Quoting F.A. Hayek’s 1960 claim that free markets will bring about a “balance … between exports and imports,” Oren Cass argues that the string of annual U.S. trade deficits over the past 44 years proves that Hayek was wrong – that history has “broken” Hayek’s “promise.”
Being a non-economist, Mr. Cass can be forgiven for missing Hayek’s meaning. The balance to which Hayek refers is not a strict equality between the value of a country’s exports and the value of its imports. Hayek means, instead, that there is a market process that connects exports to imports in a predictable manner: specifically, and contrary to popular mythology, if imports fall so, too, over time will exports fall. Hayek was bemoaning the widespread misconception – borne of a failure to grasp basic economics – that an optimal amount of exporting and importing can be achieved only if trade is controlled by government.
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