Positive economics is the branch of economic analysis that describes the way the economy actually works.

Normative economics makes prescriptions about the way the economy should work.

A forecast is a simple prediction of the future.

“If all the economists in the world were laid end to end, they still couldn’t reach a conclusion.” So goes one popular economist joke. But do economists really disagree that much?

Not according to an ongoing survey being conducted by the Booth School of Business at the University of Chicago. The Booth School assembled a panel of 41 economists, all with exemplary professional reputations, representing a mix of regions, schools, and political affiliations, and officially known as the Economic Experts Panel of Chicago Booth’s Initiative on Global Markets. Four of these economists are pictured here (clockwise from top left): Amy Finkelstein of MIT, Hilary Hoynes of UC Berkeley, Emmanuel Saez also of Berkeley, and Abhjit Banerjee of Princeton.

Roughly once every two weeks these economists are polled on a question of current policy or political interest—often it is a question on which there are bitter divides among politicians or the general public.

So what do we learn from the survey? That there is much more agreement among economists than rumor would have it, even on supposedly controversial topics. For example, 80% of the panel agreed that the American Recovery and Reconstruction Act of 2009—the so-called Obama stimulus—led to higher growth and employment, although there was more division about whether the plan was worth its cost.

Roughly the same percentage—82%—disagreed with the proposition that rent control increases the supply of quality, affordable housing.

In the first case, by the way, the panel of economists overwhelmingly agreed with a position widely considered liberal in American politics, while in the second case they agreed with a position widely considered politically conservative.

Were there areas of substantial disagreement among the economists? Yes, but they tended to involve untested economic policies. There was, for example, an almost even split over whether new Federal Reserve tactics aimed at boosting the economy would work.

Perhaps even more surprising than the relative lack of disagreement among economists was the relative absence of clear ideological patterns when they did disagree. Economists known to be liberals did have slightly different positions, on average, from those known to be conservatives, but the differences weren’t nearly as large as those among the general public.

So is the stereotype of the quarreling economists a myth? Not entirely: economists do disagree quite a lot on some issues, especially in macroeconomics. But there is a large area of common ground.

Many economists are mainly engaged in teaching and research. But quite a few economists have a more direct hand in events.

As described earlier in this chapter (For Inquiring Minds, “The Model That Ate the Economy”), one specific branch of economics, finance theory, plays an important role for financial firms on Wall Street—not always to good effect. But pricing assets is by no means the only useful function economists serve in the business world. Businesses need forecasts of the future demand for their products, predictions of future rawmaterial prices, assessments of their future financing needs, and more; for all of these purposes, economic analysis is essential.

Some of the economists employed in the business world work directly for the institutions that need their input. Top financial firms like Goldman Sachs and Morgan Stanley, in particular, maintain high-quality economics groups, which produce analyses of forces and events likely to affect financial markets. Other economists are employed by consulting firms like Macro Advisers, which sells analysis and advice to a wide range of other businesses.

Last but not least, economists participate extensively in government. According to the Bureau of Labor Statistics, government agencies employ about half of the professional economists in the United States. This shouldn’t be surprising: one of the most important functions of government is to make economic policy, and almost every government policy decision must take economic effects into consideration. So governments around the world employ economists in a variety of roles.

In the U.S. government, a key role is played by the Council of Economic Advisers, whose sole purpose is to advise the president on economic matters. Unlike most government employees, most economists at the Council aren’t longtime civil servants; instead, they are mainly professors on leave for one or two years from their universities. Many of the nation’s best-known economists have served at the Council of Economic Advisers at some point in their careers.

Economists also play an important role in many other parts of the government, from the Department of Commerce to the Labor Department. Economists dominate the staff of the Federal Reserve, a government agency that controls the economy’s money supply and oversees banks. And economists play an especially important role in two international organizations headquartered in Washington, D.C.: the International Monetary Fund, which provides advice and loans to countries experiencing economic difficulties, and the World Bank, which provides advice and loans to promote long-term economic development.

In the past, it wasn’t that easy to track what all these economists working on practical affairs were up to. These days, however, there are very lively online discussions of economic prospects and policy. See, for example, the home page of the International Monetary Fund (www.imf.org), a business oriented site like economy.com, and the blogs of individual economists, like Mark Thoma (economistsview.typepad.com) or, yes, our own blog, which is among the Technorati top 100 blogs, at krugman.blogs.nytimes.com.

Solutions appear at back of book.

In the summer and fall of 2010, workers were rearranging the furniture in Boeing’s final assembly plant in Everett, Washington, in preparation for the production of the Boeing 767. It was a difficult and time-consuming process, however, because the items of “furniture”—Boeing’s assembly equipment—weighed on the order of 200 tons each. It was a necessary part of setting up a production system based on “lean manufacturing,” also called “just-in-time” production.

Lean manufacturing, pioneered by Toyota Motors of Japan, is based on the practice of having parts arrive on the factory floor just as they are needed for production. This reduces the amount of parts Boeing holds in inventory as well as the amount of the factory floor needed for production—in this case, reducing the square footage required for manufacture of the 767 by 40%.

Boeing had adopted lean manufacturing in 1999 in the manufacture of the 737, the most popular commercial airplane. By 2005, after constant refinement, Boeing had achieved a 50% reduction in the time it takes to produce a plane and a nearly 60% reduction in parts inventory. An important feature is a continuously moving assembly line, moving products from one assembly team to the next at a steady pace and eliminating the need for workers to wander across the factory floor from task to task or in search of tools and parts.

Toyota’s lean production techniques have been the most widely adopted, revolutionizing manufacturing worldwide. In simple terms, lean production is focused on organization and communication. Workers and parts are organized so as to ensure a smooth and consistent workflow that minimizes wasted effort and materials. Lean production is also designed to be highly responsive to changes in the desired mix of output—for example, quickly producing more sedans and fewer minivans according to changes in customer demand.

Toyota’s lean production methods were so successful that they transformed the global auto industry and severely threatened once-dominant American automakers. Until the 1980s, the “Big Three”—Chrysler, Ford, and General Motors—dominated the American auto industry, with virtually no foreign-made cars sold in the United States. In the 1980s, however, Toyotas became increasingly popular in the United States due to their high quality and relatively low price—so popular that the Big Three eventually prevailed upon the U.S. government to protect them by restricting the sale of Japanese autos in the U.S. Over time, Toyota responded by building assembly plants in the United States, bringing along its lean production techniques, which then spread throughout American manufacturing.

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