Question

Agreement and disagreement among economists Suppose that Edison, an economist from an AM talk radio program, and Hilary, an economist from a university in Massachusetts, are arguing over saving incentives. The following dialogue shows an excerpt from their debate:

Hilary: I think it's safe to say that, in general, the savings rate of households in today's economy is much lower than it really needs to be to sustain an improvement in living standards.
Edison: I think a switch from the income tax to a consumption tax would bring growth in living standards.
Hilary: You really think households would change their saving behavior enough in response to this to make a difference? Because I don't.

The disagreement between these economists is most likely due to ______.

(A) differences in values
(B) differences in perception versus reality
(C) differences in scientific judgments

Answer 1

Answer: The difference between the two economist are "differences in perception versus reality". That means option B is most correct.

Explanation: The difference in their perception versus reality, means how their want to interpret things against how things really are.

Harry interpret his understanding, that the way people save their house hold is becoming lower than what it use to be, to improve the standard of living. Though he doesn't believe consumption of household product is the factor to be controlled to achieve an improvement in the standard of living. While Edison interprets his that, if tax is applied more in consumption, it will help reduce the rate of consumption of households products, which will help them to save more, thereby increasing their standard of living.

Harry views household consumption as a real factor of standard of living that has been affected due to a cause. While Edison views household consumption as the real cause, which has to be worked on, to achieve a growth in standard of living.