Why Economists Disagree:
"If all economists were laid end to end, they would not reach a conclusion" This quip from George Bernard Shaw is revealing Economists as a group are often..
Criticized for giving conflicting advice to policymakers. President Korald Reagan once joked that if the game Trivial Pursuit were designed for economists, it would have 100 questions and 3,000 answer's Why do economists so often appear to give conflicting advice to policymakers?
There are blow basic reasons
●Economists may disagree about the validity of alternative positive theories of how the world works.
●Economists may have different values and therefore different normative views about what government policy should aim to accomplish
Let's discuss each of these reasons
Differences in Scientific Judgments:
Several centuries ago, astronomers debated whether the earth or the sun was at the center of the 40lar system. More recently, climatologists have debated whether the earth is experiencing global warming and, if so, why Science is an ongoing search to understand the world around us. It is not surprising that as the search continues, scientists sometimes disagree about the direction in which
truth lies. Economists often disagree for the same reason. Economics is a young science, and there is still much tube learned. Economists sometimes disagree because they have different hunches about the validity of alternative theories or about the size
of important parameters that measure how economic variables are related.
For example, economists disagree about whether the government should tax a household's income or its consumption (spending). Advocates of a switch from the current income tax to a consumption tax believe that the change would encourage households to save more because income that is saved would not be taxed. Higher saving, in turn, would free resources for capital accumulation, leading to more rapid growth in productivity and living standards. Advocates of the current income tax system believe that household saving would not respond much to a change in the tax laws. These two groups of economists hold different normative views about the tax system because they have different positive views about savings responsiveness to tax incentives.
Differences in Values:
Suppose that Peter and Paula both take the same amount of water from the town well. To pay for maintaining the well, the town taxes its residents. Peter has income of5150,000 and is taxed $15,000, or 10 percent of his income. Paula has income of $30,000 and is taxed $6,000, or 20 percent of her income.
In this policy fair? If not, who pays too much and who pays too little? Does it
matter whether Paula's low income is due to a medical disability or to her decision to pursue an acting career? Does it matter whether Peter's high income is due to a large inheritance or to his willingness to work long hours at a dreary job?
These are difficult questions about which people are likely to disagree. If the town hired two experts to study how it should tax its residents to pay for the well, we would not be surprised if they offered conflicting advice.
This simple example shows why economists sometimes disagree about public policy. As we know from our discussion of normative and positive analysis, policies cannot be judged on scientific grounds alone. Sometimes, economists give conflicting advice because they have different values. Perfecting the science of economics will not tell us whether Peter or Paula pays too much.
Perception versus Reality:
Because of differences in scientific judgments and differences in values, some disagreement among economists is inevitable. Yet one should not overstate the amount of disagreement. Economists agree with one another to a much greater
extent than is sometimes understood. Table 1 contains twenty propositions about economic policy. In surveys of professional economists, these propositions were endorsed by an overwhelming.
Perception versus Reality
Doralie Of differences in scientific judgments and differences in values, some agreement among economists is inevitable. Yet one should not overstate the amount of disagreement. bionomists agree with one another to a much greater extent than is sometimes understood. Table 1 contains twenty propositions about economic policy. In surveys of professional economists, these propositions were endorsed by an overwhelming Proposition (and percentage of economists who agree)
1. A ceiling on rents reduces the quantity and quality of housing available. (93%)
2. Tariffs and import quotas usually reduce general economic welfare. (93%)
3. Flexible and floating exchange rates offer an effective international monetary arrangement.
(90%)
4. Fiscal policy (for example, tax cut and/or government expenditure increase) has a
significant simulative impact on a less than fully employed economy. (90%)
5. The United States should not restrict employers from outsourcing work to foreign countries.
(90%)
6. Economic growth in developed countries like the United States leads to greater levels of
well-being. (88%)
7. The United States should eliminate agricultural subsidies. (85%)
8. An appropriately. Designed fiscal policy can increase the long-run rate of capital formation.
(85%)
9. Local and state governments should eliminate subsidies to professional sports franchises.
(85%)
10. If the federal budget is to be balanced, it should be done over the business cycle rather
than yearly. (85%)
11. The gap between Social Security funds and expenditures will become unsustainably large
within the next 50 years if current policies remain unchanged. (85%)
12. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-
kind of equal cash value. (84%)
13. A large federal budget deficit has an adverse effect on the economy. (83%)
14. The redistribution of insole in the united States is a legitimate role for the govern me.
(83 %)
15. Inflation is caused primarily by too much growth in the money supply. (83%)
16. The United States should not ban genetically modified crops. (82%)
17. A minimum wage increases unemployment among young and unskilled workers. (79%)
18. The government should restructure the welfare system along the lines of a "negative
income tax." (79%)
19. Effluent taxes and marketable pollution permits represent a better approach to pollution
control than the imposition of pollution ceilings. (78%)
20. Government subsidies on ethanol in the United States should be reduced or eliminated. (78%)
Source Richard M. Alston, J. R. Karl. and Michael B, Vaughn, 1s There Consensus among Economists in the 1990s?" American Economic Review (May 1992) 203-20: Da Fuller and Doris Geode-Stevenson, "Consensus among Economists Revisited," Journal of Economics education (Fall 2003): 369-387, Robert Whelps, "Do Economists Agree unearthing? Yes" Economists voice (November 2006). 1-6, Robert Whales, "The Policy Views of American Economic Association Members. The Results of a Ne Survey, Meow Journal Hatch (September 2009). 33/-348.
majority of respondents. Most of theme propositions would fail to command a similar consensus among the public.
The first proposition in the table is about rent control, a policy that sets a legal maximum on the amount landlords can charge for their apartments. Almost all economists believe that rent control adversely affects the availability and quality of housing and is a costly way of helping the neediest members of society.
Nonetheless, many city governments ignore the advice of economists and place ceilings on the rents that landlords may charge their tenants.
The second proposition in the table concerns tariffs and import quotas, two policies that restrict trade among nations. For reasons we discuss more fully later in this text, almost all
economists oppose such barriers to free trade. Nonetheless, over the years, presidents and Congress have chosen to restrict the import of certain goods.
Why do policies such as rent control and trade barriers persist if the experts are united in their opposition? It may be that the realities of the political process stand as immovable obstacles. But it also may be that economists have not yet convinced
enough of the public that these policies are undesirable. One
purpose of this book is to help you understand the economist's
2012 view on these and other subjects and, perhaps, to persuade you
that it is the right one. As you read the book, you will occasionally see small boxes called "Ask the Experts." These are based on the IGM Economics Experts Panel, an ongoing sur
vey of several dozen of the world's most prominent economists. Every few weeks, these experts are offered a proposition and then asked whether they agree with it, disagree with it, or are uncertain. The results in these boxes will give you a sense of when economists are united, when they are divided, and when they just don't
know what to think.
You can see an example here regarding the resale of tickets to entertainment and sporting events. Lawmakers sometimes try to prohibit reselling tickets, or "scalping" as it is sometimes called. The survey results show that many economists side with the scalpers rather than the lawmaker.
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