Tuesday, June 8, 2010

Shocker: Survey Shows That Liberals Don't Understand Basic Economics

Daniel B. Klein has a great piece in today's Wall Street Journal. The article is based on a survey Klein conducted with another researcher, Zeljka Buturovic in 2008. The goal of the research was to determine if there was a relationship between Americans knowledge of basic economic principles and their political ideology. Klein explains the methodology employed:

Zogby researcher Zeljka Buturovic and I considered the 4,835 respondents' (all American adults) answers to eight survey questions about basic economics. We also asked the respondents about their political leanings: progressive/very liberal; liberal; moderate; conservative; very conservative; and libertarian.

Rather than focusing on whether respondents answered a question correctly, we instead looked at whether they answered incorrectly. A response was counted as incorrect only if it was flatly unenlightened.

Consider one of the economic propositions in the December 2008 poll: "Restrictions on housing development make housing less affordable." People were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure.

Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of production and exchange, making goods and services less affordable. There may be exceptions to the general case, but they would be atypical.

Therefore, we counted as incorrect responses of "somewhat disagree" and "strongly disagree." This treatment gives leeway for those who think the question is ambiguous or half right and half wrong. They would likely answer "not sure," which we do not count as incorrect.

Their conclusion? Let's just say the results were unambiguous. Seldom does such a study produce results this clear:

How did the six ideological groups do overall? Here they are, best to worst, with an average number of incorrect responses from 0 to 8: Very conservative, 1.30; Libertarian, 1.38; Conservative, 1.67; Moderate, 3.67; Liberal, 4.69; Progressive/very liberal, 5.26.

To simplify, those identified as either libertarian or very conservative were wrong roughly 17% of the time. At the other end of the spectrum, those who call themselves progressive/very liberal were wrong 66% of the time. The enormous sample size combined with the scientific nature by which it was obtained allows for a high degree of confidence in the results and their applicability to the population as a whole. Indeed Klein wryly observes that "the pattern was not an anomaly". And keep in mind these were not difficult questions, most could easily by answered by those who've never had a formal course in economics. Klein and Buturovic also correlated basic economic knowledge to party identification. The results were consistent:

The survey also asked about party affiliation. Those responding Democratic averaged 4.59 incorrect answers. Republicans averaged 1.61 incorrect, and Libertarians 1.26 incorrect.

For someone who teaches economics, these results are not surprising. It has always been my belief that liberals don't analyze issues with their brains but rather with their feelings. That is to say, liberal's brains function just as well as conservative's do, but for some reason they prefer not to use them when analyzing problems.

As an example, one of the eight questions Klein and Buturovic ask had to do with price controls (i.e. the minimum wage). Every semester my students can expect to get a question or two on that topic, often an essay question. On several occasions, I've had a student write an excellent essay, logically and rigorously explaining how there is no economic justification for price controls such as the minimum wage. The student will go through the economic theory, explaining how an increase in the minimum wage must increase unemployment, how it most affects those whose productivity is less than the government mandated wage, etc., etc.

Often, the student will thoughtfully draw me a graph and illustrate in graphic detail just how much a raise in the minimum wage will increase unemployment given their assumptions. In short, the student absolutely understands the economics. However, after this lucid, tightly argued essay which thoroughly demolishes the entire concept of the minimum wage, the student concludes with a statement which goes something like this: "but I still feel we should raise the minimum wage"

Heh. A non sequitur like that tells me immediately that this particular student isn't using his/her brain, an unmistakable characteristic of liberal thinking (such as it is). Their brain knows the facts as demonstrated by what they wrote prior, but when it comes time to use it and reach a conclusion based on those facts, they ignore logic and rely on "feelings" instead. I don't care what you feel, tell me what you think. This tendency by liberals to approach problems by relying on emotions rather than logic is, I think, at least partially responsible for their 66% error rate in the above survey.

Unfortunately for us, Obama and his team are solidly in the group that gets basic economics wrong 66% of the time, something increasingly obvious with each passing month of his administration. In today's open thread, I linked to an article by Arthur Laffer that doesn't paint a pretty picture of what's ahead economically if we continue down Obama's path. Obama feels that the most productive in society should have their taxes raised yet again and, sadly, there doesn't appear to be anyone in his administration with enough economic common sense to tell him otherwise. Obama felt that everyone should have free health care (as if this is even possible) so he forced Obamacare through against our wishes, regardless of the disastrous economic consequences which will result.

Economics is not as difficult to understand as many in academia try to portray. It's all about incentives and common sense. One doesn't need an advanced degree to understand that tax increases won't help the economy any more than ill-conceived gimmicks like rent controls or minimum wage hikes. Tax increases on the most productive will decrease their incentive to produce (i.e. create jobs). This is not complicated. As economically literate leaders have said from President Reagan to Governor Palin, the government isn't the solution, it's the problem. The research by Klein and Buturovic demonstrates that conservatives and libertarians understand this, and liberals don't.

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