The German Council of Experts presented the main report of the year on Wednesday.
(Photo: IMAGO/Political Moments)
Every year in autumn, the economic experts could be relied on: with their main report, they presented a creed of order economics year after year. That is now history at the latest. The proposal of the Council of Economic Experts in the new report, which the five economists presented on Wednesday, scares every market radical.
In particular, the proposal for tax increases to reduce social injustice as a result of the energy price brakes paid out as a lump sum does not fit in with the tradition of the committee at all. This also applies to requests such as the continued operation of nuclear power plants, although the energy companies themselves do not want that at all.
With its report, the Council of Economic Experts highlights the changes in the economists’ guild. Not only for the wise, worldwide the unrestricted mantra in economics no longer applies, the market regulates it and as little state as possible is always the best solution.
Incidentally, this is not at all a contradiction to economic liberalism. Because the same principle applies then as it does today: the market alone produces the best solution under optimal conditions. But when is a market in this optimal situation and when is it not? Finding out and pointing out solutions is the most important task of economics.
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For this reason, the proposal for tax increases should not be rejected outright. The description of the problem is absolutely correct: gas and electricity price brakes have both a justice and an efficiency problem.
It’s not about playing market radicals off against state believers
The villa owner gets more than the low earner, although he actually needs nothing. Taking away at least a part of this via taxes is not unreasonable, but an option. Is it the best given the circumstances of the crisis? That is exactly what needs to be discussed. Because there are enough arguments that could speak against the proposal. Are entrepreneurs being deprived of investment incentives? Do you create more injustice than justice? So are there better alternatives, such as letting low-income earners claim their gas bills for tax purposes?
The world is not black and white, and neither is economic analysis. The purpose of economics is not to play off market radicals against state believers left against right, but to find the efficient solution under the given circumstances.
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