Liberals And Economics


Don’t mix.

Recently I posted about an Economics Literacy Test.  The Minneapolis Federal Reserve conducted a survey and asked people to answer 13 economic questions.  Those 404 people didn’t do so well.

While I took the test I wondered who would do well and who would do so well.  It occurred to me that some people will do better just because they want the answer to be something other than what it is.  For example, if asked, I suspect a vast majority of Liberals would say that the oil companies make too much profit.  Indeed, the oil companies rank 114 out of 215 industries in profits.  Hardly gouging, huh?

Then I was reminded of a post I blogged here about a year ago.  It described who did well and who did poorly on questions of economics:

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.

Not so good if you are Liberal.

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4 comments
  1. nickgb said:

    Never heard of that quiz, but here’s some pretty significant points that show the problems with that poll: http://www.fivethirtyeight.com/2010/06/are-you-smarter-than-george-mason.html

    For the tl;dr crowd: many questions were vague, many were confusing (with the possible effect that the buzzwords would get the right answer from a right-leaning person), and many of the questions were excluded from the scoring without explanation. And of course the poll was done from a Zogby internet panel, which 538 has already pretty much destroyed.

  2. Well, I got 13 out of 13 correct — it was a very easy quiz, actually. I find that there are errors made by those on the left and right that reflect ideological bias. The right often doesn’t understand the need for regulation and state involvement in the economy for a market to function adequately — too often they have what seems a naive view that “markets are magic,” and ignore the way in which those with wealth and power can manipulate markets to their advantage — as well as free rider and collective good problems. You need an effective state for functioning free markets. The left often ignores the power of markets to collect diffuse information and communicate preferences through price, and under estimates the negative potential of regulations and state intervention on efficiency and innovation. What frustrates me is when the argument seems to end up being between the “market is magic” group on the right vs. the “state is magic” group on the left. Neither extreme is right, both reflect misunderstandings of how the political economy functions.

    • pino said:

      The right often doesn’t understand the need for regulation and state involvement in the economy for a market to function adequately — too often they have what seems a naive view that “markets are magic,” and ignore the way in which those with wealth and power can manipulate markets to their advantage — as well as free rider and collective good problems.

      I suspect that this is where I am most often wrong.

      You need an effective state for functioning free markets.

      Here, however, I agree. There needs to be a judiciary that is able to recognize, listen to and hold the guilty accountable for theft and fraud. In short, contracts and property rights need to be protected by the State.

      Neither extreme is right, both reflect misunderstandings of how the political economy functions.

      Well said.

      By the way, if I got 12 out of 13 and nick got 12 of 13 and you got 13 of 13, I can claim that I have the most intelligent reader base in the world!

      😉

  3. pino said:

    some pretty significant points that show the problems with that poll

    538 makes some points that seem to illuminate problems:

    1. He speaks of the polling panel. I don’t think that the point was to generate a valid group of people to poll. The point is to grab a whole bunch of people and group them according to how they organize themselves.

    2. They asked 16 questions but only selected 8. I haven’t seen reference to them asking a panel of questions and then down selecting only 8. I think they asked 8 questions.

    3. His complaint concerning monopoly is not a valid complaint. A TON of people think that monopoly means “having the largest market share”. Few people really truly know what a monopoly is.

    4. He complains about a question discussing the American rich. That question isn’t even in the 8 that were asked.

    5. The minimum wage question. The only way that I’ve seen economists split on the concept of minimum wage and unemployment levels is in the very rare, so rare it’s really only theoretical, case of a monopsony. That is the situation where there is only ONE employer. In THAT case, raising the minimum wage DOES increase employment. However, I’ve asked economists that I bump into to give me a real world example of a monopsony condition in a free market. They can’t.

    In short, 538 is making much ado about nothing.

    For the tl;dr crowd: many questions were vague, many were confusing (with the possible effect that the buzzwords would get the right answer from a right-leaning person), and many of the questions were excluded from the scoring without explanation.

    They internalized this and conducted a new study with an additional 9 questions.

    Same result.

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