Status Quo

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"The economists say: on The One hand, But on The Other side," says Prof Esther Duflo , in the picture with her husband, Abhijit Banerjee

Economists had a Hard Time in recent years, with the Conservative politicians Michael Gove 's famous adage that the people distanced during the Brexit campaign, branding them "irresponsible" and "elitist".

Today, the trust in economists is hardly a politician.

"the Economists say: on The One hand - But on The Other side," says Esther Duflo , Professor of poverty alleviation and Development Economics at the Massachusetts Institute of Technology (mit). "This is why people are always on the lookout for a one-armed economists," she jokes, quoted the former US President Harry Truman is reputed comment.

But the Prof Duflo, who in addition to her colleague and husband, Prof Abhijit Banerjee and Harvard Professor Michael Kremer , certainly from the fence in a new book that hits on some economists' estimated myths.

In a Good economy for Hard Times , Profs Duflo and Banerjee tackle, as you in dealing with some of the 21St Century 's greatest challenges, and argue that the economists are more important than ever in today's polarized world.

What motivates us?

the Conventional economic theory does not focus on what people are interested in actually, you say. Money plays a role, But in Reality , people are more concerned about "purpose, belonging, and dignity" than a few extra dollars - even if times are hard.

Conventional theory speaks of the "economic man", makes the justification to make perfectly informed decisions - the Reality is quite different

This is a "big blind spot in the economy", as economists, people often react very strongly to financial incentives.

Conventional Economics claims that "if you are in a job factory in a Small Town in the USA to Work in a dress, and that Work disappears, because the competition from China, they just pack up and go by miles, and you take a job, new clothing to sell in a store," she says.

And it is not for economists only. A separate study of 10,000 Americans by The Husband and wife team showed 62% of respondents believe that the unemployed should move to find Work - even if The Job offer 200 Miles Away .

unemployed Americans queue to speak with potential employers at a career fair, But people are less willing to move, as many economists believe, that

But when asked whether they would move for a job, only 52% said Yes. Of those who were unemployed, only a third said they were ready to move. In Reality , many people concluded not to move, even after a factory.

money plays a role; a move perhaps to tax, or any increase in wages could be eroded by higher living costs, says Prof Duflo. And the U.S. population mobility is certainly reduce. In 1985, the census figures showed nearly 20% of Americans had moved in the last 12 months, But in 2018 that number is More Than halved.

But there are other compelling reasons not to move, she says. A study shows that about half of all Americans remain connected, where you grew up. This "rooted" group are disproportionately white, older, married, and living in rural areas.

To half of Americans stay connected to where you grew up

"If Bad News comes in the form of more competition from the outside, rather than embrace and moved the resources to their best possible use, there is a tendency to duck and hope that the problem will go Away on its own," write Profs Duflo and Banerjee.

"lay off employees, not departing employees replaced, and wages will start to slip. Entrepreneurs take a Big Hit on their profits, loans received, to be renegotiated, All In order to preserve, as much as possible of the Status Quo . "

More Trade is good? Economists say the tariffs exacerbated The 1930S Great Depression

The idea that more Trade is good, is "deeply rooted" in many economists, says Prof Duflo. For example, if the imposed on US, thousands of customs duties on goods, in The 1930S , over a thousand economists wrote to President Hoover asking him to veto The Bill . Even today, The Threat of tariffs sends the wobbles on the stock market.

However, Prof Duflo cited, which shows that the profits for US from Trade 2. 5% of the gross domestic product (GDP).

"That's not really a lot," she says. "The Truth is, if the US does not go back to full self-sufficiency [Trade it would be with someone] poorer. But not a lot poorer. "

Economists debate the benefits of Trade to the U.S. economy

not everyone agrees. Douglas Irwin , a Trade historian and professor of Economics at Dartmouth College , says that the gains in the US Trade Costinot research, the range of 1. 8-10. 3% of the GDP.

"is Something like 10%, Nothing Trivial ," says Prof Irwin. "I would say that the historical experience has shown that Trade reforms in developing countries have improved their economic performance and led to a significant reduction in poverty. "

Prof, says Duflo, while countries such as China is benefiting massively from the Trade - was mixed, the experiences of other countries.

China's economies of scale make it more difficult for smaller countries to Compete

China has a reputation for the ability to make things cheaply, quickly, and reliably to Compete so that it is more difficult for smaller countries, such as Ethiopia or Egypt - even as the Chinese standard of living further.

Higher or lower taxes?

head of the Labour party Jeremy Corbyn has promised, if he would be the next British Prime Minister . Labour has vowed to have the rich pay more taxes, and some members of the party have even suggested that there should be no billionaires in This Country .

Prof Duflo, says The Evidence suggests that rich people suddenly stop, because it is through higher taxes, not But adds that only the taxation of the rich to generate more additional revenue.

head of the Labour party, Jeremy Corbyn wants to pay increase taxes for top earners

"For example, if the taxes on people who are More Than £500,000 per year is very high, then companies that do not feel the need to, this very high wages in the First Place - because you are only going to the Treasury coffers anyway. "

But the drastic reduction in taxes is not The Answer either. In their book, professors Duflo and Banerjee an example, cite US, if Republican leaders passed in Kansas deep tax cuts in 2012, in The Hope that this would spur the economy. The Opposite is happening. The State was left to pay without enough money for the public Service , and the officials were forced to cut The School week to four days.

Prof, says Duflo higher tax rates need to be complemented by better services or targeted assistance for those who need it most. "Politicians have to be guidelines that will help the person has lost their job, in a factory, because they are replaced by robots, or because the item is now made in China.

"unless we have a successful response to this question, then only the taxation of the rich is not going to help, because there are going to be these people less angry. "

Listen to Business Daily for the BBC World Service .

global economy, nobel prize, global trade, economics, tax

Source of news: bbc.com