Because most philosophies that frown on reproduction don't survive.

Friday, June 11, 2010

Ideology and Economic Knowledge

Prof Daniel Klein of had a brief piece in the WSJ this week talking about how people's economic knowledge or ignorance breaks down by ideological lines.
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.

In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. The pattern was not an anomaly.

The other questions were: 1) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree). 2) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree). 3) Rent control leads to housing shortages (unenlightened answer: disagree). 4) A company with the largest market share is a monopoly (unenlightened answer: agree). 5) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree). 6) Free trade leads to unemployment (unenlightened answer: agree). 7) Minimum wage laws raise unemployment (unenlightened answer: disagree).

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.

Americans in the first three categories do reasonably well. But the left has trouble squaring economic thinking with their political psychology, morals and aesthetics.

To be sure, none of the eight questions specifically challenge the political sensibilities of conservatives and libertarians. Still, not all of the eight questions are tied directly to left-wing concerns about inequality and redistribution. In particular, the questions about mandatory licensing, the standard of living, the definition of monopoly, and free trade do not specifically challenge leftist sensibilities.

Yet on every question the left did much worse. On the monopoly question, the portion of progressive/very liberals answering incorrectly (31%) was more than twice that of conservatives (13%) and more than four times that of libertarians (7%). On the question about living standards, the portion of progressive/very liberals answering incorrectly (61%) was more than four times that of conservatives (13%) and almost three times that of libertarians (21%).

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.

This is not strictly a matter of Klein having a right-leaning ideology, some topics which cleave strongly left/right among the general public are actually agreed on pretty widely by economists. (For more examples, click through to the paper Mankiw is linking to.)

If Klein had wanted to include something to challenge conservative sensibilities, however, he might have tried the followoing: "The Laffer Curve proves that lowering tax rates always results in higher tax revenues through economic growth." (unenlightened answer: agree)


JMB said...

What's your beef with the Laffer curve? I'm a big fan of Larry Kudlow:)

Catholic Momma said...

I'd think the problem would be with the term "always." Laffer would say "sometimes." ;-)

Darwin said...

Yes, the key word is "always". If you're on the upward sloping side of the Laffer Curve, then raising taxes will increase revenues.

I think there is a lot of economic value in keeping tax rates low, but I do fear that some conservatives have become so latched onto the idea that they are convinced that they can always "stimulate the economy" further by cutting taxes and count on not seeing tax revenues go down.

A Philosopher said...

Consider a restriction on housing development that prohibits the building of extremely extravagant homes in a particular area (for example, a cap on maximum square footage). Suppose I expect the following result from that restriction: in the restricted areas, more modest homes will be built. Wealthier consumers won't want those more modest homes, and will compete for the extravagant homes in unrestricted areas. So prices for housing go down in the restricted areas, and up in the unrestricted areas.

That looks to me like a way of giving a "somewhat disagree" or "strongly disagree" answer to the first question that doesn't require any economic ignorance. I think the same can be done with all of the others quite easily.

Anonymous said...

It's also worth remembering that the last President to preside over a balanced budget was a Democrat, and that his Republican successor immediately wrecked it.