Study says: the more you lean left, the less you know about economics

Great Debates
141

carm, you are quite out in left field here.

What does any of this have to do with the price of tea in China?

The definition of marginal product is quite unambiguous. It is the derivative of the production function, or the extra unit of output produced by incremental amounts of input. What is so confusing about this? Why did you assume that a person is beginning unemployed? Why do you think marginal product has anything to do with the maximum wage one can conceivably command in the marketplace?

They have nothing to do with each other.

I do not know why you are confused by the differences between marginal product and whatever you conceive of as market value. I don’t think I am going to try to remedy your confusion, but I can suggest a few very helpful books.

Of course. Wage above marginal product is called an efficiency wage. Akerlof has a book on this from the 80s. What’s your point, exactly?

Why do people change their minds about anything, ever? Preferences are mutable, and we like to believe that people are nonrandom.

Why do you people drink alcohol? Why do people buy crack? Why do people gamble? Why do people buy expensive works of art? I am going to take the highly controversial position here and assume that people buy these things because they want to. This is not incompatible with even basic economic reasoning.

142

Well, what about that whole “rational actor” thingy? Is that so passé now that nobody says it with a straight face?

143

No. The whole “rational actor” thingy is very much alive, but most of us deeply regret that we are saddled with the word “rational” as a term of art. It would be much better if we could keep the formal definition of “rational” and pick a new word, like “shmational” that would cause less controversy and confusion.

144

OK. Look, long as you’re here…did Phil Gramm ever have any actual standing with you guys, or was he just another right wing cracker from Texas A&M?

145

I certainly can’t speak for the huddled masses of economists out there, yearning to be free. I can say that a quick search of the literature turns up one article that Phil Gramm published in a third-tier econ journal. In 1974. As far as I’m concerned, this isn’t exactly the sign of serious economic chops.

I’m also just a “positive” political scientist, so I tend to get sneered at by all the economists at the good parties, anyway, so what do I know?

On edit: I do know something. As a political scientist, I can tell you that the best and brightest policy minds out there often don’t get elected to national office. I’m sure this comes as a huge shock to you.

146

Well, thanks for waiting until the liquor stores are closed, that was good thinking.

147

I was trying not to get you too excited.

148

And you do realize the guy who hired them is a “Worker,” and that the guys who make and deliver the materials have to be paid, and that the people who developed the land have to be paid, and so on. The money doesn’t vanish; it must have been paid to someone. For your claim that “The vast majority of workers are paid less than their marginal product” to be true, that money has to vanish.

I’m genuinely curious as to how YOU define marginal product - I think I understand the error you’re making, but I’m not going to put words in your mouth. Where do you get marginal product from?

149

Ok I think I’m mistaken.
I figured that since:

  • marginal product is what you would get from one more unit of labour,
  • this is what they set the wage to,
  • each unit of labour produces less than the last one
  • each previous labour unit produces more than the marginal product
  • yet still gets paid the marginal product
  • so everyone working in the factory, bar the last guy hired, is being paid less than their marginal product

Although I just realised that if their jobs are interchangeable, their marginal products all go down as each new worker is hired.

150

You appear to be saying that Fox News viewers are no more likely to buy into stupid shit than liberals - but the officials they vote for certainly seem to, which suggests that this is not actually the case.

151

As I said in the OP, my econ knowledge is not exactly top-notch, so I just want to share with the participants here that I am finding this discussion informative and useful!

152

I am responding without reading the whole thread, so I might be re-emphasizing something, but…the survey question correctly states that licensing increases price. As you correctly note, licensing might well lower cost.

In general, though, that is a nice distinction that is not present in the other survey questions. In particular the “exploitation” one is sloppy, because we speak of “exploiting” a resource without prejudice when we use that resource.

I think that it would be possible to create a list of 8 or 10 statements that someone trained in economics would agree have an unambiguous, generally-accepted answer, and someone not trained in economics would be likely to answer incorrectly. The statements could be selected so that the incorrect answers fell evenly on a liberal/conservative divide. The study authors did not do this, which suggests that they were simply grinding their axe.

My credentials, by the way: I have recently taken two graduate-level economics courses in pursuit of my MBA, so I probably have more formal economics training than anyone who is not an economist or studying economics.

153

Credentials are traditionally presented with a flourish, and where possible, a bow. Ribbon is nice. :wink:

154

You’re exactly correct, and the author does seem to have an axe to grind.

It also needs to be repeated that this was a psychology study, with questions designed to be answered “right” but uneducated individuals, but “wrong” by college educated individuals.

Can we get the title of this thread changed to include the word “allegedly” or “appears” since the study does not actually say that?

But here is an interesting explanation from the authors:

Which I read as, “if you grew up being conservative, you think college is full of liberal ivy tower elitists that are out to get you and won’t let you in any ways, so you won’t go.”

Classy.

155

I wasn’t saying they’re not. I was saying you can’t infer that they are from surveys that specifically compare conservative nonsense and don’t measure for liberal (or neutral) nonsense.

You’re saying that you can prove the same point by other means. Maybe or maybe not, but beyond the scope of my point.

156

I regret noticing this thread so late. I would have liked to be involved in the discussion from the beginning. Nonetheless, i’ll offer just a couple of observations about economic literacy in general, using this quote as a starting point:

I think this sentence is correct in its evaluation of some leftists. There are plenty of left/liberal folks who do, in fact, tend to base their economic opinions on a notion of what is “right.”

But the sentence also demonstrates a particular type of ignorance on the part of its author, and points to what i think is one of the key problems in the (mis)understanding of economics in American society.

The author of this sentence seems to assume that what is “right” and what is “good economic practice” are fundamentally disconnected. There’s an assumption that “good economic practice” exists in a world by itself, unencumbered by such nebulous concerns as morality and notions of right and wrong.

The problem is that economics is a social science, and the only place where economics exists is in the human, social communities that we inhabit. Economics is not just carried out on a blackboard; it affects people, and as such it is a discipline that must take into account both positive and normative factors. By positive, i mean the description and explanation of what is, generally based on concrete data, sometimes referred to as “value-free” economics. By normative, i mean a specific consideration of values and morals, a concern not just with how things are, but with how we, as a society, would like them to be.

If we rework the quote above to reflect my terminology, it might say something like this:

I think that there’s some considerable truth to this. But, as i suggested above, the very notion that there is a single, accepted notion of what constitutes “good economic practice” is, in itself, a reflection of a different type of ignorance, one that privileges positive economics to the (almost?) complete exclusion of normative factors. If leftists are guilty of focusing too much on the normative, i think conservatives and free market advocates are guilty of focusing too much on the positive.

Let me be very clear about my own beliefs. Despite being something of a leftist, i am firmly convinced that basic microeconomic principles are fundamentally sound, and describe the way that economics works in a very logical and accurate way. Ideas such as scarcity, the relationship between supply and demand, price equilibrium, opportunity cost, and a whole host of others can tell us a lot about how prices shift, about how people make choices, and about how efficiently economic resources are allocated.

I completely accept, for example, that, based on these microeconomic principles, rent control has a bunch of foreseeable and almost inevitable effects on the housing supply, including reducing the amount of housing, raising the costs for renters in non-controlled units, and ensuring that landlords of rent-controlled housing will do as little as possible to improve or even maintain their properties.

Furthermore, i accept that every attempt by government to interfere with the market distorts it in some fashion. Even without government intervention, the market itself would not operate anywhere near as perfectly as some free market advocates would have us believe, but i do accept that government intervention has particular effects on the choices that people make, on the way that wealth can be created, and on the amount and distribution of the wealth created.

But none of this means that intervention in the market is, by itself, a Bad Thing. It is only a Bad Thing is we assume that an unfettered market is, in and of itself, the main goal of human existence. But it’s not. We’re social creatures, and while some ideal free market might be the most efficient way to organize economic activity, i don’t believe that humans need to have efficiency as their over-riding goal for the species.

To take my example above, while a complete free market might organize housing rental prices most efficiently, i don’t think that there’s anything wrong with society choosing to interfere in the market in such a way that housing is made more affordable for poor people, even if this means that some other people end up paying more. The positive side of economics can tell us about what happens when we do this, and it allows us to make informed choices, but in evaluating the positive, we also need to take into account the normative.

This also is not to say that rent control is the only solution. If we want to help poor people afford housing, there are other mechanisms for doing it, and we could argue all day about which might work best. My point is simply that every economic decision we take, as individuals and as a society, has fundamental normative and positive components, and i think that economic debate in this country would be more productive if all participants would explicitly accept this, rather than arguing past each other based on hidebound preferences for the normative or for the positive.

157

I don’t have time to read this whole thread, so forgive me if this point has been made already:

It seems to me that a conclusion from this “study”, even given emacknight’s explication, is that first-year college economics courses tend to MAKE PEOPLE DUMBER. They take away their ablility to judge broadly, (and to strive to understand nuances, and to question premises) and replace it with a knee-jerk response to certain statements. I’m not sure I find this conclusion tenable (sure, we could all use some training in basic ecomonic principles), but it DOES seem to be a basic conclusion of the study, and it’s strange the authors didn’t highlight this.

158

Now that I’ve read the whole thread, I’ll amend my previous statement slightly:

If the authors had prefaced each question with something like: “In an idealized, simplified human system of the type which is used in introductory economics classes to teach certain basic concepts…”, then I’d wager that the “liberal-leaning”, but “untutored”, subjects of the study might have scored quite a bit “higher” than they did.

159

I would argue the exact opposite. This study highlighted the problem of knee jerk reactions to a series of statements (in this case showing liberal bias), with a distinct lack of nuance or critical thinking. Students saw words like, “exploitation” and rushed to say “I strongly agree with all my heart.” But didn’t bother to read, understand, or evaluate the statement made. They saw the word exploitation and ran with it.

Look at the discussion on exploitation, and this discussion on taxes to see (in these cases liberal) knee jerk reactions. There is a distinct lack of nuance in the discussion as individuals seek to assign their own personal definitions, along with their own moral positions. As said before, answering based on what the thing is morally right instead of logically right.

This psychology study did a remarkable job pointing out the liberal side of this failing, by showing that otherwise educated individuals were unable to put their own personal beliefs aside and answer a few basic questions.

As I said before, the biggest problem with these 8 statements is that liberals NEED them to be false. It is a liberal policy that society should have minimum wage levels, and one of the problems with that is a rise in unemployment. As a result, it is difficult to get liberals to agree with such a statement because it is in direct conflict with their stated beliefs.

I showed an analogous example with, “UHC will cause rationing.” Another statement that liberals do not want to have to agree with since it hurts their position.

Recently Rand Rover got caught in a trap where he believed that “UHC will cause a rise in unemployment.” But then recent data showed that to be false. His position required UHC to cause unemployment, and he is still reluctant to admit that it’s wrong.

160

Good point. My amendment to my original statement might point us toward a way to resolve this: Perhaps when a conservative takes an introductory economics course which uses an “idealized” system, their bias is “confirmed”, while a liberal has his biased “confirmed” either by not ever taking that course, or by also taking many more economic courses which explore the nuances. In either case, by not prefacing the questions in the way I mentioned, the authors did indeed, as you say, highlight certain words (like “exploitation”) which a liberal will tend to notice and react to in a certain way. But this still says very little, if anything, about the general need for better economic education, in any group, nor among the general population.