Economic IQ & Political Ideology

Econ Journal Watch reports some interesting findings from a 2008 survey of 4,835 American adults: Economic Enlightenment…

The surveyors asked randomly selected adults a series of 8 questions to determine correlations between economic knowledge and:

  • * 2008 presidential vote,
    * party affiliation,
    * voting participation,
    * race or ethnic group,
    * urban vs. rural,
    * religious affiliation,
    * religious participation,
    * union membership,
    * marital status,
    * membership in armed forces,
    * NASCAR fandom,
    * membership in the “investor class,”
    * patronage at Wal-Mart,
    * household income, and
    * gender.

From the original report, here are the questions:
“The statements of the eight questions used are the following:
1. Restrictions on housing development make housing less affordable.

2. Mandatory licensing of professional services increases the prices of those
services.

3. Overall, the standard of living is higher today than it was 30 years ago.

4. Rent control leads to housing shortages.

5. A company with the largest market share is a monopoly.

6. Third-world workers working for American companies overseas are being
exploited.

7. Free trade leads to unemployment.

8. Minimum wage laws raise unemployment.”

Survey participants were given the following answers to choose from:
1. Strongly Agree
2. Somewhat Agree
3. Somewhat Disagree
4. Strongly Disagree
5. Not sure

===========================================================================
From the original report, here are the questions with the wrong (“Unenlightened”) answers:
1. Restrictions on housing development make housing less affordable.
• Unenlightened: Disagree

2. Mandatory licensing of professional services increases the prices of those
services.
• Unenlightened: Disagree

3. Overall, the standard of living is higher today than it was 30 years ago.
• Unenlightened: Disagree

4. Rent control leads to housing shortages.
• Unenlightened: Disagree

5. A company with the largest market share is a monopoly.
• Unenlightened: Agree

6. Third-world workers working for American companies overseas are being
exploited.
• Unenlightened: Agree

7. Free trade leads to unemployment.
• Unenlightened: Agree

8. Minimum wage laws raise unemployment.
• Unenlightened: Disagree”

As you may have noticed, the authors chose to identify the wrong answers, (Strongly Agree / Somewhat Agree   or     Strongly Disagree / Somewhat Disagree) so, they could identify what groups seriously mis-understand basic economics, to identify which groups have deeply held fallacies about economics, and also identify which groups advocate un-workable American govt. policies, and to identify which groups are solidly grounded in effective basic financial and economic policy.
(e.g. Not Sure was not counted as a wrong answer.)

Conclusions:
Economic “enlightenment” (basic knowledge) was found to have no correlation with going to college.**

In contrast, economic “enlightenment” (basic knowledge) was highly correlated with the participant’s self-identified political ideology. Participants were offered the following choices for describing their political ideology:

  • Progressive/very liberal
  • Liberal
  • Moderate
  • Conservative
  • Very conservative
  • Libertarian
  • Not sure
  • (Refuse to answer)

AVERAGE NUMBER OF INCORRECT ANSWERS BY POLITICAL IDEOLOGY:

AVERAGE NUMBER OF WRONG ANSWERS FOR ALL PARTICIPANTS: 2.98 wrong (37% wrong +/- 0.4%)

PROGRESSIVE: 5.26 wrong (66% wrong)

LIBERAL: 4.69 wrong (59% wrong)

MODERATE 3.67 wrong (46% wrong)

CONSERVATIVE: 1.67 wrong (21% wrong)

VERY CONSERVATIVE: 1.30 wrong (16% wrong)

LIBERTARIAN: 1.38 wrong (17% wrong)

Does anyone see trends in the data?
Self-described Progressives and Liberals were basically wrong far more often than the overall average:    Average = 37% vs. 66% Progressive wrong answers and 59% Liberal wrong answers.

The high percentages of wrong Progressive and wrong Liberal answers were also outside of the statistical window of Average 37% +/- 8% Standard Error, so, these two groups of idealogues answered   wrong   between  3X  and  4X more often than Conservatives and Libertarians, and Progressives and Liberals were substantially more wrong than the average on all issues queried.

Least Worst Scores by Question:
Self-described Progressives and Liberals were basically wrong on all questions except for one question  (being wrong more than 50% for all questions) except for:
” 5. A company with the largest market share is a monopoly. ”

Progressives and Liberals still had the worst scores by far of all groups on this question, but only 31% of Progressives and 28% of Liberals failed this question (see Table 2, Page 11 of the study).

Worst Scores by Question:
93% of Progressives and 86% of Liberals believe that: “8. Minimum wage laws (lower) unemployment.”

Other Anomolies:
The only other “flyer” I saw in the data was the Libertarians surprisingly higher number of wrong answers (21% wrong) relative to their peers on:

“3. Overall, the standard of living is higher today than it was 30 years ago.”

If the reader sees trends here, such trends may also explain why economic understanding is not correlated with college attendence.
**The authors propose that economic theory and financial policy are taught in colleges by individuals who are “preponderantly centrist, center-left, or left.” Since numerous past studies have found that:

  • Economic enlightenment tends to go with being …
    “conservative” or “libertarian” in today’s parlance,
    and such types are rare among the professoriate. (Reference 8)
    Once a person has been acculturated and committed to
    the pattern of social-democratic political aesthetics,
    she might become not only unreceptive to economic enlightenment,
    but actually unfriendly to it,
    especially where it upsets cherished beliefs and values.

Said another way, the average college teacher of economics and finance appears to be influenced by their own personal ideological biases, and those personal biases translate into non-factual teaching of economics and finance to people who attend college. Alternately, if the teacher is teaching economic facts, then their side-light comments and contextual presentations seem to contaminate the students’ understanding.

Do these study results also explain why the current US Congress and US Presidential Administration have tripled the US Govt Deficit, to levels that are projected by the CBO to hit $15 trillion of total Govt Debt under the current administration: up 50% in just 3 years from the previous 138 years total cumulative deficits?

Does the study also point to whom (and which political ideologies) should be trusted when listening to financial advice, and which ideologies will lead to fiscal solvency and which ideologies lead to financial trouble?

How did you rank on the questions?***

How did you characterize your political ideology?

Your thoughts?

***Disclosure: I am a self-described Independent – conservative to very conservative on fiscal policies – a guy who leans Libertarian on financial issues – but abhor Anarchist Libertarian policies.    (I just happened to answered all 8 questions correctly.)
*                 *                *                *
Mexico: “Nothing can be organized but everything can be arranged…”
*                 *                *                *
Feel free to copy while giving proper attribution: YucaLandia/Surviving Yucatan.
© Steven M. Fry

Read-on MacDuff . . .

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5 Responses to Economic IQ & Political Ideology

  1. Pingback: Economic IQ & Political Ideology | Surviving Yucatan

  2. Pingback: Economic Knowledge (cont.) | Surviving Yucatan

  3. Get out while you still can from Amerika
    There are many new homeland Security camps already set up across the US, time is short. they want your money and to foster obedience thru fear and it’s working.
    I think of it like a boiling a frog, he doesn’t notice till its too late

  4. a says:

    As a liberal who got all these questions right (though I think #6 is a bit more complicated than yes or no) I would like to point out that most of these questions are specifically geared toward pointing out the evils of government regulation. Since conservatives are generally proponents of deregulation, it is not surprising that there was a correlation between conservatism and correct answers. Now, if they had said “Unskilled immigration increases the price of goods and services” or “Increased government spending lowers employment”, I bet conservatives would have been more likely to give the wrong answer.

    • yucalandia says:

      a
      Fun Stuff!
      Unskilled immigration increases the price of goods and services
      And the enlightened answer is…. (drum roll) …

      Unskilled immigrants generally work for low wages, except for those who choose locations with the best benefits to game the systems. Which type have you chosen?
      Those that use fake IDs, don’t work, and draw benefits raise the price of goods and services.
      Those that work hard for low wages, lower the cost of goods and services associated with their work or service.
      Do the economic losses caused by the immigrants who game the system exceed the economic gains produced by those who work? Since there are no accurate figures for any of these quantities, particularly when illegal immigrants are factored in, there is no definitive answer… (Accurate data on illegals is nearly impossible to get.)

      Your first question is formed in a way that has no single enlightened answer.

      Increased government spending lowers employment“,
      And the enlightened answer is…. (drum roll) …

      What type of government spending do you intend? The kind of spending makes a world of difference and Government spending in the USA over the past century has been quite diverse.

      Post WW2 Government spending on GI Bill education benefits clearly gave net lower US employment, as the better educated workers went on to more productive careers that contributed to the booming economic growth, creating more jobs, lowering unemployment.

      Government spending that results in maintaining inefficient bureaucratic programs where 80% of the employees do no work, increases unemployment, because such spending produces little or nothing, increases the deficits, and increased deficits require additional unnecessary Govt. borrowing, which increases competition for limited loan funding, raising interest rates, which reduces capital expenditures by businesses, and fewer jobs are created = higher unemployment. I have worked for 2 such agencies.

      Government Spending on make-work “Public Works” programs like the WPA, temporarily gave lower Govt. reported unemployment statistics, but ultimately this Govt. spending gave net higher unemployment due to resources wasted on unproductive work, by having potentially productive employees who could have been working on other productive activities, instead spend their time on non-productive work. e.g. My grandparents families and the economy were better served by them shoveling coal out of railroad cars, removing firewood from fence rows, tending gardens, milking cows, and other productive acts while still formally unemployed, than “working”in FDR’s make-work programs. WPA created jobs on paper, “ëmploying people”, but were net unproductive and ultimately raised unemployment: In Michigan they literally dug a ditch one day by filling the previous day’s ditch with today’s dirt. Similarly, for the other grandfather in Illinois, a large WPA crew of men in our town took a year to level an already flat football field. Non-productive make-work Govt. deficit spending on “Public Works” projects temporarily and artifically lower unemployment statistics, but again, such spending ultimately raises unemployment.

      Again, your second question is formed in a way that has no single enlightened answer.

      I personally am a Centrist. Neither Right nor Left. Neither Conservative nor Liberal. Neither Tea Partier nor Progressive.

      I bet conservatives would have been more likely to give the wrong answer.
      Maybe. If you reformed each question into a form that has a single clear answer, they might give more wrong answers.

      What seems to have been shown by your proposal is that clear questions with unambiguous answers about economics can be difficult to create.

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