Greg Mankiw's Blog: Define "Rich"

Greg Mankiw's Blog: Define "Rich"

Greg Mankiw's Blog: Another Reason to Envy Brad Pitt

Greg Mankiw's Blog: Another Reason to Envy Brad Pitt

Purchasing Power Parity: Link Between Exchange Rates and Inflation

[Q:] I found your article on exchange rates very helpful. Please could you explain what is Purchasing Power Parity (PPP) and how does inflation in two countries affect the exchange rates between the two countries...more>>

Beware of Expert' Forecasts

Early this week a colleague told me about Philip Tetlock's recent book on experts and their biases, Expert Political Judgment: How Good Is It? How Can We Know? I immediately thought of the old adage, "Those who think they Know, Don't Know…". Adding to the intrigue, Robert Jervis bills Tetlock's Expert Political Judgement book a "must read." Jervis' Systems Effects: Complexity in Political and Social Life is one of my main compass bearings in professional life. Both factors suggest that I am once again seeking to confirm my own professional biases in adding this book to my library. So be it. Ironically, "confirming evidence bias" is itself covered in the book. I'm still on track to get it...more>>

Link between income and happiness is mainly an illusion

While most people believe that having more income would make them happier, Princeton University researchers have found that the link is greatly exaggerated and mostly an illusion...more>>

People respond to incentives

Hal Varian, writing on the Economic Scene (NY Times), thinks about how to improve the incentives for people to save...more>>

Behavioral Economics

A reader asks about hot topics in economics:

What have been the most important theoretical papers/breakthroughs in the last 10-15 years? New growth theory is now getting quite old and while there are plenty of hot topics empirically, theory seems to have died down since the 1980s. Am I missing some important developments?...more>>

Special Case of Keynes

A sweet young lady asked me today 'What was Keynesian Theory?' I responded with the old adage that if you don't know what boxing gloves are, you don't know Boxing. I've decided this was probably a rude response, though I still would suggest the lady keep her Day job as a Surgical Nurse. Still, there exists the compulsion to explain this major element of Economics...more>>

Using Music to Teach Introductory Economics

A quick look around any university campus will see students walking to and from class listening to music on headphones. This paper describes a writing assignment designed to harness student interest in music to improve economic understanding and reasoning. In the assignment, students are given the lyrics to a song and asked to respond to a series of questions focusing on the economics contained within the song. Five song examples are given together with several student responses... more>>

This Day in History: Keynes Predicts Economic Chaos

On a whim, I went to This Day in History at the History Channel web site. This is what I found:...more>>

Lawrance G. Lux: Income Tax v. Consumption Tax

Lawrance G. Lux: Income Tax v. Consumption Tax

Slow going for trade liberalization

Jagdish Bhagwati and the Cato Institute’s Dan Ikenson discussed the (slim) chance of unilateral trade liberalization at a Cato event last week. Podcast and video available. From a summary by Jonathan Dingel:... more>>

Price Controls on Labor

Good intentions, when guided by error and ignorance, may have undesirable consequences. There is no better example than minimum wage legislation. It means to raise the wages and improve the living conditions of poor workers but actually condemns many to chronic unemployment. It forcefully raises the costs of unskilled and inexperienced labor and thereby lifts it right out of the labor market...more>>

Does a gold standard involve resource costs?

Milton Friedman said yes, but on this question I am not convinced. Friedman thought the costs would be as high as 2.5 percent of gdp...more>>

Greg Mankiw's Blog: Consumption vs Income Taxation

Greg Mankiw's Blog: Consumption vs Income Taxation

Teaching about Money and Payments

Whether you teach personal finance, consumer economics, or a more traditional economics course, here is an article that I found quite interesting...more>>

CPI Null Set (via The Economist)

This is a classic example of working the refs: If enough long-only fund managers/sell side pundits spew the same misleading nonsense long enough, it will eventually find resonance somewhere in the mainstream media. More...

Greg Mankiw's Blog: Philanthropy vs Free Trade

Greg Mankiw's Blog: Philanthropy vs Free Trade

Greg Mankiw's Blog: On Inequality

Greg Mankiw's Blog: On Inequality

'Commerce' or 'Trade'?

‘Montesquieu on Commerce’ by Tim Hilton (Globalisation Institute blog) produces an interesting quote:

“The natural effect of commerce is to lead to peace” (Baron de Montesquieu, 1748, The Spirit of the Laws, Book 20, Chapter 2: ‘Of the Spirit of Commerce’).

This is a claim made since at least the 18th century. It should make sense, logically, but I am not sure expressed this way it is as convincing as Thomas Nugent’s translation of Montesquieu:

‘Peace is the natural effect of trade.’

Baron de Montesquieu, 1748, The Spirit of the Laws, Book 20, Chapter 2: ‘Of the Spirit of Commerce’, translated by Thomas Nugent, with an introduction by Franz Neumann, two volumes in one, Hafner Library of Classics, Hafner Publishing, New York, 1949, p 316.

As I do not have a French copy of Montesquieu’s wonderful title I cannot check which version is more accurate (and the translator quoted by Tim Wilson is not given, or from which English edition he is sourcing his quotation).

Why the quibble? Because the next sentence of Montesquieu’s paragraph, as translated by Thomas Nugent, is more helpful of elucidating his meaning:

“Two nations who traffic with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and their union thus is founded on their mutual necessities.”

It is trade – the action of two-way exchange – that solidifies relationships between nations. I am not sure about ‘commerce’, a very broad activity well beyond the act of trade, leading to peace; war ‘leads’ to peace, but that is not so good. Trade, on the other hand has a natural affect in that peace is a possibility from the mutual dependence of each country on the other in a reciprocal relationship for each other’s benefit.

Hence, my comment is more than a ‘quibble’.