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15 June 2010

The Politcal Spectrum and Economic Wrongheadedness

Daniel B. Klein, professor of economics at George Mason University, worked with pollster Zeljka Buturovic to characterize the relative degree of determined wrongheadedness of Americans self-identified as one of the following:
  • Very Conservative
  • Conservative
  • Libertarian
  • Moderate
  • Liberal
  • Progressive/ Very Liberal
They say they were out to measure the relative degree of economic enlightenment, but this is not an accurate a way of stating what they really did.  They rated responses to economic questions based on the responses:
  • Strongly agree
  • Somewhat agree
  • Somewhat disagree
  • Strongly disagree
  • Not sure
Suppose the correct answer to the question is Strongly Agree.  They counted up the responses that were strongly wrong, namely those responding with Somewhat disagree and Strongly disagree.  The answer Not sure was not considered strongly wrong.  Thus, this was not a test for economic knowledge, which it has been mistakenly characterized as being.  Instead, it is a test for those who do not understand economics and who refuse to recognize that they do not understand it.  It is a test for the pretense of knowledge which does not exist!

What were the statements?  What are the correct answers?
  1. Restrictions on housing development make housing less affordable.  Answer: Strongly agree
  2. Mandatory licensing of professional services increases the prices of those services.  Answer: Strongly agree.
  3. Overall, the standard of living is higher today than it was 30 years ago.  Answer: Strongly agree.
  4. Rent control leads to housing shortages.  Answer: Strongly agree.
  5. A company with the largest market share is a monopoly.  Answer:  Strongly disagree.
  6. Third World workers working for American companies overseas are being exploited.  Answer:  Strongly disagree.
  7. Free trade leads to unemployment.  Answer: Strongly disagree.
  8. Minimum wage laws raise unemployment.  Answer:  Strongly agree.
While it may allow one a faster response to these questions if one has previously thought about them, most of these statements are easy to think through and come to the correct answer.  For instance: restrictions on housing development will mean such things as a local government refusing to allow housing to be built on parcels of land in the county or town.  This must cause those parcels on which housing can be placed to be priced more highly, since the government is putting the restrictions on other land because otherwise housing would be placed on it.  Thus, the demand for housing is greater than the amount of land which will be made available, so the prices of that land will be bid upward.  Housing will be more expensive as a result.  There are other types of restrictions, such as building codes and requirements to use union labor or licensed tradesmen in the building, but all of these restrictions are placed precisely because they must be since they will raise costs.

Question 5 is really just an understanding of a definition, but as such, it requires some knowledge of economics as a study.  Question 3 requires some knowledge of how people lived 30 years ago, so it requires a bit of historical knowledge, which many young people may find challenging to come by.  Since young people are indoctrinated by the public schools and universities to become liberals and commonly have little historical knowledge of 30 years ago, this question may be a bit hard for some of them.

Question 7 is a more abstract question to which the answer is somewhat harder to think through on one's own.  But, Adam Smith and many others long ago figured this out.  It is reasonable to expect that the answer should be common knowledge today.  There are many special interests and political groups which have spread claims that free trade leads to unemployment, at least in the developed countries.  They claim that low-cost-of-labor countries are stealing American jobs.  But their wages are lower because they are less productive or production in their countries is less efficient or involves greater investment risks.  Many Americans only see the company making buggy whips whose product is now more cheaply produced in Kenya, so the American company has laid off workers.  They fail to see that the workers who were once employed making buggy whips are now becoming employed to make biomedical prostheses and infrared sensors and the old buggy whip manufacturing building is now being used to produce Kindles.  Study after study has shown that free trade leads to more jobs in the U.S. and across the world, while raising most people's standard of living.  But, it is clear that it is helpful to know some economics to understand the right answer to this question.  But also remember, one does not need to know the right answer, one only needs to know what one knows and what one does not know.  The answer 'I do not know' is not wrong.  It is not wrongheaded.  It is not a pretense to knowledge one does not have.

So, what are the results of this test for economic wrongheadedness?  Who across the political spectrum is found to be a big-headed pretender to knowledge?  Each very wrongheaded answer adds 1 to the score of each person.  The average for each person in each self-identified part of the political spectrum is given below.
  • Very conservative, 1.30
  • Libertarian, 1.38
  • Conservative, 1.67
  • Moderate, 3.67
  • Liberal, 4.69
  • Progressive/ Very liberal, 5.26
Note the very large jump in wrongheadedness between conservatives and moderates.  Those who are very conservative, libertarian, or conservative do not have a great tendency to pretend to economic knowledge which is in fact wrong.  Moderates are much more like liberals in their tendency to be wrongheaded.  The more liberal one is, the greater the pretense to knowledge in general and the more frequently that knowledge is economically wrong.  Progressives, which Obama and Hilary Clinton are, are very pretentious and very wrongheaded economically as a group.

Progressives answered the monopoly question badly wrong 31% of the time, while conservatives were badly wrong only 13% of the time.  Libertarians were so wrong only 7% of the time.

The Progressives were wrong on the living standard comparison 61% of the time, while conservatives were wrong 13% of the and libertarians were wrong 21% of the time.

Broken down on party lines the results were:
  • Libertarians, 1.26
  • Republicans, 1.61
  • Democrats, 4.59
Another huge leap in economic wrongheadedness is found for Democrats.  So-called conservative Democrats clearly do little to improve the party standing relative to Liberals with the wrongheaded score of 4.69!

Ms. Buturovic noted that men scored better than women, as did married people better compared to those who were single.  She noted that particularly poor scores were earned by those who never shop at Wal-Mart or who consider themselves residents of the 'planet Earth', rather than of America or the city or town where they live.  She says, "It took many centuries for basic economic concepts and principles to be discovered so, in a sense, it is not that surprising that some people are having trouble grasping them."

Of those who have had trouble grasping the principles and concepts of economics, unusual numbers have become politicians, book writers, newspapermen, network news announcers of the mainstream media, public school teachers, and university professors outside of economics departments.  The elitists who believe they should rule America through socialist governments are happily wrongheaded about basic economics concepts and eager to force their mistakes on the rest of us.  We can readily see that in efforts of government to micromanage the economy through long-discredited central planning, the constant meddling in our personal lives, the excessive taxes, the still more excessive government spending, the self-indulgent salaries and benefits of government workers, the claims of government job creation in the private sector, and the many special interest groups chosen as the recipients of income and wealth redistribution thefts.

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