Economics Dictionary of ArgumentsHome
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| Balance of payment: The balance of payments is a record of a country's financial transactions with the rest of the world. It includes two main accounts the current account (trade, income, and transfers) and the capital/financial account (investment flows). A balanced account indicates equilibrium, while imbalances can signal economic issues like deficits or surpluses. See also Equilibrium, Market, Economy._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Dictionary of Arguments. | |||
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Murray N. Rothbard on Balance of Payment - Dictionary of Arguments
Rothbard III 821 Balance of payment/Rothbard: (…) an individual's income can be called his exports, and the physical sources of his income his goods exported; while his expenditures can be termed his imports, and the goods purchased his goods imported.(1) >Cash balance/Rothbard, >Consumption/Rothbard. We also saw that it is nonsensical to call a man's balance of trade "favorable" if he chooses to use some of his income to add to his cash balance, or "unfavorable" if he decides to draw down his cash balance, so that expenditures are greater than income. Every action and exchange is favorable from the point of view of the person performing the action or exchange; otherwise he would not have engaged in it. A further conclusion is that there is no need for anyone to worry about anyone else's balance of trade. Rothbard III 822 Balance of trade/balance of payments: A person's income and expenditure constitute his "balance of trade," while his credit transactions, added to this balance, comprise his "balance ofpayment." Credits: Credit transactions may complicate the balance, but they do not alter its essentials. When a creditor makes a Ioan, he adds to his "money paid" column to the extent of the Ioan - for purchase of a promise to pay in the future. He has purchased the debtor's promise to pay in exchange for transferring part of his present cash balance to the debtor. The debtor adds to his "money receipts" column - from the sale of a promise to pay in the future. These promises to pay may fall due at any future date decided upon by the creditor and the debtor; generally they range from a day to many years. On that date the debtor repays the Ioan and transfers part of his cash balance to the creditor. This will appear in the debtor's "money paid" column - for repayment of debt - and in the creditor's "money received" column - from repayment of debt. Interest: Interest payments made by the debtor to the creditor will be similarly reflected in the respective balances of payments. Rothbard: More nonsense has been written about balances of payments than about virtually any other aspect of economics. Problem: This has been caused by the failure of economists to ground and build their analysis on individual balances of payments. Rothbard III 823 National balance of payment: Instead they have employed such cloudy, holistic concepts as the "national" balance of payment without basing them on individual actions and balances. Solution/Rothbard: Balances of payments may be consolidated for many individuals, and any number of groupings may be made. In these cases, the balances of payments only record the monetary transactions between individuals of the group and other individuals, but fail to record the exchanges of individuals within the group. Rothbard III 824 Consolidated balance of payments: The consolidated balance tells less about the activities of the members of the group than do the individual balances, since the exchanges within the group are not revealed. This discrepancy grows as the number of people grouped in the consolidated balance increases. The consolidated balance of the citizens of a large nation such as the United States conveys less information about their economic activities than is revealed by the consolidated balance of the citizens of Cuba. World balance of payment: Finally, if we lump together all the citizens of the world engaged in exchange, their consolidated balance of payments is precisely zero.(2) 1. To say that "exports pay for imports" is simply to say that income pays for expenditures. 2. For an excellent and original analysis of balances of payments along these lines, see Mises, Human Action, New Haven, Conn.: Yale University Press, 1949. Reprinted by the Ludwig von Mises Institute, 1998. pp. 44--49._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. "Vs" indicates differences in content, not necessarily the chronological progression of a controversy. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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> Counter arguments against Rothbard
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