Finding consensus

Dr Eric Crampton
Insights Newsletter
11 February, 2022

What passes for economics in Wellington has seemed increasingly out of step with the academic consensus.

Ideas long dismissed by academic economists as mad or harmful become trendy in Wellington circles.

It makes for a dangerous policy environment. Economists who speak out against the fashionable consensus are too easily cast as ideologues by policy proponents.

A circuit-breaker is needed.

And now we have one.

For over a decade, the IGM Forum at the University of Chicago has asked an expert panel of economists about economic policy. When Congress floats ideas about policy, panellists are asked what they think. For example, the expert panel recently said that market power is not to blame for current American inflation, so antitrust intervention would not reduce inflation.

This week, the New Zealand Association of Economists and the New Zealand Initiative released the results of the first New Zealand Economics Experts Survey.

Distinguished Fellows, Life Members, and Past Presidents of the Association, and winners of the NZIER ‘Economist of the Year’ competition were invited to join the panel.

We asked their views on three policy questions drawn from prior IGM surveys. More surveys are yet to come.

Rent control has been politically fashionable. Rent control proponents have pointed to fringe American blogs for support, while casting opponents as right-wing ideologues or out of step with the literature. But 82% of our panel said that rent controls have not helped improve the amount and quality of affordable rental housing.

Opposition to rent control is not some fringe ideological view: it is the strong expert consensus. The Prime Minister rightly ruled it out. But vigilance is still needed as it could too easily re-emerge under other names.

The trendy view is that immigration is harmful. But 87% of our panel agreed or strongly agreed that the average Kiwi would be better off if more highly educated foreign workers were allowed to migrate here.

And while there has been loud support among some business journalists for printing money to fund government investment, drawing on ‘Modern Monetary Theory’, the academic consensus is otherwise. A core MMT proposition is that countries can finance as much real government spending as they want by creating money. Not a single expert agreed with that view.

Economists have a reputation for disagreeing. But there is strong agreement among expert economists on core matters, and that agreement can be far from the fashionable Wellington view. Finally, we have a way of testing that consensus.

Results of the New Zealand Economics Experts Survey are available here.


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