In this article we will discuss about the reasons for the disagreement among economists.
No doubt economics is a science and economists use scientific methods with evidence about the real world, in a manner comparable with other sciences. There are various ways in which scientific knowledge develops. One which is often fruitful is based on the gradual development of understanding.
Scientists build on their knowledge of what has gone before. X puts forward a theory, Y points out a flaw and Z improves the theory. Hence the development of understanding depends on criticising the work of others. This does not, however, prevent economists from disagreeing.
Economists live in the real world and not in the land of dreams. Hence they disagree with each other and occasionally with their own previously expressed opinions. This disagreement is a virtue. Since no economist would claim to have discovered the ultimate truth about the subject, it follows that what is written and spoken by economists is less than the whole truth.
Therefore, criticism of such untruths or partial truths is necessary, for it is only by rigorous criticism that the subject will progress.
There are various reasons why economists disagree:
Economists disagree because they are ignorant. This statement applies to scholars of all disciplines. Until ultimate truth is known, if it ever is, people will make false statements which reflect their ignorance. Consequently, economics books, like those of other subjects, cannot be regarded as conveying ‘ultimate truth’.
2. Particular difficulties facing social scientists:
If all scientists face the problem of ignorance, those working in social sciences, such as economics, face particular difficulties. One reason is that the focus of their attention is people and people’s behaviour changes. The same family will save this year, but decide to spend next year.
At another time, they will want work, but as time passes they may be content to stay at home. If taxes are increased, some people will decide to work more in order to maintain their income after tax, whilst others will work less because they decide work is no longer worthwhile. Moreover, people’s behaviour changes over time because they learn from their experiences.
People sometimes change their actions when faced with a similar situation. This makes it very difficult, perhaps even impossible, to derive any general laws of human behaviour. An’ economic ‘law’ which seems to operate in one country, or at one period of time, may prove to be quite inadequate else-where or at other times.
Human beings are complex creatures, so economists who try to derive laws which will predict their action often prove to be wrong.
3. 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. These explanations are often expressed in terms of ‘if this, then that; for example, if the price of fish rises then people will eat less fish, or if the government increases its spending then there will be a fall in unemployment.
However, in complex societies such predictions can never be absolute; the demand for fish may not fall, even if its price does rise, if there is a shortage of meat or if there is a successful advertising campaign for fish.
Such predictions depend on the assumption of ceteris paribus — that other things remain equal. In real life, however, other things do not remain equal. A prediction that was previously successful may not be so at another time or in another place.
4. Lack of empirical test:
The only way to test economic theories is to match them against the evidence. This may seen obvious, but in practice evidence cannot prove a theory to be true. That is because; facts do not speak for themselves, but have to be interpreted. Which facts should be used?
There are millions of economic ‘facts’, so the ones which are chosen will depend, in part, on the purpose of the investigation and also on the values and attitudes of those undertaking the investigation. For example, there may be disputes between economists over whether the people in a particular area are really poor. Even if this could be agreed, differences of opinion would emerge as to the causes of the poverty.
Some may argue that poverty is caused because: people are lazy; people are unlucky; of ignorance; of family background; people are the victims of social forces, such as declining industries; of bad government policies, among others.
Evidence could be found to support all these possible causes of poverty. Those researchers who believe that the real reason why some people are poor is that they are lazy or ignorant will certainly be able to find examples to support their case, as will those who favour other causes, such as unsatisfactory government policies.
People tend to seek out evidence to support their beliefs and so substantiate their opinions. For example, people who believe that poverty is a severe problem in India may often associate with others who hold similar beliefs and so strengthen this belief. If such people then decide to research the extent of poverty in the country it is not surprising if they find many examples of people living in poverty.
There is strong disagreement in economics as to whether or not it is possible to develop economic theories which are entirely value free—where the economist’s opinions make no difference to the argument or to the evidence which is presented to support or oppose the argument. This ‘value free’ approach is called positive economics and dominated the subject for many years.
In fact, the positive issues of economics is to be interpreting historical events and predicting the effects of adopting different policies. If we follow the debate about some proposed change in policy, such as the effect on savings of lowering the rate of personal income tax, will find some disagreement among economists.
Even more disagreement surrounds the forecasts of the economic models made by economists in government, in universities, in research institutes and elsewhere. Their forecasts, e.g., for inflation, economic growth, or exports, not infrequently differ, sometimes by rather wide margins. Such differences arise from varying theories that economists have developed in order to explain how the economy works.
“They follow simply from the problems involved in drawing conclusions from statistical testing of economic hypotheses.” Whether or not it is possible for economics to be value free, it is certainly true that in some cases the values and opinion held by economists influence their findings and cause them to disagree with other economists.
So, there is disagreement among economists in normative aspects of economic science. There is wide disagreement among economists regarding the appropriate size of the government, the power of trade unions, the adverse effects of unemployment and inflation, an equitable distribution of income and whether a policy of tax cut is desirable or not. On these issues economists are divided among themselves.