Why do economists offer conflicting advice to policymakers?
"There are two basic reasons: - Economists 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."
Economists can give conflicting advice as they may disagree on two major factors. The first one is that they see the validity of theories regarding how the world works differently. The other one is that they disagree on what the government's policies should accomplish as their values are not the same.
In an IGM Forum survey of leading economists, 90 percent either agreed or strongly agreed that one “reason why economists often give disparate advice on tax policy is because they hold differing views about choices between raising average prosperity and redistributing income.”
'Policy maker' is a broad terms that covers all the people resposible for formulating or amending policy. At a national level in the UK this includes Ministers, their advisers, civil servants, officially appointed Chief Scientific Advisers, Parliamentary Committee members, MPs, Lords, and all of their advisory staff.
Paul Krugman writes that Fourcade's basic point is that successful economists tend to be intellectually arrogant because they live in a social setup that is very hierarchical, with steep gradients of prestige, widespread agreement about what constitutes good work and who is doing it, and pretty big rewards by ...
Why do economists make assumptions? Economists make assumptions to simplify problems without substantially affecting the answer. Assumptions can make the world easier to understand.
The assumptions of economists are made to better understand consumer and business behavior when making economic decisions. Economists can't isolate individual variables in the real world, so they make assumptions to create a model that they can control.
Economists give conflicting advice sometimes because they have different values. Perfecting the science of economies will not tell whether P or Q pays too much.
Economists disagree because they can. Inadequate methods: Economists also disagree because their methods are not good enough to reveal the whole truth. Economic theory is an attempt to explain and interpret economic data, for example, to determine the causes and effects of economic events.
Economic advisers to the president might disagree about a question of policy because of differing scientific judgments or differences in values.
Why policymakers should not try to stabilize the economy?
Con: Policymakers should not try to stabilise the economy. Monetary and fiscal policy affect the economy with a substantial lag. Monetary policy affects interest rates, which may take six months or more to affect residential and business investment spending. A change in fiscal policy involves a long political process.
Policymakers have to make decisions quickly, often based on their values and judgements reflecting their beliefs. New data triggers schemata in the brain that 'filter out' the need to pay complete attention, by, for example, recognising a familiar array of circ*mstances.
Defining a policy problem is an act of conceptualizing collective problems or challenges to be dealt with. It involves mobilizing others in a specific way to look at problems and solutions (Jennings, 1987; Spector and Kitsuse, 1987; Fischer, 1987, 1993; Schram, 1993; Hanberger, 1997).
There are two basic reasons: Economists 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.
Why does the impact lag influence monetary policy effectiveness? Because it takes time for businesses to change investment spending decisions.
The rational expectations theory is a concept and theory used in macroeconomics. Economists use the rational expectations theory to explain anticipated economic factors, such as inflation rates and interest rates. The idea behind the rational expectations theory is that past outcomes influence future outcomes.
The Phillips curve shows the short-run trade-off between inflation and unemployment. The Phillips curve shows the short-run combinations of unemployment and inflation that arise as shifts in the aggregate demand curve move the economy along the short-run aggregate supply curve.
