Agreement and disagreement among economists Suppose that Eric, an economist from a research facility in Washington, and Ginny, another economist from a nonprofit institution in the Midwest, a both guests on a popular science podcast. The host of the podcast is facilitating their debate over saving incentives. The following dialogue represen a portion of the transcript of their discussion: Ginny: I think it’s safe to say that, in general, the savings rate of households in today’s economy is much lower than it really needs to be to sustain an improvement in living standards. Eric: I think a switch from the income tax to a consumption tax would bring growth in living standards. Ginny: You really think households would change their saving behavior enough in response to this to make a difference? Because I don’t. The disagreement between these economists is most likely due to Despite their differences, with which proposition are two economists chosen at random most likely to agree? Lawyers make up an excessive percentage of elected officials. Tariffs and import quotas generally reduce economic welfare. Minimum wage laws do more to harm low-skilled workers than help them.
The Correct Answer and Explanation is:
Correct answer: Tariffs and import quotas generally reduce economic welfare.
Explanation:
Economists often have different views about policy effectiveness because of their varying assumptions, interpretations of data, and perspectives on human behavior. In the conversation between Eric and Ginny, their disagreement revolves around the effectiveness of a consumption tax in encouraging saving. Eric believes that switching from income tax to consumption tax would encourage more saving and improve living standards. Ginny is skeptical that this tax policy change would lead to a significant shift in saving behavior. This disagreement stems from differing assumptions about consumer behavior and the effectiveness of tax policy, which is a common source of variation in economic opinion.
However, when it comes to broader economic principles supported by both theoretical and empirical research, most economists tend to find common ground. One such principle is the belief that tariffs and import quotas generally reduce economic welfare.
Tariffs and import quotas limit the ability of markets to allocate resources efficiently. They often lead to higher prices for consumers, reduced choices, and inefficiencies in production. The majority of economists agree that such trade barriers disrupt the benefits of comparative advantage, where each country specializes in producing goods it can make most efficiently. This leads to a net loss in welfare due to misallocation of resources and the deadweight loss caused by protectionist policies.
In contrast, opinions on the minimum wage and the number of lawyers in government are more divided. While some economists believe minimum wage laws reduce employment for low-skilled workers, others argue they can improve standards of living without significant job losses. As for the percentage of lawyers in political office, this is more of a political or sociological question rather than an economic one.
Therefore, the statement about tariffs and quotas reducing economic welfare is the one most likely to earn broad agreement among economists.
