Economic Enlightenment

Numbers give me a headache, so being a grown up has its challenges for me. Being an informed grown up is even worse. But my financial-whiz-kid/ mission-pal, Steve Mackay (aka Daddy Mac) is always posting educational bits on facebook from his Manhattan Office of Financial Wizardry that help me to understand what-in-the-BELL is going on with the economy. This weekend's offering was espceially helpful for a novice like me (it didn't even give me a headache!). It's from THIS blog by Harvard Econ Professor, Greg Mankiw.

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My favorite textbok covers business cycle theory toward the end of the book (the last four chapters) precisely because that theory is controversial. I believe it is better to introduce students to economics with topics about which there is more of a professional consensus. In chapter two of the book, I include a table of propositions to which most economists subscribe, based on various polls of the profession. Here is the list, together with the percentage of economists who agree:

A ceiling on rents reduces the quantity and quality of housing available. (93%)
Tariffs and import quotas usually reduce general economic welfare. (93%)
Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
The United States should not restrict employers from outsourcing work to foreign countries. (90%)
The United States should eliminate agricultural subsidies. (85%)
Local and state governments should eliminate subsidies to professional sports franchises. (85%)
If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
A large federal budget deficit has an adverse effect on the economy. (83%)
A minimum wage increases unemployment among young and unskilled workers. (79%)
The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)

If we could get the American public to endorse all these propositions, I am sure their leaders would quickly follow, and public policy would be much improved. That is why economics education is so important.

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Well put. Of course, that's why he works at Harvard. I don't understand how people can be tricked into ignoring FACTS in favor of politics. I like economics (and yes, even NUMBERS, in this context) because there are hard facts and a couple of centuries of evidence upon which to build theories. Of course theories take off in all directions and can become mind-boggling (did you see "A Beautiful Mind?" YIKES), but basic principles like these can help us so much in day-to-day decision making (and voting). Thanks for all the insight, Mac. Keep it coming!

PS: Here is another guy who helps me make sense of the world. Love him.