Economics, 3rd Edition

Ten Propositions About Which Most Economists Agree

Proposition (and percentage of economists who agree)

1.  A ceiling on rents reduces the quantity and quality of housing available. (93%)

2.  Tariffs and import quotas usually reduce general economic welfare. (93%)

3.  

Flexible and floating exchange rates offer an effective international monetary arrangement. 

(90%)

4.  

Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant 

 stimulative impact on a less than fully employed economy. (90%)

5.  

If the government budget is to be balanced, it should be done over the business cycle 

rather than yearly. (85%)

6.  

Cash payments increase the welfare of recipients to a greater degree than do transfers- 

in-kind of equal cash value. (84%)

7.  A large government budget deficit has an adverse effect on the economy. (83%)

8.  A minimum wage increases unemployment among young and unskilled workers. (79%)

9.  

The government should restructure the welfare system along the lines of a ‘negative 

income tax’. (79%)

10.  

Effluent taxes and marketable pollution permits represent a better approach to pollution 

control than imposition of pollution ceilings. (78%)

TABLE 2.1

Another of the propositions concerns the imposition of a legal minimum wage – nearly 80 per cent of 

economists surveyed said that they thought a minimum wage increases unemployment among unskilled 

and young workers. Nevertheless, the majority of European Union countries now have a statutory mini-

mum wage. Of course, these economists were not necessarily against the imposition of a minimum 

wage. Some of them might argue, for example, that while, on the one hand, introducing a minimum wage 

above a certain level may affect unemployment, on the other hand it may increase the average quality of 

goods and services produced in the economy by making it harder for producers of low-quality goods and 

services to compete by keeping wages and prices low, and this may lead to a net benefit to the economy 

overall. Remember: people face trade-offs.

Table 2.2 shows another aspect of this same idea. This is based on a paper written by Alan Budd, a 

former Chief Economic Advisor to HM Treasury in the UK, former Chair of the Office for Budget Respons-

ibility and Provost of the Queen’s College, Oxford University until 2008. The paper appeared in the journal 

World Economics in 2004. This table shows a list of things that Sir Alan thinks that economists know and 

therefore agree on. Most of these things are based on hypotheses that have been tested and observed 

and which appear to explain key behaviours. It is worth bearing the information in Tables 2.1 and 2.2 in 

mind as you read through the book.