The Economist (2022-01-08)

64 Finance&economics TheEconomistJanuary8th 2022

O

bservershavelongpokedfunatthe

inabilityoftheeconomicsprofes­

siontomakeupitsmind.“Ifparliament

weretoasksixeconomistsforanopin­

ion,sevenwouldcomeback,”runsone

versionofanoldjoke.Yetthegibesmay

belosingtheirforce.A newpaper,by

DorisGeide­StevensonandAlvaroLa

ParraPerezofWeberStateUniversity,

findsthateconomistsareagreeingwith

eachothermoreona numberofpolicy­

relatedquestions.

Thepaperpublishestheresultsofthe

latestwaveofa surveyofeconomiststhat

hasbeenconductedroughlyoncea

decadesince 1976 (thoughtheresultsof

thefirstwavearenotentirelycompara­

blewithlaterones).Membersofthe

AmericanEconomicAssociationwere

askedwhethertheyagreedwitha num­

berofpropositions,rangingfromthe

economicimpactofminimum­wage

increasestothedesirabilityof universal

healthinsurance.Basedonthefrequency

ofresponses,theresearchersdevisedan

indexthatcapturedthedegreeofcon­

sensusoneachquestion.

Theresultssuggestthattheextentof

consensushasrisensignificantly.Econ­

omistswereinstrongagreementon

abouta thirdofthepropositionsinthe

latestwave,comparedwitharound15%

in 2011 andlessthan10%in 1990 (see

chart,left­handpanel).Respondents

weremoreunitedontheirdiagnosisof

economicproblems.And,strikingly,

moreofthemwereconvincedoftheneed

formuscularpolicy.

Inequalitywasa growingconcern.

Theshareofrespondentswhowhollyor

somewhatagreedthatthedistributionof

incomeinAmericashouldbemoreequal

rosefrom68%in 2000 to86%in2020­21.

Fully85%thoughtcorporatepowerwas

tooconcentrated.Anotherworrywas

climatechange,whichmostagreed

poseda bigrisktotheeconomy.(Both

questionswereaskedforthefirsttimein

thelatestwave.)

Unsurprisingly,giventheirviewson

marketpower,respondents’supportfora

vigoroususeofantitrustpolicyhas

increasedmarkedlyoverthepasttwo

decades(seechart,right­handpanel).

Anothernotablechangewasintheen­

thusiasmforfiscalactivism.Moreecon­

omiststhoughtthattheFederalReserve

alonecouldnotmanagethebusiness

cycle—perhapsconsistentwiththe

declineinitspolicyratetowardszero—

andwerekeenerona biggerrolefor

government.Moreofthemalsoagreed

thatfiscalpolicycouldhaveimportant

economiceffects,bothduringdown­

turnsandoverthelongterm.

Thedismalsciencehasnotbecome

entirelyharmonious,though.Econo­

mistswereslightlymoresplitonthe

consequencesofloweringincomeand

capital­gainstaxesinthelatestwave,

withroughlyhalfofrespondentsagree­

ingwiththepropositionsputtothemby

theresearchers,andtherestdisagreeing.

Enoughroom,still,forhealthydebate.

Economics

The new consensus

Anewstudyfindsthateconomistsareagreeingwitheachothermore

Finding common ground

United States, survey of economists

Source:“Consensusamongeconomists2020—asharpeningofthepicture”,

byD.Geide-StevensonandA.LaParraPerez,Dec 2021 (workingpaper)

30

20

10

0

5

15

25

35

1990 2000 11 20-21

Shareofeconomicpropositions

with“strong”consensus,%

TheFederalReserveshouldfocuson keeping

inflationlowratherthanothergoals

Business-cyclemanagementshould be left to the

Fed.Activistfiscalpoliciesshouldbe avoided

Antitrustlawsshouldbeenforcedvigorously

Distributionofincomeshouldbemore equal

0 25 50 75 100

Share of economists agreeing , %

2000 2011 2020-21

TroubledbanksinChina

North-eastern

exposure

“C

abbage homes”have  brought  some

notoriety  to  Hegang  in  recent  years.

Flats in the small city in China’s far north­

east have been selling for outrageously low

prices—some for just $3,500 apiece—earn­

ing a comparison with the cheapest items

in  vegetable  markets.  The  region’s  eco­

nomic outlook has been so poor for so long

that  it  cannot  retain  residents.  The  city,

which is in Heilongjiang province, has lost

about  16%  of  its  population  in  a  decade.

The cabbage homes were built by the gov­

ernment to help alleviate poverty, but they

have  found  few  takers.  The  local  govern­

ment is now struggling to make good on its

debts  and  is  restructuring  its  finances.  In

late  December  officials  said  they  had

stopped  hiring  new  government  employ­

ees in order to save money. 

Hegang  is  one  of  many  gloomy  stories

from  China’s  rustbelt  provinces  of  Hei­

longjiang,  Jilin  and  Liaoning.  The  region

bordering  Russia,  known  for  its  long,  bit­

terly  cold  winters,  has  slogged  through

years of depressed economic conditions as

state­owned  industrial  plants  have  closed

down  and  young  people  have  migrated

south.  Poor  energy  infrastructure  meant

that companies in the area were dispropor­

tionately affected by an acute power short­

age in 2021. In a desperate attempt to keep

families  from  moving  away  and  to  spur

population  growth,  Jilin  has  announced

that  it  will  hand  out  “marriage  and  birth

consumer  loans”  of  up  to  200,000  yuan

($31,500) to couples.

H ONG KONG

Could a struggling region be home to

China’s next banking disaster?