Why Economists Disagree

"If all economists were laid end to end, the)' 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 policymaker». President Ronald Reagan onoc joked that if the game Trivial Pursuit were designed for economists, it would have 100 questions and 3,IXX> answers

Why do economists so often appear to give conflicting advice to policymakers? There are two basic reason*

• Economist» may disagree about the validity of alternative positive theories about how the world works.

• Economists may have different values and therefore different normative views about what policy should try to accomplish.

Lei'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 solar system. More recently, meteorologists have debated whether tl>c earth is experiencing global warming and, if so, why. Science is a search for understanding about the world around us. It is not surprising that as the search continues, scientists can disagree a Unit the direction in which truth Iks.

Economists often disagree for the same reason. Economics is a young science, and there is still much to be learned. Economists sometimes disagree because they have different hunches about the validity of alternative theories or about the size of important parameters tltat 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 lax to a consumption tax believe thai the change would encourage households ti) 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 hokl different normative views about the tax system because they have different positive views about the responsiveness of saving to tax incentives.

Differences in Values

Suppose that Peter and Paula both take «he same amount of water from the town well. To pay for maintaining the well, the town taxes its residents. Peter has income of $50,000 and is taxed $5,000, or 10 percent of his income. Paula has ino.ime of $10,030 and is taxed S2,(XX), or 20 percent of her income.

Is this policy fair? If not, who pays loo much a:td who pays too little? Does it matter wl>ethcr Paula's low incomc is due to a medical d «ability or to her decision to pursue a career in acting? 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 on which people are likely to disagree. If the town hired two experts to study how the town 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 learned earlier in our discussion of normative and positive analysis, policies cannot be judged on scientific grounds alone. Economists give conflicting advice sometimes 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 far more than is sometimes understood.

Table 1 contains I I propositions about economic policy. In surveys of pntfes-sional economists, these proposition* were endorsed by an overwhelming majority of respondents. Most of these propositions would fail to command a similar consensus among the public.

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Responses

  • Luwam
    What are positive reasons why economists disagree?
    2 years ago

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