In this country we are blessed with some outstanding economists. But can they be collectively wrong? The Gillard Government thinks not. They claim that no economist is backing the Coalition’s Direct Action Plan, which therefore proves that it is the wrong policy. Case closed.
Gillard’s claim is false: there are economists who back alternative approaches to her carbon tax including Nobel laureates and Reserve Bank board members. However, even when there is a massive consensus among economists, history shows that they can be wildly off the mark.
A prominent example of this was the letter that 364 economists signed against Margaret Thatcher’s Budget in 1981. Thatcher broke economic orthodoxy by cutting borrowings with aggressive fiscal measures in order to make it easier to control monetary policy and get inflation under control.
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