On Monday morning (April 23, 2018), the Grim Reaper cut down Leland Yeager—a great scholar, collaborator, and friend. I share the sentiments about Leland that have already been expressed by David Gordon, David Henderson, and George Selgin.
To fill in the picture, I will recount my first encounter with Leland, which took place in the summer of 1967. Then, I will leap ahead to the last email I received from Leland on April 5, 2018.
I first met Leland in the summer of 1967, when I attended a short course on the principles of economics at the University of Virginia. The course was offered to young faculty with an interest in free-market economics. I qualified because I had recently joined the faculty of the Colorado School of Mines. What a course it was. The Big Guns lectured. They included: Armen Alchian, Bill Allen, Bill Breit, Jim Buchanan, Warren Nutter, Gordon Tullock, and Leland Yeager. Leland presented the lectures on international trade. I can still recall them. He arrived fully prepared and ready to go—armed with a yardstick. Yes, a yardstick, which Leland used to draw complicated trade diagrams. And, typical of Leland, he did so with great precision. Indeed, Leland is the only professor I have ever observed who could, and did, draw picture-perfect diagrams on a chalkboard. Even while lecturing, Leland was an ever-careful and precise scholar.
Fast forward 50-plus years, and we arrive at the last email I received from Leland (April 5, 2018). Our correspondence over the past few years has largely focused on a book project that we have been collaborating on. Our book’s main idea – to treat waiting as a factor of production, and its price (the interest rate) as a reminder of the opportunity cost – contributes to unifying economic theory and identifying errors. Fortunately, our manuscript for Capital and Interest is complete, thanks largely to Leland’s work and scholarship. As I recently promised Leland, I anticipate having the manuscript cleaned and ready to go to the publisher this summer.
As our work on Capital and Interest progressed, Leland would always add what I considered to be a throw-away line about his advancing years and ill-health. I thought Leland would make it into triple digits. However, in his last email, Leland alarmingly went way beyond his usual grumblings about his age and ill-health. He wrote, “At age 93 and suffering from weakness, fatigue, various ailments, and severe pains (most recently from osteoporosis), I must admit that I am in no condition to contribute much more to the MS.” Leland’s shot across the bow shocked me because he remained as sharp as a tack. Indeed, in his last email, Leland did what he had always done: he never stopped turning over ideas and fretting about the quality of his work. Until his dying day, Leland remained to me that precise professor who lectured with a yardstick -- a master of rhetoric, blackboard economics, and much, much more.
Cato adjunct scholar Leland B. Yeager had a long career at the University of Virginia Department of Economics in its golden age and later at Auburn University. He is the author of Foreign Trade and U.S. Policy: The Case for Free International Trade (1976), International Monetary Relations: Theory, History and Policy (1976), and Free Trade: America's Opportunity (1954). At 93 he is still as insightful and as blunt as ever, and he just published this critique of President Trump's understanding of trade policy at Liberty magazine under the title "Profound and Destructive." The whole thing is reprinted below.
President Trump’s destructiveness requires few words here. Consider how world stock and currency markets have been shaken by the resignation on March 6 of Gary Cohn, regarded until then as Trump’s chief economic adviser. Although not a trained economist, Cohn apparently had some sound instincts derived from years of financial experience. His departure apparently and ominously leaves more influence, or echo, to Peter Navarro — look him up with Google.
This latest example of destructiveness follows the one touched off by Trump’s March 2 tweet bewailing America’s loss of “many billions of dollars on trade with virtually every country it does business with” and heralding trade wars as “good, and easy to win.”
I’ll spend more words on how profound Trump’s ignorance is. He considers a country’s excess of imports over exports a measure of loss. This measure applies even to trade with each foreign country separately. He counts China and Mexico among the worst offenders, deserving punishment. He does not understand the multilateral aspect of beneficial trade.
Nor does he understand how we gain in buying goods cheap from abroad. What difference does it make if steel and aluminum are cheap because of low foreign prices or because they grow cheaply on bushes at home? Money cost is a measure of opportunity cost, which means the loss of other goods when resources go instead to make the particular good in question. Opportunity cost reflects scarcity. Scarcity applies even to prosperous America, where we could enjoy still higher standards of living if food, clothing, shelter, entertainment, and other goods and services came costlessly and miraculously from heaven. Scarcity and how gains from domestic and foreign trade alleviate it are fundamentals of economics. The principle of comparative advantage goes far in explaining how.
Without understanding the academic presentation of the “absorption approach to the balance of payments,” everyone should be able to grasp its central idea, which is sheer arithmetic. If we as a country use more output for consumption and real investment than we produce, then the difference must come from somewhere — from abroad in the form of more imports than exports. A big item in this excess absorption, alias national undersaving, is government deficits. Yet Trump and Congress are complacent about increasing the deficit and debt by taxing less and spending more.
All too many politicians say that they are in favor of free trade if it is “fair trade” played on a “level playing field.” These slogans express Trump’s view of international trade as a game, a zero-sum game in which one player’s gain is another’s loss.
Trump does not understand how the price system coordinates economic activity, making most government planning about jobs and industries unnecessary and harmful.
The profundity of Trump’s ignorance goes beyond economics. It extends to diplomacy in domestic and foreign relations and even to the behavior of a decent human being. Yet his destructive economic ignorance remains prominent.