Heterodox Economics Newsletter

Issue 291 January 24, 2022 web pdf Heterodox Economics Directory

After some months, in which we mainly promoted online-events, more and more Calls for Papers and events came up during the past weeks that proactively announce offline-events. While surely these announcements are somewhat bold, for me they are a sign of hope. After all – and notwithstanding the lessons learned from being forced into an online-working-mode – Corona is here to stay, so we are probably well-advised to experiment with how to organize the comeback of scientific meetings under appropriate conditions.

Another sign of hope these days comes from a new survey on ‘scientific consensus’ in economics, which shows that the average economist has shifted towards more heterodox policy propositions in recent years: it is now a “strong consensus” that inequality is detrimental for stability and growth, that climate change is a real danger for humanity, that the real-world impact of the minimum wage is different from its textbook-description, and that fiscal policy is a suitable tool for stabilizing the economy and fostering long run growth. These changes not only indicate that the empirical turn may make an occasional difference in the long run (this seems to be the case for the minimum wage), but also that the average economist is willing to embrace a more pragmatic attitude towards policy issues, willing to go with what is necessary or what works (instead of insisting to further reorganize economic processes to better align with textbook descriptions).

Now, if somebody would add, these changes only represent a minimal amount of sanity emerging in the mainstream, which was highly overdue anyway and, hence, enthusiasm is somewhat misplaced, I will not disagree. Still, things could always be worse and, relentlessly optimistic as I am, I am happy to embrace every change in the right direction ;-)

Notwithstanding this good news, a more detailed look at the outcomes points towards a hard-headed, but still sizeable, minority that holds stronger, more traditional views; for instance, about a third of surveyed economists still believe increasing the minimum wage will increase unemployment, while 15% still believe that climate change does not pose risks to the U.S. economy. Such ‘radical minorities’ are not to be ignored as indicated by the German case: in a recent paper, we show that although the policy views of the average economist in Germany and the U.S. do not differ much, selection-mechanisms into policy work quite differently, showing a bias in Germany that favors exactly such hard-headed minorities, which partly explains Germany’s more hawkish economic policy stance.

Finally, a fun fact: Out of 46 policy propositions, there is only one where “no consensus” was achieved. This ‘most divisive issue’ related to the question of hysteresis or, more generally, Kaldor-Verdoorn effects. Specifically, the survey proposed that “changes in aggregate demand affect real GDP in the short run, but not in the long run”, which received mixed answers. Seems like, we should do more research on this topic to bring some more clarity and consensus into the discipline ;-)

All the best & keep up the good work,

Jakob

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