Tuesday, June 8, 2010

Zinger or below the belt? WSJ argues that "liberals and Democrats" are economically unenlightened

An editorial in today's WSJ (Are You Smarter Than a Fifth Grader? ) argues that "self-identified liberals and Democrats do badly on questions of basic economics."

Written by a George Mason economist, the article is admirably transparent in its reasoning. The analysis turns on a battery of Econ 101-style questions on a Zogby poll (e.g. "Restrictions on housing development make housing less affordable.) It turns out that self-identified Republicans and libertarians score substantially better on this quiz than Democrats. Conclusion: the left doesn't understand, or is unwilling to accept, the fundamental economic tradeoffs that exist in any society. In the author's words, the left is "economically unenlightened."

Usually when I see this kind of thing in the WSJ, I'm inclined to ignore it as partisan sniping. In this case, they lay out their methodology thoroughly enough to invite inspection. And against my will, I find myself agreeing, because I don't see anything wrong with the analysis. Here's my reasoning.

The first thing to check is the quality of evidence. In order to score respondents' answers, the researchers had to designate right and wrong answers to each question on the quiz. What questions, exactly, were asked? Did the scoring reflect objective truth, or was there libertarian dogma in the way things were framed?

Here are the 8 questions.

Question"Unenlightened" AnswerValidity
1. Restrictions on housing development make housing less affordableDisagreeHigh
2. Mandatory licensing of professional services increases the prices of those servicesDisagreeHigh
3. Rent control leads to housing shortagesDisagreeHigh
4. Free trade leads to unemploymentAgreeLow
5. Minimum wage laws raise unemploymentDisagreeMedium
6. Overall, the standard of living is higher today than it was 30 years agoDisagreeHigh
7. A company with the largest market share is a monopolyAgreeMedium
8. Third World workers working for American companies overseas are being exploitedAgreeLow

On the whole, these questions strike me as having high validity. They measure what they intend to measure. A respondent who answers these questions correctly probably does have a better understanding of the likely consequences of economic policies. And therefore, it looks like a substantial part of the left's constituency is unwilling to come to grips with hard choices.

I'm not sure I want to believe that. Does anybody see a way out of this conclusion?

Notes on specific questions:
Questions 1 through 5 focus on fundamental tradeoffs in price, quantity supplied, and market intervention. The first three are well-grounded in evidence. The fourth is true -- in the long run. The last one is contested, but (having read up on the subject for a final debate in a policy analysis class) the proponderance of evidence supports this conclusion. Bottom line: both theory and evidence strongly suggest that the tradeoffs described in these questions are real forces in society.

Question six is a simple factual question about recent economic history. Question seven is a vocab question.

Question eight is more values-based. A typical economist will tell you that Third World workers aren't being exploited, because they voluntarily choose to accept and continue in those jobs. Companies aren't exploiting people; they're giving them new opportunities. The counterargument is that (some) workers are led into sweatshop jobs under false pretenses, and held there against their wills. This is exploitation. Additionally, one could argue that it is "exploitation" in a moral sense for a company to pays its workers only Third World wages plus a fraction when it could pay more.


Rachel said...

I don’t think liberals are the only ones willing to support bad economic policies. The problem with these questions is many of them support a conservative worldview. Even if a liberal understands just as well as a conservative the negative economic effect of rent controls, their answers are much more likely to be influenced by their positive feelings towards rent controls (i.e., there is an economic cost, but it is worth it). It would be interesting to see if a question that goes against the conservative agenda followed the same pattern. I can’t think of any specifically, but maybe something to do with the economic benefits of gay marriage? Or an open immigration policy?

Abe said...

@Rachel: Good point. Erin raised this idea too. So basically, the study proves that some liberals are stupid about some kinds of economics. At no point have they demonstrated that conservatives are not equally stupid about other kinds of economics.

Margaret said...

An interesting point. Any suggestions as to what questions you think would trip conservatives up similarly?

Abe said...


Here are a few conclusions from economics that I bet would stump conservatives more than liberals:

1. Regulation of utility companies lowers prices and increases availability. (True)

2. A cap-and-trade system for pollution helped reduce acid rain in the 80's and 90's. (True)

3. An open-market system for transportation would provide more and better roads than our current system of government-provided transportation. (False)

The wordings could use work, but the gist is there.

Margaret said...

Regulation is an interesting one - I keep thinking that surely we should have government regulation, but I also have a knee-jerk anti-intervention reaction. It's nice to be reminded that it does work out sometimes.

The roads one I'm interested in hearing more about - I'm guessing this is because roads can be considered a utility, and thus the same economic principle at work in (1) applies here? Have we seen privatized roads in practice anywhere? I understand that New York's subway system was started as a series of private ventures, which probably helps explain why it's such a mess while DC's centrally-planned system requires no more than one change to get from any point in the system to any other.

Anonymous said...

Perhaps the poling methodology should be examined. Have you seen this?
Daily Kos is suing Research 2000