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March 24, 2009

Economics and politics

When many people hear economics, they also think politics. That is, they link the two, almost thinking there's an economic approach to go with each political philosophy. Is this the way you, a professional economist, see it? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Not at all. Professional economists - by professional economists, I mean those with advanced degrees who were trained at colleges and universities - we all studied one kind of economics. There's not a particular kind of economics for one political party or political philosophy and another for another philosophy or another party. We all studied the same kinds of basic economic theory. Then you might say why do economists disagree? Well, I don't think we do disagree so much in the theory. I think it's often that we disagree more in the empirical support for the theory. Let me give you one example - the stimulus plan. Many economists, or I would say all economists would say, look, the stimulus plan is going to be funded by the federal government going to the capital markets and borrowing that money. Now, is there going to be an impact on the capital markets? And economists would, I think, agree that, yes, there can be impact. That is to say that if you're increasing the demand for borrowing, you're going to increase the interest rate. If the increased interest rate causes private borrowing to go down, then the stimulus plan is not going to be as effective. Economists will generally agree with that line of logic. What they will disagree about is the amount by which the interest rate goes up and, therefore, private borrowing will go down. And different economists will look at different studies, read them differently, think one study is done better than the other. So it's not a disagreement on the philosophy. It's a disagreement on the empirical implementation of that particular logic."

Posted by Dave at March 24, 2009 08:00 AM