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17/11/2018 04:18:24 PM

The role of economists

Nowadays, economists are asked to explain the causes of economic events. For example, unemployment is higher for teenagers than for older workers. Sometimes, economists are asked to recommend policies to improve economic outcomes. What, for instance, should the government do to improve the economic well-being of teenagers? So what is the role of economists? When economists are trying to explain the world, they are scientists. When they are trying to help improve it, they are policy advisers. Although they play any role, they have to use positive and normative statement to explain. So what are positive and normative statement ? 

Example of a discussion of minimum-wage laws: Polly says, “Minimum-wage laws cause unemployment.” Norma says, “The government should raise the minimum wage.”

In general, statements about the world are of two types. Positive statements: claims that attempt to describe the world as it is. Normative statements: claims that attempt to prescribe how the world should be. Positive statements can be evaluated by examining data, while normative statements involve personal viewpoints. Positive views about how the world works affect normative views about which policies are desirable. Much of economics is positive; it tries to explain how the economy works. But those who use economics often have goals that are normative. They want to understand how to improve the economy. However, economist's advice is not always followed because Economists offer crucial input into the policy process, but their advice is only part of the advice received by policymakers. In addition, economists sometime disagree. Why? Any economist who advises presidents or other elected leaders knows that his or her recommendations are not always heeded. Frustrating as this can be, it is easy to understand. The process by which economic policy is made differs in many ways from the idealized policy process assumed. 

1. Differences in Scientific Judgments

Economists may disagree about the validity of alternative positive theories or about the size of the effects of changes in the economy on the behavior of households and firms. Example: some economists feel that a change in the tax code that would eliminate a tax on income and create a tax on consumption would increase saving in this country. However, other economists feel that the change in the tax system would have little effect on saving behavior and therefore do not support the change.

2. Differences in Values

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

3.Perception versus Reality

      The first proposition in the table is about rent control, a policy that sets a legal maximum on the amount landlords can charge for their apartments. Almost all economists believe that rent control adversely affects the availability and quality of housing and is a costly way of helping the neediest members of society. Nonetheless,

many city governments ignore the advice of economists and place ceilings on the rents that landlords may charge their tenants. The second proposition in the table concerns tariffs and import quotas, two policies that restrict trade among nations. For reasons we discuss more fully later in this text, almost all economists oppose such barriers to free trade. Nonetheless, over the years, presidents and Congress have chosen to restrict the import of certain goods.

MBA. Nguyen Thi My My