Does a foreign tourist who spends $2,000 in America bring $2,000 in benefits? Of course not. But this was not always obvious. In fact, it is still not obvious to many of our contemporaries. But it was already well explained by Jean-Baptiste Say in his book A Treatise on Political Economy, first published in 1803. Say explains that, for his $2,000, the tourist obtains the equivalent value in goods and services, and it is just as if he had imported goods worth $2,000 to wherever he lives. It is an exchange like any other exchange of something for something else, from which each party to the exchange benefits, but nobody gives away money. Continue reading →