A Quick Thought on the Balance of Trade

When a foreign nation buys resources and goods from the domestic nation and takes them out of the country (exports), it’s considered “good” by mercantilists.

When a foreign nation sells goods and resources to the domestic nation (imports), it’s considered “bad” by mercantilists.

When the number of resources coming in is higher than going out, and some resources are bought by the foreign nation and kept in the domestic country (trade deficit), it’s considered terrible by mercantilists.

Mercantilism is a strange doctrine.

Inspired by today’s Cafe Hayek post

Water, Water Everywhere

This morning at Cafe Hayek, Don Boudreaux writes on water, responding to a radio program describing water as “our most precious resource.”  Don says (emphasis added):

While it’s true that water is a scarce resource, it is simply untrue that water is a precious resource.  Potable water is sufficiently abundant today in most places where human beings live that it can be acquired at a low price.  Indeed, given modern techniques for delivering and safely storing potable water, water is widely available today even in some desert areas, such as Las Vegas and Tucson.  And while I don’t defend (quite the contrary!) government subsidies that make water more available where and to whom it would be less available, it remains silly-talk to say that water is “our most precious resource.”  The market price of water testifies powerfully to the contrary.

Don’s comment is true for most of the US.  But what about places it’s not?  Third-World countries and the like?  Why is it we can produce water in Las Vegas, Phoenix, and Tucson, but not Venezuela, Zaire, and Somalia?  It’s clearly not the environment; the US has harsh deserts and tundras and yet no water issues (in fact, water to spare!).  I suspect it has more to do with the free market institutions of the United States that allows us to bring water everywhere.  There’s a lot of private water here (think bottled water).  It is sold (mainly) at market prices, so places that have abundant water (like Maine) can bottle it and sell it to Arizona, where it is more scarce.  The areas where there are no functioning price systems and lots of trade controls (like Venezuela, Zaire, and Somalia) are facing water crises.

In short: water is precious in places where it is not treated as a commodity (and, in some cases like Venezuela, called a “right”).  It is abundant in places it is treated as a commodity.