m e r i c a n c o r p o r a t i o n s o r in A m e r i c a n real estate, o rt h e y c a n s i m p l y h o l d d o l l a r s as cash.T h e y c a n also lend t h e d o l l a r s t o A m e r hee a r n s f r o m this sale i n n e w l y i s s u e d U . S . T r e a s u r y s e c u i c a n s . A t y p i c a l w a y o f d o i n g so is t o b u y U . S . T r e a s u r yr i t i e s , t h e U . S . c u r r e n t - a c c o u n t deficit i n c r e a s e s as d o e sN o t e s f r o m U n c l e S a m . T h e s e N o t e s are I O U s t h e g o v U n c l e S a m ' s i n d e b t e d n e s s . B u t it's n o t t w o d e b t s ; it's o n e .e r n m e n t issues t o g e t m o n e y t h a t a l l o w s it t ospendm o r e t h a n it r e c e i v e s i n taxes.T o s e e w h y , w e first n e e d a b r i e f p r i m e r o n t h e m e a n ing of the current account. This account measures thedollar value of g o o d s a n d services e x p o r t e d a n d i m p o r t Donald Boudrcaux (dboudrea@gmu.cdu)e d d u r i n g s o m e p e r i o d (say, a y e a r ) , a l o n g w i t h i n t e r n a -economics at George MasonTHE F R E E M A N : Ideas on Liberty6University.is chairman of the department of

IT J U S T A I N ' TS O ! : The TradeDeficitIs D e b t ?N o w w e c a n see Stiglitz's d o u b l e - c o u n t i n g .across p o l i t i c a l b o r d e r s , n a t i o n a l e c o n o m i e s l o s e m u c h o fS u p p o s e t h a t all 2 9 0 b i l l i o n o f t h e d e b t t h a t U n c l etheir relevance. T h e relevant e c o n o m y b e c o m e s largerS a m a c c u m u l a t e s this y e a r is b o u g h t b y f o r e i g n e r s . I n s o t h a n t h a t o f a n y o n e c o u n t r y . T h i s d e v e l o p m e n t is b e n far as t h e y p u r c h a s e this d e b t w i t h n e w e a r n i n g s f r o meficial, for it m e a n s ( a m o n g o t h e r t h i n g s ) t h a t failure t ot h e sale o f g o o d s a n d s e r v i c e s t o A m e r i c a n s , t h e s e p u r save a n d invest c a n b e m a d e u p b y f o r e i g n e r s d o i n g so.chases i n c r e a s e t h e U . S . c u r r e n t - a c c o u n t deficit.L i k e w i s e , failur

The Chicago school blossomed into one of the most influential schools of thought after Friedman joined the economics faculty in 1946 and then was joined by his long-time friend George J. Stigler in 1958. Friedman revolutionized macroeconomics, while Stigler helped to do the same in microeconomics. Friedman challenged the dominance of Keynesian .