Economic theory at a glance

[Seth Ackerman]

>From the Financial Markets Center's latest Fed research roundup:
http://www.fmcenter.org/pdf/roundup01Q1web.pdf

In a San Francisco Fed Economic Letter, UC Davis
professor Paul Bergin approvingly cites "standard
economic theories" suggesting "that any current
account deficit that arises exclusively from the actions
of private agents in this context must be optimal in the
sense that it is improving the welfare of people in the
economy." However, "if government action rather
than purely private behavior is the underlying cause of
the current account deficit, the argument stated
previously for not worrying would no longer apply."