Something's wrong if economists agree on every issue

The Initiative on Global Markets, based at the University of Chicago, periodically surveys a group of leading academic economists, of varying political persuasions, on the issues of the day.

Its latest round-up asked whether President Barack Obama's stimulus plan helped to reduce unemployment in the United States.

Officially known as the American Recovery and Reinvestment Act of 2009, the plan entailed government spending of more than US$800 billion (S$995.2 billion) on infrastructure, education, health and energy, tax incentives and various social programmes. Implemented amid an economic crisis, it was the classic Keynesian response.

The economists were virtually unanimous. All but one of the 37 top economists who responded to the survey said the plan had been successful in its avowed objective of reducing unemployment.

The University of Michigan economist Justin Wolfers cheered the consensus in his New York Times blog. The virulent public debate about whether fiscal stimulus works, he complained, has become totally disconnected from what experts know and agree on.

In fact, economists agree on many things, some of which are politically controversial. Harvard economist Greg Mankiw listed some of them in 2009.

The following propositions garnered support from at least 90 per cent of economists: import tariffs and quotas reduce general economic welfare; rent controls reduce the supply of housing; floating exchange rates provide an effective international monetary system; the US should not restrict employers from outsourcing work to foreign countries; and fiscal policy stimulates the economy when there is less than full employment.

This consensus about many important issues contrasts rather starkly with the general perception that economists rarely agree on anything.

No doubt, there are many public policy questions that economists debate vigorously. What should be the top income tax rate? Should the minimum wage be raised? Should the fiscal deficit be reduced by raising taxes or cutting spending?

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