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Things Economists Agree On

119 points by robobenjie 16y ago

amattn 16y ago
The classic response is "nothing". That being said, getting 4 out of 5 economists to agree on something doesn't mean it's right. Most economists will tell you that public policy works best when you have the capability/political will to iterate on solutions. Not unlike a startup really.
- sliverstorm 16y ago
  I was shocked when I didn't get an empty white page.
  - mdda 16y ago
    That's because the media loves an argument, and politicians love lobbyists... When most economists see a debate between 'experts' on CNN (or Fox) I'm sure they're shaking their heads and sighing. Imagine seeing a debate on TV about the merits of Java vs Windows - with the two experts being marketing people from Oracle and Microsoft. The whole thing would be a facepalm for HN readers - except that to an outsider, it would sound like a clash of brilliant minds.
sliverstorm 16y ago
I'm curious about the "Eliminate Agriculture Subsidies" one. I don't know enough to give a good opinion, but it seems to me like that could wind up pricing basic, quality food out of the hands of the poorest people, and they'd either have problems with starvation or be forced to eat junk. I mean, maybe I'm wrong, but I could have sworn it was The Man that is keeping eggs down at around $3/dozen and milk around $4/gallon.
- dcbell 16y ago
  "Basic, quality food" isn't the issue. Right now we have an abundance of junk made from subsidized crops. High fructose corn syrup only came into vogue because there was a surplus of corn lying around because of corn subsidies. Food represents such a small part of the average American's budget (about 12%) that the real restraints on healthy eating are convenience (Chicken sandwich---five minutes of ordering and waiting in line on the way somewhere. Grilled chicken---25 minutes at home) and education (looking up how to make grilled chicken---10 minutes). If anyone actually looks at what they're eating, they can almost certainly increase quality AND decrease cost.
  - alextp 16y ago
    Indeed. A lot of the junk food culture comes from agricultural subsidies, not just the obvious corn syrup. I recall (but can't find the link) a study showing that a really high proportion of supermarket products had traces of corn (even meat). When you cross the border you see these effects more clearly. Here in brazil, for example, for most of my childhood McDonalds was an expensive-ish place people went out to eat in, and even today junk american-style chocolate bars cost way more than standard not-so-junky chocolate. With an exception for soda (which can be cheaper than bottled water in some places) junk food is not at all attractive if you don't actually have a lot of money (the standard no-money food around here is beans and rice, with maybe cheaper cuts of meat thrown in the beans or served with the food; junk food costs a lot more than twice that).
    - johnwatson11218 16y ago
      yes, I have heard that one of the reasons why there are 99 cent cheeseburgers in all of the major fast food chains here in the US is because of the subsidies. Essentially all the ingredients that go into those burgers are subsidized. When you think about an actual market economy it would seem that some kind of rice and beans with mixed vegetables would be what would cost 99 cents.
- gojomo 16y ago
  Many of the subsidies are price supports and protection from foreign competition -- which raise food prices. 'The Man' is keeping milk prices up; read this expose from the (usually very pro-government) Washington Post: http://www.washingtonpost.com/wp-dyn/content/article/2006/12/09/AR2006120900925.html http://www.washingtonpost.com/wp-dyn/content/article/2006/12...
- dantheman 16y ago
  The government has very little to do with keeping food inexpensive, in fact through various forms of subsidies and tariffs they make some foods more expensive - sugar vs corn syrup. Also: Myth #3: Maintaining a cheap and stable food supply. Some contend that food markets would fluctuate wildly without farm subsidies. In reality, food prices of both subsidized and unsubsidized crops are relatively stable. Given that the percentage of family budgets spent on food has dropped from 25 percent to 10 percent since 1933, any potential price instability would have an increasingly small impact on family budgets.[7] Even if price stabilization was necessary, price support programs have largely been replaced by commodity subsidies that stimulate overproduction rather than stabilize prices. Nor do farm subsidies contribute to lower food costs. Two-thirds of food production is unsubsidized and thus relatively unaffected by subsidies. Of the remaining one-third, price reductions caused by crop subsidies are balanced by conservation programs that raise prices. Furthermore, food prices are based not only on crop prices, but also on food processing, transportation, and marketing costs. Bruce Babcock, professor of economics at Iowa State University, has calculated that eliminating farm subsidies would have virtually no effect on food prices.[8] http://www.heritage.org/research/reports/2007/06/how-farm-subsidies-harm-taxpayers-consumers-and-farmers-too http://www.heritage.org/research/reports/2007/06/how-farm-su...
  - johnny22 16y ago
    can you quote something a little less biased?
    - jerf 16y ago
      Given the level of agreement, you will have a hard time finding much disagreement from any source. I would even suspect that a significant number of those who "disagree" disagree more on technicalities than on the general idea that the US's agricultural subsidies are a bad idea as implemented. For instance, I could argue: 1. A free market economy tends to surprisingly precisely match production to demand; producing extra costs you more than your competition is spending and tends to drive you out of business. 2. Food is subject to unpredictable random failures on a large scale. 3. It is better to have too much food than too little. 4. The economic effect of a subsidy is to cause overproduction. (As opposed to price fixing, which is to cause shortage. Rather a lot of verbiage is expended on the internet trying to explain away these two facts, yet the facts remain.) Therefore, it may actually be desirable strategically for a country and even for the species to subsidize food production, in the hopes that the excess will offset the unpredictable disasters that a free market would tend to produce very little slack for. This will cost the society as a whole more than a "precise match" produced by the free market, but it only takes one bad harvest for this insurance to pay off bigtime. This could lead an economist to vote "disagree" on principle, even if they probably would agree the current subsidy is not an efficient way of accomplishing this goal. As others have pointed out, slamming this to a "true/false" question does erase many of the finer distinctions. But other than those directly monetarily benefiting and those who don't understand the economics well enough to understand how bad these things are, you're not going to find much thoughtful support of these subsidies as they currently exist.
- panic 16y ago
  In that case, why not spend the subsidies on reducing taxes for those poorest people, or on giving them benefits in other ways?
  - sliverstorm 16y ago
    Notice that subsidizing the 'best' foods basically gives the poorest people a break ONLY when they eat good foods. Which may not be such a bad thing. Notice food stamps already do much the same thing. I personally know I would much rather subsidize a poor guy buying milk and bread than a poor guy buying donuts or alcohol.
- benmccann 16y ago
  The subsidies cause harmful distortions. They ruin farmland and create unnecessary pollution because farmers overproduce. They put farmers in poorer countries out of work because we export our excess crops. This causes harm to relations with our neighbors and hampers trade agreements. They cause unhealthy eating habits by making high fructose corn syrup artificially cheap. They make our cattle sick because we feed them corn instead of grass. I could go on and on. It's fair to say we don't want people starving, but removing farm subsidies wouldn't have a large effect on grocery prices and there are better solutions such as giving additional funds to the poor.
- sdurkin 16y ago
  Actually, you'd like federally unsubsided foods. It would mean more locally grown produce and meats. Most of the big agricultural subsidies are for corn and sugar, the really bad stuff. Agricultural subsidies are making the nutrition crisis worse, not better.
  - sprout 16y ago
    It's unlikely that the removal of agricultural subsidies would create a significantly large market for locally grown produce and meats. In fact, it would probably do precisely the opposite, as food could be outsourced just like the rest of our industry to areas with minimal labor laws to hamper cheap food production.
  - cma 16y ago
    Don't corn subsidies make food-corn more expensive (the majority of corn subsidies are for ethanol production, which diverts supply from food/feed)?
- rmorrison 16y ago
  Also, read about what ethanol subsidies are doing to prices elsewhere. Farmers are replacing fields of grains and other crops with corn, in part because corn was already profitable before the subsidies. This has in turn increased the prices of a wide variety of food. One sad example are the prices of hops and barley, which has strained beloved micro-brewers.
- igrekel 16y ago
  Well I tend to believe the really poorest people are more affected by the current dumping of the excess produce than the poor americans you refer to would ever be affected.
- icegreentea 16y ago
  Agricultural subsidies are one of the weird parts of countries economic policies. Simply put, nearly every single developed country has them. And nearly every country agrees that 'in the long run we should probably get rid of them', but then also agrees 'realistically, nothing will budge, so we'll ignore it as much as we can at every WTO (previously GATT) meeting' And the reason why they continue to exist, and will probably continue to exist is that there are relatively few farmers in each of those countries, who make up incredibly homogenous democgraphics within their election ridings. Government that even proposes eliminating the tariffs will lose their rural seats/votes/whatever. Every single one of them.
  - yxhuvud 16y ago
    The effects on seats depends a lot on how the seats are distributed. It is a much less powerful effect in countries that have a proportional distribution compared to the effects in a winner takes all system. Sigh. Here in Sweden we had finally managed to totally do away will all subsidies in the early 90's. Then we entered EU and got more subsidies than ever. :(
  - jacoblyles 16y ago
    Some governments have gotten rid of them. I believe New Zealand cut its agricultural subsidies greatly in recent years without ill effect.
- protomyth 16y ago
  I often wonder in conversations like this how many people have actual backgrounds in agriculture? Yes, in some states milk is price regulated and subsidized. Sometimes to keep prices low and sometimes to keep prices high (it kinda depends on the place - yes, screwy and in the same place people argue about the reasons). Messing with subsidies will raise input costs to a lot of businesses, much like rising truck transport costs. Generally someone will pull out this local plots / in city farms and forget a lot of basic economic truths about mass production and transportation.
- metamemetics 16y ago
  An additional problem with subsidies is the detrimant to international trade. For example, massive subsidies make corn in America TOO cheap, that everyone in Mexico City buys American corn! Yet comparative advantage would say Mexico, with a higher proportion of unskilled laborers, should be able to put corn on the marketplace in their own country cheaper, and build up their economy. Subsidizing exportable domestic goods has similar negative effects to tariffing imports.
  - evgen 16y ago
    The only glaring flaw with your argument is that corn production is a capital-intensive process, not a labor-intensive one. High-yield corn is produced using big machines and lots of nitrogen-based fertilizer. A high proportion of unskilled laborers is useless for corn, but is useful for fruits and vegetables. This is why you have large pools of unskilled migrant labor working the fields in California but now Iowa.
jleader 16y ago
"If all the economists were laid end to end, they'd never reach a conclusion." -- George Bernard Shaw Edit: note that the article only claims a maximum of 93% of economists agreeing on any one of the items.
benmccann 16y ago
I found #4 and #11 to be interesting because it is difficult to spend money, reduce taxes, and not have a deficit. Everyone can agree that it'd be great to have all of those things. Economists are far less in agreement when it comes to what the correct balancing act is.
splat 16y ago
I find it rather strange that even predictions that should be fairly clear-cut and straightforward (e.g. "A ceiling on rents reduces the quantity and quality of housing available.") only get around 9/10 agreement. As a non-economist, I would have thought that a seemingly simple (and testable!) question like that would be like polling physicsts with the question "Does F = ma?". And I would sure hope that more than 93% of physicists would say yes.
- joelmichael 16y ago
  There are people who think the Earth is flat, but they aren't called physicists; yet Marxists are still called economists.
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- msbarnett 16y ago
  That question is a tad bit more subjective than "F = ma" (an economist from a Marxist school of thought would probably disagree that is is entirely clear-cut), and it would depend entirely on the specific way it was asked and exactly what counted as an "agree". Professionals will tend to hedge their answers when they can conceive of any kind of scenario that would contradict an absolute like "A ceiling on rents reduces the quantity and quality of housing available.". A ceiling of 2 trillion dollars/sq. foot would likely not impact on the quality or quantity of housing in the US, to make up a wild counter-claim off the top of my head.
- _delirium 16y ago
  Well, unlike with physical laws, economic "laws" rarely describe direct causal mechanisms, but rather generalizations about what happens when you poke a multi-agent system, whose behavior is often rather complex. It's hard to test, tests often throw up quirks, it's nearly impossible to control for all confounding variables, etc. In the rent-control case, for example, here is one (paywalled and somewhat dated) dissenting view: http://www.springerlink.com/content/k75072652rkxut61/ http://www.springerlink.com/content/k75072652rkxut61/. Pointed out mostly as an example--- it's quite possible that particular paper is now obsolete and adequately responded to. It's a common approach to dissenting from economic conclusions, though: you admit that a particular widely held belief is true in a particular model, but then argue that the model doesn't sufficiently correspond to reality, e.g. because it doesn't incorporate certain important effects.
WingForward 16y ago
1) Getting answers to collide when there's only two choices, Agree or Disagree, is simple, absurdly simple. 50% represents maximum dissension. How many other questions were there? How did they coincide with the presented questions? What is the expected distribution if answers were assigned randomly? 2) A question that deals with global or national finance often can't be accurately stated in a single sentence. I look at, say, the minimum wage, or the sports franchise question, and I think, "It depends." 3) There's an assumption in the questions that contain "should". That assumption is that economists all share the same goals. They don't. The ones who do may agree about the methods to achieve it.
- notahacker 16y ago
  Agree. It's positively dangerous to assume a simple, selectively chosen set of questions are a basis for public policy recommendations. Take the argument about minimum wages increasing unemployment amongst the unskilled and the young, for example. It's not too difficult to infer an implicit policy recommendation from the answer to that question... If, however, you had asked the question "minimum wages increase unemployment overall" you would find a much lower level of agreement (not least empirical observations of the introduction of minimum wages in many jurisdictions have contradicted that claim). There's no inconsistency here since there are plenty of plausible economic mechanisms for believing that imposing a minimum wage leads to a countervailing increase in older, more skilled labourers, but even amongst the subset of economists that believe the actual effect of a minimum wage is to concentrate unemployment amongst the young and unskilled you'll find a large degree of dissent over whether this has good or bad implications for society and the economy as a whole. It's possible to agree wholeheartedly with Mankiw's simple observation of minimum wages => youth unemployment whilst disagreeing passionately with any policy recommendation against imposing a wage floor, even using narrow economic efficiency criteria.
tocomment 16y ago
What does this one mean? "If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)"
- WingForward 16y ago
  It means its okay to go into debt for a few years, as long as we pay it back when the going gets good. A business cycle doesn't have a defined length, which is one of the problems of the approach. I think 3-7 years is a decent range.
- skybrian 16y ago
  It's a question about how a balanced budget amendment should work (if we had one). Balancing the budget every year would be a worse idea than requiring it to balanced over several years.
- jswinghammer 16y ago
  This is a Keynesian and Monetarist view of budgets. The idea is that IF you balance the budget (they often don't think this is ever a great idea anymore) then it should be balanced over the ups and downs of the business cycle. So let's say a business cycle starts up again and somehow the government doesn't spend all that extra money before it comes in and there is surplus. Now booms are followed by an inevitable bust no matter what anyone tells you when the next one starts up. Keynes argued that you should spend during busts to keep aggregate demand up and let the economy recover. So you run a deficit during this time. If you consider a balanced budget then they might argue that you should balance it with consideration to short term gains and losses. If you're interested this video is a fun and very accurate way to learn about two different views of the business cycle: http://www.youtube.com/watch?v=d0nERTFo-Sk http://www.youtube.com/watch?v=d0nERTFo-Sk For the record I'm with Hayek in this video :)
- silentOpen 16y ago
  The federal budget process and the economic reality on the ground are out of phase. To achieve stability in the system, these processes need to be brought more into phase. Put another way: the budget contains a de facto representation of the current economic position as well as economic "velocity" and higher derivatives. In forming the budget, legislators encode these values. In many cases, these values over- or under-shoot reality with poor consequences. tl;dr: Balancing the budget is a stabilization criterion and bringing the active driver into synchrony with the driven body (the economy) should improve stability.
kiujhgbnj 16y ago
Interesting that all economists seem to be pro-business, anti-tax, anti-worker rights. You would almost think that most economists worked at banks or for university business schools. In other research naval officers believe in a larger navy with lots of ships
- astine 16y ago
  You might think that economistshold pro-business, anti-tax, anti-worker rights biases. Or you might think that the more easily demonstrated principles of economics hold pro-business, anti-tax, anti-worker rights biases. Given my limited studies of history and economics, I'd suggest the later.
  - scrod 16y ago
    If only we could discover a series of rules that would explain how perfectly self-interested robots behaved in a fictional market with no government/community interference in business on behalf of workers, where capital could be employed as a wealth-yielding instrument purely in and of itself, and where property gained from the proceeds of such was protected by the threat of violence. Surely then we could use those fundamental rules to help us predict how an ideal society should function. And I say ideal because clearly my preferred set of premises were definitely not chosen as a convenient rationalization for maintaining a pre-existing social structure that enabled the effective subjugation of most of society by a minority owner class.
- dstorrs 16y ago
  Yep, many economists do work for those institutions. And yep, all of them have /some/ particular axe to grind (everyone does -- I do, you do, etc). That doesn't mean that what they're saying isn't correct. - Businesses are, in fact, what generates most of the wealth and innovation in a country - Taxes, whether personal or corporate, are not economically efficient. Government can be compared to an electrical grid -- the money comes in one place, flows out somewhere else, and there are line losses on the way. (Government overhead, wastage, etc) - As to workers' rights: any society represents a particular set of choices about production needs and social needs. Sometimes those needs are cooperative, sometimes orthogonal, and sometimes they are in opposition. When "workers' rights" means "give us the money and the time to innovate and consume outside of work", it's good for society. When it means instead "give us the power to force you to comply with stupid and inefficient rules about who can do what" (e.g. most modern union shops that I've encountered), that's bad for society.
nhebb 16y ago
Interesting that most of these were fiscal and regulatory policies, but no monetary policies held a broad consensus. I would have thought there would be more consensus on interest rates and money supply.
pedanticfreak 16y ago
I am not an economist, but I think economists have been doing a lot of catch up lately. Traditional economists have tended to see people as rational agents, whereas more recent behavioral economists are showing how people are pretty universally irrational. Sure, in an idealized economic simulation we would consider every possibility and only choose the most optimal one. It only stands to reason in such an environment we should remove barriers and maximize choice. But the reality is people are limited and take shortcuts in decision making that traditional economists never even imagined. Those human cognitive limitations need to be seriously considered before jumping to any conclusions about economic policy.
- mdda 16y ago
  But economists would all agree that the models have limitations - that's not really news. The news here is that the limitations are a 10% slice rather than a 1% slice. But that doesn't stop the theory being 90% correct. Incentives-wise : is it easier to get people to buy a book about 'classical economics' or the 'whole new type of economics that makes those classical guys look like dinosaurs'?
  - pedanticfreak 16y ago
    I would liken it more to elaborate geocentric models of the solar system. Sure, they can explain the data. And they can make accurate predictions within a certain margin of error. But then there are the cases they can't explain or predict accurately. Not to mention they keep getting more complex and more uncomfortable to believe. At the end of the day it's just the completely wrong idea tortured to give the right answers. The solar system was heliocentric all along. That's the kind of place I think traditional economic models are in right now. We're steps away from proving out the planets orbit the Sun, but there are still a lot of smart people writing elaborate dissertations about the Sun orbiting the Earth.
- deleted 16y ago
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- dctoedt 16y ago
  > more recent behavioral economists are showing how people are pretty universally irrational I suspect economists might phrase it more guardedly, along the lines of "people don't always behave in a totally-rational manner."
HilbertSpace 16y ago
Here's one broad way Mankiw and company are going wrong. I start with three preliminary points and then point to the going wrong: (1) They have physics envy. In particular, they want to sit in a small, dark, closed room and with just pure thought, with little to no contact with any real economy, come up with some economics version of Newton's second law F = ma or Einstein's result in special relativity E = mc^2. Nonsense. Incompetent, intellectually bankrupt nonsense. (2) With their physics envy, they want mathematical economics and to build mathematical models. E.g., for some decades after Dantzig's simplex algorithm, they fell in love with optimization. As optimization moved forward with nonlinear programming, the Kuhn-Tucker conditions, nonlinear duality, deterministic optimal control and the Pontryagin maximum principle, and stochastic optimal control, the mathematical economists continued to use such applied math to build their models. A shockingly large fraction of the Nobel prizes in economics are from just such nonsense. The math is rock solid; there are occasional good applications to particular, small problems, e.g., the climb, cruise, and descent of an airplane or what mix of refined products should come today from an oil refinery; an application to a real economy is nearly always just total BS. (3) To keep their models relatively simple, they make a lot of assumptions. E.g., in finance, they assume perfect information and f'get about the guy on a motorcycle at an airport who asked the guy on the ramp where the plane was going (as in the movie Wall Street), naked shorting, etc. E.g., they make a lot of Brownian motion assumptions that then say that the LTCM disaster was wildly improbable, which it was not. They make assumptions about which workers are more productive and feed that into their optimization looking for some case of a non-inferior solution or Pareto optimality as if Chinese women had 20 fingers on each hand so could sew buttons much faster than women in South Carolina. Going Wrong. They take their assumptions of their simplistic models and the corresponding conclusions and say that a real economy SHOULD be like that. So, they want to bend the real economy to their Procrustean bed of simplistic assumptions and conclusions. If physical science had done such a thing, then they would still be saying that the planets should move as Ptolemy said, that falling bodies should still move like Aristotle said, and that we should still be looking for flogiston. This economic science is intellectually both incompetent and dishonest; it's contemptible, and dangerous. Once I went through Samuelson's college text: I found NOTHING that made any sense at all except for his chapter on the Federal Reserve; in that chapter, he just described what the laws had established and was clear. All the rest of the book was total BS disconnected from any real economy. E.g., if we buy more transistors, then the price of each transistor has to go up. Right: Transistors used to cost several dollars each, and now, after buying many billions, maybe trillions, of transistors, we can buy a few hundred million for less than $100, retail. Wheat: For years 1800, 1850, 1900, 1950, and 2000, take the quantity in bushels of wheat produced in the US and the price per bushel of wheat, corrected for inflation, see that the quantity has gone way up and the price, way down. Similarly for iron, steel, chickens, and pork. We're talking total suckage. The very first things in academic econ, the supply and demand curves, just do not work in any meaningful way in a real economy; real economies mostly just don't work that way, guys. Total BS. E.g., the econonuts argue for free trade based on simplistic nonsense. Their idea is that, for some global benefit or some Pareto optimality for the world, it is better if the production is where it is most efficient. So, yes, grow teak wood in Thailand, grow rubber in Viet Nam, mine tin in Indonesia, and pump oil in Saudi Arabia. Fine. Then, sew buttons in China? Sure, if the Chinese women had 20 fingers on each hand. But they don't. And a sewing factory in China has to struggle with bad situations for each of suppliers, legal system, transportation system, communications infrastructure, information technology infrastructure, etc. Still, the econonuts want to conclude that China is more efficient at sewing buttons. No they aren't: Instead, the Chinese government understands what the econ profs don't: China takes their young women and makes each of them "an offer they can't refuse", work for pennies a hour under whatever conditions, or else, period. It's not a matter of being efficient. So, businesses, careers, lives, and communities in South Carolina are ruined. So, we pay the former textile workers to do nothing or just let them die. I know: A few of the textile workers get to serve BBQ. From such destructive nonsense, instead of textile workers, I have a better suggestion for who deserves to die. They are doing it, and we should say so: The academic econ profs are KILLING Americans. Then there's US competitiveness: In the 1950s the US had a great economy. Except for some points of information, biomedical, and materials technology, it's not clear that our standard of living is as high now. Our imports were meager, maybe some tin from Indonesia, etc. We didn't buy much from outside because the other industrialized economies were devastated and, thus, had little to sell us. But we did sell some products: Telephone systems, construction machinery, airplanes, etc. Then the idea is that since we could sell at what were astoundingly high prices, especially for the buyers, that is why our economy was doing well: NONSENSE. Total 100% nonsense: So, Joe went to work at, say, Caterpillar, and made great machines which we shipped to, say, France. France paid us in silly paper which we converted to gold. So, we accumulated a lot of gold. What good did this do Joe or the US? Next to none: In particular, Joe's labor got consumed in France instead of the US. Econonuts are confused. It is easy to see why, say, Japan, Saudi Arabia, or Jamaica needs foreign trade. But the US was doing just fine, thank you, as essentially a self-sufficient economy in the 1950s and, with foreign trade, is doing worse now. We are shipping our going businesses, market position, education, technology secret sauce, and intellectual property overseas, and the econonuts conclude that this is good. Total BS. Now, sure, we want to import some oil: Saudi Arabia has oil and needs national defense, wheat, construction expertise, water and sewer systems, information technology, cars, etc., so we can swap. Fine. So, why did we give away major parts of the US economy? Sure: Some econonuts had excuses for why this was optimal, and the Foggy Bottom types wanted to save the world by exporting the US economy. Meanwhile, back in the US, the citizens got it in the rear. US citizens were killed, and are still dying. So, several large US industries got shipped to Taiwan, South Korea, Pakistan, and China, and whole states in the US had their economies devastated. There is a loss the econonuts don't count: The human capital that gets written off. Or, the econonuts assume that the textile workers and metal bending manufacturing workers can, of course, just move to Redmond and write software for Microsoft, which has so far likely never happened even once, to sell to China, which, of course, steals software and doesn't buy it. The econ profs conveniently f'get about market manipulations we learned about in the US in the 1890s -- predatory marketing practices, etc. And they f'get about the assets of a going business, technology secret sauce, market position, etc. The simplistic econ models just don't count such things, so the econonuts assume that we shouldn't think about such things in the real economy and, thus, just give them away. In school, I knew the applied math MUCH better than the econ profs, and their nonsense and its intellectual dishonesty were infuriating. After the first lecture, I asked the econ prof, nicely, what he was assuming -- continuity, differentiability, continuous differentiability, convexity, pseudo convexity, quasi convexity, or what. Then within an hour he had called my Ph.D. advisor and got me OUT of his class. That was not my intention but was GOOD. Academic economics has NOTHING important to do with any real economy and is from irrelevant, incompetent, dishonest, and contemptible down to seriously dangerous. We're talking ordinary crooks way down to the lawyers way, way down to bucket shop operators and from there way, way, way down to the politicians and from there, far, far down where just can't see at all, the econ profs. I know what we should export next: If all the econ profs were lined up on a cargo ship, it would be a good thing. And still better if the ship sank far out at sea. The real economy is IMPORTANT, way, WAY too important ever to be touched by anything like econ profs.
e40 16y ago
"A minimum wage increases unemployment among young and unskilled workers. (79%)" The fair market price for young and unskilled workers would be lower than the minimum wage, yes. Is this a good thing? For young workers, if young is less than 18 (ie, still in school), then this is OK. But, for unskilled workers? That entire class would be in poverty, as if they aren't on the edge of it now.
- Symmetry 16y ago
  Only 2 percent of nonsalaried workers earn minimum wage.
- billswift 16y ago
  The problem is that the only real way most unskilled workers have to increase their skills is by working. Even those hired at minimum wage usually quickly move up to a higher wage as they get experience. Unskilled workers don't stay unskilled once they actually start getting experience.
- newt 16y ago
  The statement "A minimum wage increases unemployment among young and unskilled workers." is probably true, but if maximizing employment is the only goal, then just pay them peanuts and abolish overheads like health and safety. I'd say that maximizing employment is not the only goal.
yc_peter 16y ago
I would argue that the questions asked are largely wrong. A ceiling on rents does reduce the amount and quality of housing. The question, then, is: how much does it reduce amount and quality of housing, and how much does it lower prices? If we have minimum wages, unemployment will be higher, but how much higher? On the other hand, how much higher will average wage be? Economics is a cost/benefit trade-off. If minimum wage doesn't reduce unemployment that much (and all evidence is that it doesn't -- the US is at about a natural level of unemployment in the long term, moving up and down with business cycles), we're better off with it in place. If it kills employment, we're better off without it.
magice 16y ago
Last time I checked, economics was still considered "scientific." That means we should not be operating on consensus basis, but proof. What is the scientific model of these things that economists agree on? Have them be checked against history? Have them predicted future accurately? Have we been able explained whatever deviation they have with reality? Until such model exists, consensus means nothing but politics. Maybe, just maybe, we should start considering demote economics status to "pseudo-science." Last time I check, fortune tellers also agree on shit, you know.
- fredex 16y ago
  "consensus means nothing but politics" Actually, why don't you do this if you think it's all about politics. Get your favorite politician, see who their economic advisers are, then understand their views. Mankiw stated economic points that are accepted by a wide political spectrum.
jboydyhacker 16y ago
#4 is a bit misleading. It states "Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)". While that sounds harmless, a lot of people will take that item and extrapolate it to our current situation and say the correct policy response is to stimulate the economy with fiscal policy. That has to be right since 90% of economists agree right? Well, what happens if you add a little context to the quote and add the text "with high levels of debt as a share of GDP". That 90% number would likely come down massively most likely skewed by biases not related to economic theory. In short, the quote is very misleading if you are trying to use it as a guide to our current mess. What does this imply the right policy response for us is now?: We have to make major cuts in areas of excess that have little stimulative impact. This means cutting back on government pensions, entitlement reform, and cutting things like 9/11 contracts that don't provide any real increase in safety. It means we can also strategically spend in areas that have been neglected the last 10 years like an energy grid for a more stable energy policy, alternatives to petroleum based fuels, a modernized air traffic control system and infrastructure. At a macro level this means net spending decreases in very sensitive areas like entitlements but also strategic increases that make our country more able to compete like education, energy independence and infrastructure.
bugsy 16y ago
Great article. I fully agree with its findings that 93% of US economists are me-too academics who don't understand economics and whose "consensus" is destroying the world.
jkent 16y ago
Whilst it doesn't really support or refute any points, economists and interested people might be interested in the light-hearted http://www.youtube.com/watch?v=VVp8UGjECt4 http://www.youtube.com/watch?v=VVp8UGjECt4
dennisgorelik 16y ago
Surprisingly, I agree with all 14 statements on that list.

119 points by robobenjie 16y ago

The classic response is "nothing". That being said, getting 4 out of 5 economists to agree on something doesn't mean it's right. Most economists will tell you that public policy works best when you have the capability/political will to iterate on solutions. Not unlike a startup really.

sliverstorm 16y ago
I was shocked when I didn't get an empty white page.
- mdda 16y ago
  That's because the media loves an argument, and politicians love lobbyists... When most economists see a debate between 'experts' on CNN (or Fox) I'm sure they're shaking their heads and sighing. Imagine seeing a debate on TV about the merits of Java vs Windows - with the two experts being marketing people from Oracle and Microsoft. The whole thing would be a facepalm for HN readers - except that to an outsider, it would sound like a clash of brilliant minds.

sliverstorm 16y ago

I'm curious about the "Eliminate Agriculture Subsidies" one. I don't know enough to give a good opinion, but it seems to me like that could wind up pricing basic, quality food out of the hands of the poorest people, and they'd either have problems with starvation or be forced to eat junk. I mean, maybe I'm wrong, but I could have sworn it was The Man that is keeping eggs down at around $3/dozen and milk around $4/gallon.

dcbell 16y ago
"Basic, quality food" isn't the issue. Right now we have an abundance of junk made from subsidized crops. High fructose corn syrup only came into vogue because there was a surplus of corn lying around because of corn subsidies. Food represents such a small part of the average American's budget (about 12%) that the real restraints on healthy eating are convenience (Chicken sandwich---five minutes of ordering and waiting in line on the way somewhere. Grilled chicken---25 minutes at home) and education (looking up how to make grilled chicken---10 minutes). If anyone actually looks at what they're eating, they can almost certainly increase quality AND decrease cost.
- alextp 16y ago
  Indeed. A lot of the junk food culture comes from agricultural subsidies, not just the obvious corn syrup. I recall (but can't find the link) a study showing that a really high proportion of supermarket products had traces of corn (even meat). When you cross the border you see these effects more clearly. Here in brazil, for example, for most of my childhood McDonalds was an expensive-ish place people went out to eat in, and even today junk american-style chocolate bars cost way more than standard not-so-junky chocolate. With an exception for soda (which can be cheaper than bottled water in some places) junk food is not at all attractive if you don't actually have a lot of money (the standard no-money food around here is beans and rice, with maybe cheaper cuts of meat thrown in the beans or served with the food; junk food costs a lot more than twice that).
  - johnwatson11218 16y ago
    yes, I have heard that one of the reasons why there are 99 cent cheeseburgers in all of the major fast food chains here in the US is because of the subsidies. Essentially all the ingredients that go into those burgers are subsidized. When you think about an actual market economy it would seem that some kind of rice and beans with mixed vegetables would be what would cost 99 cents.
gojomo 16y ago
Many of the subsidies are price supports and protection from foreign competition -- which raise food prices. 'The Man' is keeping milk prices up; read this expose from the (usually very pro-government) Washington Post: http://www.washingtonpost.com/wp-dyn/content/article/2006/12/09/AR2006120900925.html http://www.washingtonpost.com/wp-dyn/content/article/2006/12...
dantheman 16y ago
The government has very little to do with keeping food inexpensive, in fact through various forms of subsidies and tariffs they make some foods more expensive - sugar vs corn syrup. Also: Myth #3: Maintaining a cheap and stable food supply. Some contend that food markets would fluctuate wildly without farm subsidies. In reality, food prices of both subsidized and unsubsidized crops are relatively stable. Given that the percentage of family budgets spent on food has dropped from 25 percent to 10 percent since 1933, any potential price instability would have an increasingly small impact on family budgets.[7] Even if price stabilization was necessary, price support programs have largely been replaced by commodity subsidies that stimulate overproduction rather than stabilize prices. Nor do farm subsidies contribute to lower food costs. Two-thirds of food production is unsubsidized and thus relatively unaffected by subsidies. Of the remaining one-third, price reductions caused by crop subsidies are balanced by conservation programs that raise prices. Furthermore, food prices are based not only on crop prices, but also on food processing, transportation, and marketing costs. Bruce Babcock, professor of economics at Iowa State University, has calculated that eliminating farm subsidies would have virtually no effect on food prices.[8] http://www.heritage.org/research/reports/2007/06/how-farm-subsidies-harm-taxpayers-consumers-and-farmers-too http://www.heritage.org/research/reports/2007/06/how-farm-su...
- johnny22 16y ago
  can you quote something a little less biased?
  - jerf 16y ago
    Given the level of agreement, you will have a hard time finding much disagreement from any source. I would even suspect that a significant number of those who "disagree" disagree more on technicalities than on the general idea that the US's agricultural subsidies are a bad idea as implemented. For instance, I could argue: 1. A free market economy tends to surprisingly precisely match production to demand; producing extra costs you more than your competition is spending and tends to drive you out of business. 2. Food is subject to unpredictable random failures on a large scale. 3. It is better to have too much food than too little. 4. The economic effect of a subsidy is to cause overproduction. (As opposed to price fixing, which is to cause shortage. Rather a lot of verbiage is expended on the internet trying to explain away these two facts, yet the facts remain.) Therefore, it may actually be desirable strategically for a country and even for the species to subsidize food production, in the hopes that the excess will offset the unpredictable disasters that a free market would tend to produce very little slack for. This will cost the society as a whole more than a "precise match" produced by the free market, but it only takes one bad harvest for this insurance to pay off bigtime. This could lead an economist to vote "disagree" on principle, even if they probably would agree the current subsidy is not an efficient way of accomplishing this goal. As others have pointed out, slamming this to a "true/false" question does erase many of the finer distinctions. But other than those directly monetarily benefiting and those who don't understand the economics well enough to understand how bad these things are, you're not going to find much thoughtful support of these subsidies as they currently exist.
panic 16y ago
In that case, why not spend the subsidies on reducing taxes for those poorest people, or on giving them benefits in other ways?
- sliverstorm 16y ago
  Notice that subsidizing the 'best' foods basically gives the poorest people a break ONLY when they eat good foods. Which may not be such a bad thing. Notice food stamps already do much the same thing. I personally know I would much rather subsidize a poor guy buying milk and bread than a poor guy buying donuts or alcohol.
benmccann 16y ago
The subsidies cause harmful distortions. They ruin farmland and create unnecessary pollution because farmers overproduce. They put farmers in poorer countries out of work because we export our excess crops. This causes harm to relations with our neighbors and hampers trade agreements. They cause unhealthy eating habits by making high fructose corn syrup artificially cheap. They make our cattle sick because we feed them corn instead of grass. I could go on and on. It's fair to say we don't want people starving, but removing farm subsidies wouldn't have a large effect on grocery prices and there are better solutions such as giving additional funds to the poor.
sdurkin 16y ago
Actually, you'd like federally unsubsided foods. It would mean more locally grown produce and meats. Most of the big agricultural subsidies are for corn and sugar, the really bad stuff. Agricultural subsidies are making the nutrition crisis worse, not better.
- sprout 16y ago
  It's unlikely that the removal of agricultural subsidies would create a significantly large market for locally grown produce and meats. In fact, it would probably do precisely the opposite, as food could be outsourced just like the rest of our industry to areas with minimal labor laws to hamper cheap food production.
- cma 16y ago
  Don't corn subsidies make food-corn more expensive (the majority of corn subsidies are for ethanol production, which diverts supply from food/feed)?
rmorrison 16y ago
Also, read about what ethanol subsidies are doing to prices elsewhere. Farmers are replacing fields of grains and other crops with corn, in part because corn was already profitable before the subsidies. This has in turn increased the prices of a wide variety of food. One sad example are the prices of hops and barley, which has strained beloved micro-brewers.
igrekel 16y ago
Well I tend to believe the really poorest people are more affected by the current dumping of the excess produce than the poor americans you refer to would ever be affected.
icegreentea 16y ago
Agricultural subsidies are one of the weird parts of countries economic policies. Simply put, nearly every single developed country has them. And nearly every country agrees that 'in the long run we should probably get rid of them', but then also agrees 'realistically, nothing will budge, so we'll ignore it as much as we can at every WTO (previously GATT) meeting' And the reason why they continue to exist, and will probably continue to exist is that there are relatively few farmers in each of those countries, who make up incredibly homogenous democgraphics within their election ridings. Government that even proposes eliminating the tariffs will lose their rural seats/votes/whatever. Every single one of them.
- yxhuvud 16y ago
  The effects on seats depends a lot on how the seats are distributed. It is a much less powerful effect in countries that have a proportional distribution compared to the effects in a winner takes all system. Sigh. Here in Sweden we had finally managed to totally do away will all subsidies in the early 90's. Then we entered EU and got more subsidies than ever. :(
- jacoblyles 16y ago
  Some governments have gotten rid of them. I believe New Zealand cut its agricultural subsidies greatly in recent years without ill effect.
protomyth 16y ago
I often wonder in conversations like this how many people have actual backgrounds in agriculture? Yes, in some states milk is price regulated and subsidized. Sometimes to keep prices low and sometimes to keep prices high (it kinda depends on the place - yes, screwy and in the same place people argue about the reasons). Messing with subsidies will raise input costs to a lot of businesses, much like rising truck transport costs. Generally someone will pull out this local plots / in city farms and forget a lot of basic economic truths about mass production and transportation.
metamemetics 16y ago
An additional problem with subsidies is the detrimant to international trade. For example, massive subsidies make corn in America TOO cheap, that everyone in Mexico City buys American corn! Yet comparative advantage would say Mexico, with a higher proportion of unskilled laborers, should be able to put corn on the marketplace in their own country cheaper, and build up their economy. Subsidizing exportable domestic goods has similar negative effects to tariffing imports.
- evgen 16y ago
  The only glaring flaw with your argument is that corn production is a capital-intensive process, not a labor-intensive one. High-yield corn is produced using big machines and lots of nitrogen-based fertilizer. A high proportion of unskilled laborers is useless for corn, but is useful for fruits and vegetables. This is why you have large pools of unskilled migrant labor working the fields in California but now Iowa.

jleader 16y ago

"If all the economists were laid end to end, they'd never reach a conclusion." -- George Bernard Shaw Edit: note that the article only claims a maximum of 93% of economists agreeing on any one of the items.

benmccann 16y ago

I found #4 and #11 to be interesting because it is difficult to spend money, reduce taxes, and not have a deficit. Everyone can agree that it'd be great to have all of those things. Economists are far less in agreement when it comes to what the correct balancing act is.

splat 16y ago

I find it rather strange that even predictions that should be fairly clear-cut and straightforward (e.g. "A ceiling on rents reduces the quantity and quality of housing available.") only get around 9/10 agreement. As a non-economist, I would have thought that a seemingly simple (and testable!) question like that would be like polling physicsts with the question "Does F = ma?". And I would sure hope that more than 93% of physicists would say yes.

joelmichael 16y ago
There are people who think the Earth is flat, but they aren't called physicists; yet Marxists are still called economists.
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msbarnett 16y ago
That question is a tad bit more subjective than "F = ma" (an economist from a Marxist school of thought would probably disagree that is is entirely clear-cut), and it would depend entirely on the specific way it was asked and exactly what counted as an "agree". Professionals will tend to hedge their answers when they can conceive of any kind of scenario that would contradict an absolute like "A ceiling on rents reduces the quantity and quality of housing available.". A ceiling of 2 trillion dollars/sq. foot would likely not impact on the quality or quantity of housing in the US, to make up a wild counter-claim off the top of my head.
_delirium 16y ago
Well, unlike with physical laws, economic "laws" rarely describe direct causal mechanisms, but rather generalizations about what happens when you poke a multi-agent system, whose behavior is often rather complex. It's hard to test, tests often throw up quirks, it's nearly impossible to control for all confounding variables, etc. In the rent-control case, for example, here is one (paywalled and somewhat dated) dissenting view: http://www.springerlink.com/content/k75072652rkxut61/ http://www.springerlink.com/content/k75072652rkxut61/. Pointed out mostly as an example--- it's quite possible that particular paper is now obsolete and adequately responded to. It's a common approach to dissenting from economic conclusions, though: you admit that a particular widely held belief is true in a particular model, but then argue that the model doesn't sufficiently correspond to reality, e.g. because it doesn't incorporate certain important effects.

WingForward 16y ago

1) Getting answers to collide when there's only two choices, Agree or Disagree, is simple, absurdly simple. 50% represents maximum dissension. How many other questions were there? How did they coincide with the presented questions? What is the expected distribution if answers were assigned randomly? 2) A question that deals with global or national finance often can't be accurately stated in a single sentence. I look at, say, the minimum wage, or the sports franchise question, and I think, "It depends." 3) There's an assumption in the questions that contain "should". That assumption is that economists all share the same goals. They don't. The ones who do may agree about the methods to achieve it.

notahacker 16y ago
Agree. It's positively dangerous to assume a simple, selectively chosen set of questions are a basis for public policy recommendations. Take the argument about minimum wages increasing unemployment amongst the unskilled and the young, for example. It's not too difficult to infer an implicit policy recommendation from the answer to that question... If, however, you had asked the question "minimum wages increase unemployment overall" you would find a much lower level of agreement (not least empirical observations of the introduction of minimum wages in many jurisdictions have contradicted that claim). There's no inconsistency here since there are plenty of plausible economic mechanisms for believing that imposing a minimum wage leads to a countervailing increase in older, more skilled labourers, but even amongst the subset of economists that believe the actual effect of a minimum wage is to concentrate unemployment amongst the young and unskilled you'll find a large degree of dissent over whether this has good or bad implications for society and the economy as a whole. It's possible to agree wholeheartedly with Mankiw's simple observation of minimum wages => youth unemployment whilst disagreeing passionately with any policy recommendation against imposing a wage floor, even using narrow economic efficiency criteria.

tocomment 16y ago

What does this one mean? "If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)"

WingForward 16y ago
It means its okay to go into debt for a few years, as long as we pay it back when the going gets good. A business cycle doesn't have a defined length, which is one of the problems of the approach. I think 3-7 years is a decent range.
skybrian 16y ago
It's a question about how a balanced budget amendment should work (if we had one). Balancing the budget every year would be a worse idea than requiring it to balanced over several years.
jswinghammer 16y ago
This is a Keynesian and Monetarist view of budgets. The idea is that IF you balance the budget (they often don't think this is ever a great idea anymore) then it should be balanced over the ups and downs of the business cycle. So let's say a business cycle starts up again and somehow the government doesn't spend all that extra money before it comes in and there is surplus. Now booms are followed by an inevitable bust no matter what anyone tells you when the next one starts up. Keynes argued that you should spend during busts to keep aggregate demand up and let the economy recover. So you run a deficit during this time. If you consider a balanced budget then they might argue that you should balance it with consideration to short term gains and losses. If you're interested this video is a fun and very accurate way to learn about two different views of the business cycle: http://www.youtube.com/watch?v=d0nERTFo-Sk http://www.youtube.com/watch?v=d0nERTFo-Sk For the record I'm with Hayek in this video :)
silentOpen 16y ago
The federal budget process and the economic reality on the ground are out of phase. To achieve stability in the system, these processes need to be brought more into phase. Put another way: the budget contains a de facto representation of the current economic position as well as economic "velocity" and higher derivatives. In forming the budget, legislators encode these values. In many cases, these values over- or under-shoot reality with poor consequences. tl;dr: Balancing the budget is a stabilization criterion and bringing the active driver into synchrony with the driven body (the economy) should improve stability.

kiujhgbnj 16y ago

Interesting that all economists seem to be pro-business, anti-tax, anti-worker rights. You would almost think that most economists worked at banks or for university business schools. In other research naval officers believe in a larger navy with lots of ships

astine 16y ago
You might think that economistshold pro-business, anti-tax, anti-worker rights biases. Or you might think that the more easily demonstrated principles of economics hold pro-business, anti-tax, anti-worker rights biases. Given my limited studies of history and economics, I'd suggest the later.
- scrod 16y ago
  If only we could discover a series of rules that would explain how perfectly self-interested robots behaved in a fictional market with no government/community interference in business on behalf of workers, where capital could be employed as a wealth-yielding instrument purely in and of itself, and where property gained from the proceeds of such was protected by the threat of violence. Surely then we could use those fundamental rules to help us predict how an ideal society should function. And I say ideal because clearly my preferred set of premises were definitely not chosen as a convenient rationalization for maintaining a pre-existing social structure that enabled the effective subjugation of most of society by a minority owner class.
dstorrs 16y ago
Yep, many economists do work for those institutions. And yep, all of them have /some/ particular axe to grind (everyone does -- I do, you do, etc). That doesn't mean that what they're saying isn't correct. - Businesses are, in fact, what generates most of the wealth and innovation in a country - Taxes, whether personal or corporate, are not economically efficient. Government can be compared to an electrical grid -- the money comes in one place, flows out somewhere else, and there are line losses on the way. (Government overhead, wastage, etc) - As to workers' rights: any society represents a particular set of choices about production needs and social needs. Sometimes those needs are cooperative, sometimes orthogonal, and sometimes they are in opposition. When "workers' rights" means "give us the money and the time to innovate and consume outside of work", it's good for society. When it means instead "give us the power to force you to comply with stupid and inefficient rules about who can do what" (e.g. most modern union shops that I've encountered), that's bad for society.

nhebb 16y ago

Interesting that most of these were fiscal and regulatory policies, but no monetary policies held a broad consensus. I would have thought there would be more consensus on interest rates and money supply.

pedanticfreak 16y ago

I am not an economist, but I think economists have been doing a lot of catch up lately. Traditional economists have tended to see people as rational agents, whereas more recent behavioral economists are showing how people are pretty universally irrational. Sure, in an idealized economic simulation we would consider every possibility and only choose the most optimal one. It only stands to reason in such an environment we should remove barriers and maximize choice. But the reality is people are limited and take shortcuts in decision making that traditional economists never even imagined. Those human cognitive limitations need to be seriously considered before jumping to any conclusions about economic policy.

mdda 16y ago
But economists would all agree that the models have limitations - that's not really news. The news here is that the limitations are a 10% slice rather than a 1% slice. But that doesn't stop the theory being 90% correct. Incentives-wise : is it easier to get people to buy a book about 'classical economics' or the 'whole new type of economics that makes those classical guys look like dinosaurs'?
- pedanticfreak 16y ago
  I would liken it more to elaborate geocentric models of the solar system. Sure, they can explain the data. And they can make accurate predictions within a certain margin of error. But then there are the cases they can't explain or predict accurately. Not to mention they keep getting more complex and more uncomfortable to believe. At the end of the day it's just the completely wrong idea tortured to give the right answers. The solar system was heliocentric all along. That's the kind of place I think traditional economic models are in right now. We're steps away from proving out the planets orbit the Sun, but there are still a lot of smart people writing elaborate dissertations about the Sun orbiting the Earth.
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dctoedt 16y ago
> more recent behavioral economists are showing how people are pretty universally irrational I suspect economists might phrase it more guardedly, along the lines of "people don't always behave in a totally-rational manner."

HilbertSpace 16y ago

Here's one broad way Mankiw and company are going wrong. I start with three preliminary points and then point to the going wrong: (1) They have physics envy. In particular, they want to sit in a small, dark, closed room and with just pure thought, with little to no contact with any real economy, come up with some economics version of Newton's second law F = ma or Einstein's result in special relativity E = mc^2. Nonsense. Incompetent, intellectually bankrupt nonsense. (2) With their physics envy, they want mathematical economics and to build mathematical models. E.g., for some decades after Dantzig's simplex algorithm, they fell in love with optimization. As optimization moved forward with nonlinear programming, the Kuhn-Tucker conditions, nonlinear duality, deterministic optimal control and the Pontryagin maximum principle, and stochastic optimal control, the mathematical economists continued to use such applied math to build their models. A shockingly large fraction of the Nobel prizes in economics are from just such nonsense. The math is rock solid; there are occasional good applications to particular, small problems, e.g., the climb, cruise, and descent of an airplane or what mix of refined products should come today from an oil refinery; an application to a real economy is nearly always just total BS. (3) To keep their models relatively simple, they make a lot of assumptions. E.g., in finance, they assume perfect information and f'get about the guy on a motorcycle at an airport who asked the guy on the ramp where the plane was going (as in the movie Wall Street), naked shorting, etc. E.g., they make a lot of Brownian motion assumptions that then say that the LTCM disaster was wildly improbable, which it was not. They make assumptions about which workers are more productive and feed that into their optimization looking for some case of a non-inferior solution or Pareto optimality as if Chinese women had 20 fingers on each hand so could sew buttons much faster than women in South Carolina. Going Wrong. They take their assumptions of their simplistic models and the corresponding conclusions and say that a real economy SHOULD be like that. So, they want to bend the real economy to their Procrustean bed of simplistic assumptions and conclusions. If physical science had done such a thing, then they would still be saying that the planets should move as Ptolemy said, that falling bodies should still move like Aristotle said, and that we should still be looking for flogiston. This economic science is intellectually both incompetent and dishonest; it's contemptible, and dangerous. Once I went through Samuelson's college text: I found NOTHING that made any sense at all except for his chapter on the Federal Reserve; in that chapter, he just described what the laws had established and was clear. All the rest of the book was total BS disconnected from any real economy. E.g., if we buy more transistors, then the price of each transistor has to go up. Right: Transistors used to cost several dollars each, and now, after buying many billions, maybe trillions, of transistors, we can buy a few hundred million for less than $100, retail. Wheat: For years 1800, 1850, 1900, 1950, and 2000, take the quantity in bushels of wheat produced in the US and the price per bushel of wheat, corrected for inflation, see that the quantity has gone way up and the price, way down. Similarly for iron, steel, chickens, and pork. We're talking total suckage. The very first things in academic econ, the supply and demand curves, just do not work in any meaningful way in a real economy; real economies mostly just don't work that way, guys. Total BS. E.g., the econonuts argue for free trade based on simplistic nonsense. Their idea is that, for some global benefit or some Pareto optimality for the world, it is better if the production is where it is most efficient. So, yes, grow teak wood in Thailand, grow rubber in Viet Nam, mine tin in Indonesia, and pump oil in Saudi Arabia. Fine. Then, sew buttons in China? Sure, if the Chinese women had 20 fingers on each hand. But they don't. And a sewing factory in China has to struggle with bad situations for each of suppliers, legal system, transportation system, communications infrastructure, information technology infrastructure, etc. Still, the econonuts want to conclude that China is more efficient at sewing buttons. No they aren't: Instead, the Chinese government understands what the econ profs don't: China takes their young women and makes each of them "an offer they can't refuse", work for pennies a hour under whatever conditions, or else, period. It's not a matter of being efficient. So, businesses, careers, lives, and communities in South Carolina are ruined. So, we pay the former textile workers to do nothing or just let them die. I know: A few of the textile workers get to serve BBQ. From such destructive nonsense, instead of textile workers, I have a better suggestion for who deserves to die. They are doing it, and we should say so: The academic econ profs are KILLING Americans. Then there's US competitiveness: In the 1950s the US had a great economy. Except for some points of information, biomedical, and materials technology, it's not clear that our standard of living is as high now. Our imports were meager, maybe some tin from Indonesia, etc. We didn't buy much from outside because the other industrialized economies were devastated and, thus, had little to sell us. But we did sell some products: Telephone systems, construction machinery, airplanes, etc. Then the idea is that since we could sell at what were astoundingly high prices, especially for the buyers, that is why our economy was doing well: NONSENSE. Total 100% nonsense: So, Joe went to work at, say, Caterpillar, and made great machines which we shipped to, say, France. France paid us in silly paper which we converted to gold. So, we accumulated a lot of gold. What good did this do Joe or the US? Next to none: In particular, Joe's labor got consumed in France instead of the US. Econonuts are confused. It is easy to see why, say, Japan, Saudi Arabia, or Jamaica needs foreign trade. But the US was doing just fine, thank you, as essentially a self-sufficient economy in the 1950s and, with foreign trade, is doing worse now. We are shipping our going businesses, market position, education, technology secret sauce, and intellectual property overseas, and the econonuts conclude that this is good. Total BS. Now, sure, we want to import some oil: Saudi Arabia has oil and needs national defense, wheat, construction expertise, water and sewer systems, information technology, cars, etc., so we can swap. Fine. So, why did we give away major parts of the US economy? Sure: Some econonuts had excuses for why this was optimal, and the Foggy Bottom types wanted to save the world by exporting the US economy. Meanwhile, back in the US, the citizens got it in the rear. US citizens were killed, and are still dying. So, several large US industries got shipped to Taiwan, South Korea, Pakistan, and China, and whole states in the US had their economies devastated. There is a loss the econonuts don't count: The human capital that gets written off. Or, the econonuts assume that the textile workers and metal bending manufacturing workers can, of course, just move to Redmond and write software for Microsoft, which has so far likely never happened even once, to sell to China, which, of course, steals software and doesn't buy it. The econ profs conveniently f'get about market manipulations we learned about in the US in the 1890s -- predatory marketing practices, etc. And they f'get about the assets of a going business, technology secret sauce, market position, etc. The simplistic econ models just don't count such things, so the econonuts assume that we shouldn't think about such things in the real economy and, thus, just give them away. In school, I knew the applied math MUCH better than the econ profs, and their nonsense and its intellectual dishonesty were infuriating. After the first lecture, I asked the econ prof, nicely, what he was assuming -- continuity, differentiability, continuous differentiability, convexity, pseudo convexity, quasi convexity, or what. Then within an hour he had called my Ph.D. advisor and got me OUT of his class. That was not my intention but was GOOD. Academic economics has NOTHING important to do with any real economy and is from irrelevant, incompetent, dishonest, and contemptible down to seriously dangerous. We're talking ordinary crooks way down to the lawyers way, way down to bucket shop operators and from there way, way, way down to the politicians and from there, far, far down where just can't see at all, the econ profs. I know what we should export next: If all the econ profs were lined up on a cargo ship, it would be a good thing. And still better if the ship sank far out at sea. The real economy is IMPORTANT, way, WAY too important ever to be touched by anything like econ profs.

e40 16y ago

"A minimum wage increases unemployment among young and unskilled workers. (79%)" The fair market price for young and unskilled workers would be lower than the minimum wage, yes. Is this a good thing? For young workers, if young is less than 18 (ie, still in school), then this is OK. But, for unskilled workers? That entire class would be in poverty, as if they aren't on the edge of it now.

Symmetry 16y ago
Only 2 percent of nonsalaried workers earn minimum wage.
billswift 16y ago
The problem is that the only real way most unskilled workers have to increase their skills is by working. Even those hired at minimum wage usually quickly move up to a higher wage as they get experience. Unskilled workers don't stay unskilled once they actually start getting experience.
newt 16y ago
The statement "A minimum wage increases unemployment among young and unskilled workers." is probably true, but if maximizing employment is the only goal, then just pay them peanuts and abolish overheads like health and safety. I'd say that maximizing employment is not the only goal.

yc_peter 16y ago

I would argue that the questions asked are largely wrong. A ceiling on rents does reduce the amount and quality of housing. The question, then, is: how much does it reduce amount and quality of housing, and how much does it lower prices? If we have minimum wages, unemployment will be higher, but how much higher? On the other hand, how much higher will average wage be? Economics is a cost/benefit trade-off. If minimum wage doesn't reduce unemployment that much (and all evidence is that it doesn't -- the US is at about a natural level of unemployment in the long term, moving up and down with business cycles), we're better off with it in place. If it kills employment, we're better off without it.

magice 16y ago

Last time I checked, economics was still considered "scientific." That means we should not be operating on consensus basis, but proof. What is the scientific model of these things that economists agree on? Have them be checked against history? Have them predicted future accurately? Have we been able explained whatever deviation they have with reality? Until such model exists, consensus means nothing but politics. Maybe, just maybe, we should start considering demote economics status to "pseudo-science." Last time I check, fortune tellers also agree on shit, you know.

fredex 16y ago
"consensus means nothing but politics" Actually, why don't you do this if you think it's all about politics. Get your favorite politician, see who their economic advisers are, then understand their views. Mankiw stated economic points that are accepted by a wide political spectrum.

jboydyhacker 16y ago

#4 is a bit misleading. It states "Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)". While that sounds harmless, a lot of people will take that item and extrapolate it to our current situation and say the correct policy response is to stimulate the economy with fiscal policy. That has to be right since 90% of economists agree right? Well, what happens if you add a little context to the quote and add the text "with high levels of debt as a share of GDP". That 90% number would likely come down massively most likely skewed by biases not related to economic theory. In short, the quote is very misleading if you are trying to use it as a guide to our current mess. What does this imply the right policy response for us is now?: We have to make major cuts in areas of excess that have little stimulative impact. This means cutting back on government pensions, entitlement reform, and cutting things like 9/11 contracts that don't provide any real increase in safety. It means we can also strategically spend in areas that have been neglected the last 10 years like an energy grid for a more stable energy policy, alternatives to petroleum based fuels, a modernized air traffic control system and infrastructure. At a macro level this means net spending decreases in very sensitive areas like entitlements but also strategic increases that make our country more able to compete like education, energy independence and infrastructure.

bugsy 16y ago

Great article. I fully agree with its findings that 93% of US economists are me-too academics who don't understand economics and whose "consensus" is destroying the world.

jkent 16y ago

Whilst it doesn't really support or refute any points, economists and interested people might be interested in the light-hearted http://www.youtube.com/watch?v=VVp8UGjECt4 http://www.youtube.com/watch?v=VVp8UGjECt4

dennisgorelik 16y ago

Surprisingly, I agree with all 14 statements on that list.