Questions that are rarely asked

by on May 24, 2013 at 2:41 am in Economics, Education, Science, Uncategorized | Permalink

In my email, from Eric Crampton:

Imagine the following deal, which is entirely not on any PPF so it’s not really a deal anyway. But imagine it. Genie offers a button. Push the button, and it burns the last n years of every journal in economics, along with all knowledge that those results ever existed, though they can be rediscovered. At the same time, every potential voter is brought up to a thorough Econ 101 level of understanding of Economics. At what value of n is the deal no longer worthwhile? A decade? Two?

Here is a related blog post by Eric.  And here is Eric in praise of New Zealand health care institutions.

JZ May 24, 2013 at 3:10 am

I’d be a bit skeptical here and ask, is it possible that more informed voters may choose a worse outcome?

If all voters understand the economic implications of their votes, and learn the Nash equilibrium of prisoner’s dilemma, we may very well end up with higher marginal tax rate for the rich, a policy that most economics-trained social planners would argue against.

Daniel May 24, 2013 at 4:04 am

The point about strategic voting leading to worse outcomes seems relevant, though I don’t recall my intro Econ classes touching on any more complex game theory than 2×2 competition games.

What you want to get at is optimal policy setting with a limited level of knowledge. Would a benevolent dictator acting in the best interest of society(Understanding that they’ll be acting on 1 of many social preference functions) who can use any advice up to 20 years ago for economic policy provide a better solution than the current situation.

dan1111 May 24, 2013 at 4:06 am

I think the question of what better-informed voters would do is a very good (and infrequently asked) one. It is not at all clear what the outcome would be.

At its cheapest, this complaint about ignorant voters is a complaint about one’s own position failing to have overwhelming support (despite it being self-evidently correct, of course!). If this were true, then all the ignorant people would be on one side and knowledgeable people on another side. But actually, the well-informed voters we already have are distributed throughout the political spectrum. The party differences are due to philosophical differences and disagreements about what models best explain the world, and these differences would still exist if everyone were better-informed.

Maybe increased knowledge would lead people to support better implementations of their philosophical positions.
Politicians wouldn’t be able to promise the self-evidently impossible, etc. But even this is not clear. A lot of the dumb positions and dumb outcomes come through compromises between different factions, rather than people who actually want the dumb outcome.

Tracy W May 24, 2013 at 8:01 am

But, if more informed voters cut back on wasteful subsidies and transfers to the middle-class, overall tax revenues could be much lower without cutting effectiveness of outcomes, which may well offset any other such costs.

JZ May 25, 2013 at 4:54 am

Why would more informed voters, most of whom are middle-class, cut back on wasteful subsidies to themselves?

Tracy W May 29, 2013 at 1:46 am

Because they’re paying for them themselves.

Harry Bowls May 24, 2013 at 3:32 am

So wait, we want to teach people about 50 year old neoclassical models, in hopes that they will behave more like those simplistic models? What happens if they see those models as unrealistic and idealised, and don’t change their behaviour? Do we have to bring Pinochet back?

I can’t think of another discipline than economics where someone would seriously propose that question.

The idea that we want to roll back any recent progress we’ve made in improved models of how people actually behave, and instead try to indoctrinate (?) them with simple neoclassical models is ludicrous. Have we forgotten that models are just simple representations of how agents behave, rather than descriptions of how we think they *should* behave?

dan1111 May 24, 2013 at 4:11 am

I don’t see anything about “indoctrination” or attempts to control people’s behavior here. It is about making the voters better informed, in the hope that this knowledge would lead them to make better choices.

Anonymous May 24, 2013 at 4:27 am

This was my thought too. I’m not an economist, but for example getting rid of the lump of labour fallacy and the idea that money has some intrinsic, fixed value (is there a name for this fallacy?), among the population seem to me very beneficial since it would put some politically unrealistic, but good policy options on the table.

dearieme May 24, 2013 at 5:53 am

Maybe you are referring to the medieval notion of a “just price”? It’s still obviously alive in the noddles of many ignorant and dim people.

Nathan Goldblum May 24, 2013 at 8:36 am

I believe the correct term is “Catholics”.

dearieme May 24, 2013 at 12:56 pm

Shhhh, NG, shhhhh.

Jim May 25, 2013 at 5:05 pm

Econ 101 Topics Review:

1. Positive versus normative claims.
2. Opportunity Costs

Often “justice” or better yet equity come at the cost of efficiency. A preference for justice is not ignorance, but not understanding its cost is.

RPLong May 24, 2013 at 7:45 am

… what the heck are you talking about?

Tracy W May 24, 2013 at 8:21 am

I can’t think of another discipline than economics where someone would seriously propose that question.

I take it that you don’t know many other disciplines. Physicists have been teaching Newtonian physics for centuries, in the hope that their students will change their behaviour in line with that. Biologists have of course been teaaching evolution for over a century. Chemistry teachers still cover the periodic table, first published in 1879, the periodic table represents the repetition of certain properties of elements.

Have we forgotten that models are just simple representations of how agents behave, rather than descriptions of how we think they *should* behave?

Personally I hope that most people here are well aware that models are representations of how things behave, and that useful models are ones that tell us useful things about how we should behave. (To put it another way “all models are wrong, but some are useful” – George Box.)
For example “every reaction has an equal and opposite reaction” is a simple model about how things behave that should tell you not to stand directly behind a cannon that’s just about to fire.
Or, to pick a case from classical economics (even older than neoclassical economics), that if the government subsidies a good, then the money it spends on that subsidy must come from somewhere else, which will mean that overall what one party gains by the subsidy, everyone else loses by higher taxes, and furthermore, that subsidy will influence people’s own behaviour to consume more of the good in question than if they were paying for it out of their own taxes. I had an argument about this yesterday with a co-worker who thought that a government subsidising some loss-making power plants would be a good idea rather than letting the plants go bust and wholesale prices rise.

RPLong May 24, 2013 at 8:42 am

Agreed. Dismissing core economic curriculum because it fails to perfectly describe all of real-world economics is a pretty hyperbolic Nirvana fallacy: http://en.wikipedia.org/wiki/Nirvana_fallacy

byomtov May 25, 2013 at 3:24 am

Unfortunately for this proposal, “core economic curriculum” and “Economics 101″ are very far from the same thing.

AaronM May 24, 2013 at 3:50 am

The first thought that comes to my mind is an analagous scenario for the physical sciences – delete all recent physics/chemistry/biomedical findings, and the public gets brought up to speed with intro-level understanding of the same subjects.

Is n significantly higher or lower than for economics? I feel like a good case could be made for either.

Anonymous May 24, 2013 at 4:19 am

At least in physics, I don’t see any benefit for any finite n. Making physics any useful, much deeper than physics 101 level understanding is required. It is not so much the knowledge of what laws govern the behavior of things that is useful (except if you are an engineer of a scientist), but the empirically rooted world view and the analytically trained mind that come as a result of practicing natural sciences for years.

Adrian Ratnapala May 24, 2013 at 5:16 am

Basic physics means intuitively understanding Newton’s laws and Kirchoff’s laws. It also means getting the relationship between heat and temperature, and understanding pressure.

This will turn everyone into slightly better auto-mechanics, home electricians, plumbers. They would still be incompetent compared to actual tradesmen; but I still imagine it would be a meaningful improvement on the status quo. Well worth at least one year of burned physics journals.

Also think about the side effect: everyone who knows “basic physics” understands what passes for “advanced maths” in high school.

Anonymous May 24, 2013 at 7:06 am

Typically the practical applications of physics happen long after the basic theories have been formulated. The kind of electronics that requires insights from quantum mechanics (i.e. transistor, lasers, LEDs, superconducting devices, etc.) were invented after 1950s (and applied to consumer level electronics even later) while the main findings in quantum mechanics required for them were already known in 1930s. And this 20 year gap between basic theory and practical application I would even consider quite short; GPS devices were developed in 1970s while the physics behind them (theory of relativity, electromagnetism, quantum mechanics) were all known about 50 years before.

That said, I would still argue that there are a lot of achievements in physics in the past 10-20 years that matter (or are on the verge of mattering) to non-physicists. Particularly in the field of condensed matter physics. That fact that Moore’s law still holds is at least partly due to our improved understanding of how nanometer-sized electronic structures behave (the whole field of quantum transport and nano-electronics has emerged since the end of 1980s). Graphene and carbon nanotubes are possibly revolutionary findings (for almost any kind of applications) and they were both found and the theories governing them were formulated in the past 15 years.

It is true that the more esoteric fields of physics such as cosmology or string theories haven’t yet had much impact on our daily lives, but they might still have in the future. The road from a fundamental scientific discovery to consumer electronics can sometimes be of the order of half a century, but still after the road has been successfully traversed, no-one can seriously suggest it was a mistake.

Anonymous May 24, 2013 at 7:07 am

I meant this as a response to dan1111′s comment below.

dan1111 May 24, 2013 at 5:48 am

Really? It seems to me that everyone having a basic understanding of physics would be hugely beneficial.

Also, how valuable have recent developments in physics really been? What are the great achievements of the last 10-20 years that actually matter to non-physicists? Quantum mechanics was important for the development of electronics, but the key discoveries were all made 60 years ago or more. I do think highly theoretical research, even if it has no practical benefits in the short term, is beneficial. And knowledge for knowledge’s sake alone is worthwhile. But is it valuable enough to offset the benefit of giving everyone physics 101 knowledge?

A lot more people with basic knowledge means a lot more people going on to learn further. And a ultimately a lot more people contributing to our knowledge.

vinc May 24, 2013 at 6:24 am

You have an overly narrow view of the field. The biggest subfield of physics is “condensed matter” and not cosmology/string theory/whatever field you are thinking of as impractical. This includes things like semiconductors, magnetism and superconductors. Take away a few years of physics and a modern electronic device is an impossibility. The continuation of Moore’s law depends on physics research. Biophysics gives you medical devices. Atomic/molecular/optical physics gives you better lasers. etc.

Urso May 24, 2013 at 10:11 am

So we would be rid of cell phones *and* have a smarter populace all at once? Sign me the f up.

Adrian Ratnapala May 24, 2013 at 6:31 am

Vinc is right, most physics research is different from, and more practical than, what most people imagine. But I stand by my claim that universal basic knowledge is still worth at least an year of research.

And Dan is also right, that if lots more people got the basics, then soon enough, the cutting edge would move faster than otherwise.

CD May 24, 2013 at 12:56 pm

Hey genie, how about this: all voters get intro-physics knowledge, and we wipe out the last 30 years of economics journals?

Even for econ questions, the benefits of physics outweigh econ: the ability to think quantitatively and systemically.

prior_approval May 24, 2013 at 3:53 am

Interesting data about New Zealand and health care – ‘New Zealand’s public health system makes up about 18% of aggregate government expenditures. Add in $1.1 billion for ACC, the government-run accident insurance company, and you get about $15.3 billion all up, or about $3475 per capita. This is complemented by private insurance for those who wish to have private insurance; about 30% of the country subscribes.’

Though not completely comparable, this provides an adequate data basis for comparison. – ‘U.S. health care spending grew 3.9 percent in 2011, reaching $2.7 trillion or $8,680 per person. As a share of the nation’s Gross Domestic Product, health spending accounted for 17.9 percent, the same share as 2010 and 2009.’ http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html

But look at the hell he experienced using the New Zealand health care system -

‘On a Thursday, Susan fell rather ill. An evening visit to the 24-Hour Clinic was followed by a Friday ultrasound confirming gallstones. On Sunday, a physician from the 24-Hour Clinic called after having reviewed Susan’s files and recommended antibiotics for inflammation that they’d missed on the Friday visit; I picked them up that afternoon. A Monday visit to the GP’s office gave a Tuesday visit to the specialist surgeon. We called Sovereign, our health insurer, from the doctor’s office at 12:30 PM, then faxed off some easily acquired paperwork at 1:00. Two hours later we had insurer sign-off for a Wednesday surgery at Southern Cross Hospital. Southern Cross is the biggest private insurer; our insurance is with Sovereign, but that wasn’t a problem. The public health system also sometimes contracts for services at Southern Cross when there isn’t enough capacity at Christchurch General.’

This is what happens when you don’t live in the U.S. and don’t have to deal with its truly exceptional health care system.

And to tie this back to the actual post – I’d suggest burning all Americn economics work which ‘demonstrates’ the ineffectiveness of any public health care system which can be branded as ‘universal.’ Then, the U.S. could actually gain the same horrible disadvantages as every other industrial societies health care system – lower costs, no fear of personal bankruptcy, and no need to worry about losing a job. The higher life expectancy and lower infant rate are an indication, and why yes, New Zealand does resemble the U.S. quite a bit in terms of different groups with different historical experiences and income levels. Though unlike in the U.S., unequal care is not as compelling an explanation for different outcomes in New Zealand.

‘# The median age at death in 2010 was 77.0 years for males and 82.9 years for females.
# During the 2010 year, the number of infant deaths (under one year of age) registered in New Zealand totalled 325. Two decades earlier, 500 infant deaths were registered. (Infant deaths exclude stillbirths.)
# In 2010, 50 percent of all infant deaths occurred within the first week of life.
# The infant mortality rate in 2010 was 5.1 infant deaths per 1,000 live births.
# In 2010, there were 23,678 deaths of people belonging to the European ethnic group; 2,782 deaths of people belonging to the Māori ethnic group; 1,081 Pacific; 744 Asian; 83 Middle Eastern, Latin American, and African (MELAA); and 215 in ‘Other’. People may belong to more than one ethnic group and each death has been included in every ethnic group stated.
# A newborn girl can expect to live, on average, 82.2 years, and a newborn boy 78.0 years, according to the New Zealand complete period life tables for 2005–07.
# The difference between female and male life expectancy at birth narrowed from a peak of 6.4 years in 1975–77 to 4.1 years in 2005–07.
# The 2005–07 period life tables indicate that life expectancy at birth for the Māori ethnic group is 70.4 years for males and 75.1 years for females.

http://www.stats.govt.nz/browse_for_stats/population/estimates_and_projections/demographic-trends-2011/deaths and life expectancy.aspx

Anybody interested in seeing where New Zealand compares to the U.S. can look here – http://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy and then use the power of the Internet to discover why America’s poor showing for its exceptional expenditure for health care is not at all representative of reality, because … well, fill in that blank however you wish. And if you are clever enough, you might just get paid to repeat it.

(As a final note – just about every public health care system in Europe, with the quite notable exception of the already exceptional NHS, allows for the purchase of additional health insurance.)

dan1111 May 24, 2013 at 4:35 am

“I’d suggest burning all American economics work which ‘demonstrates’ the ineffectiveness of any public health care system which can be branded as ‘universal.’”

Sorry, but the genie is not cool with suppressing dissenting points of view.

dan1111 May 24, 2013 at 4:50 am

Also, the genie can’t raise the dead, give you more wishes, or magically make U.S. life expectancy compared to countries with universal healthcare relevant to every discussion.

Andrew' May 24, 2013 at 5:39 am

Simple question: Why are cheap things expensive in the US healthcare system? Why is the aspirin $10?

dan1111 May 24, 2013 at 5:52 am

Why is any cheap thing ever expensive? Because there is not a free market.

Aspirin is cheap at Walmart. So you must be talking about how much a hospital charges, or something. It is easy to see why market forces would not be at work there.

prior_approval May 24, 2013 at 5:58 am

Well, considering that Prof. Cowen actually posted the link detailing just what it is like to live in a normal country, it seemed relevant enough. Especially since I doubt exceedingly few citizens of New Zealand are concerned that anyone is ‘subsidizing’ anyone else’s health care.

Mainly because they have a functioning health care system, unlike the U.S.

Besides, some people complain about bias at this log – it is nice to see Prof. Cowen posting a real life example of what life is like in a country that is not exceptional.

dan1111 May 24, 2013 at 6:13 am

I’m sorry about these comments. See below. But now that I realize that I missed that last link, and you were directly responding to something in the post, I am doubly sorry. Very stupid on my part.

prior_approval May 24, 2013 at 5:52 am

Interesting – so if the genie was oriented to biology, it can’t be tasked with burning Lysenko’s work?

Because that too was a ‘dissenting’ view. And one equally unsupported by things like actual data, involving generations.

Again, the U.S. spends far more for health care than any other country, with results that are mediocre by the standards of such almost equally expensive systems as those in Germany and Switzerland (where ‘almost equally expensive’ means costing a third less as measured by GDP).

dan1111 May 24, 2013 at 6:10 am

Sure, some dissenting views are outright wrong, stupid, and/or offensive. But I still don’t think suppressing these views is a good idea. It is far better to respond and discredit them. That way you have a collective memory of previous bad ideas and are less likely to come up with those ideas again. Also there is the inherent problem of with the majority being able to decide which dissenting views are worthy and which should be destroyed.

I do regret the snarky tone of my previous comments. You obviously care deeply about the health care debate, and presumably you care about it because you want the U.S. health care system to be improved, and people’s lives to be better. This is admirable. However, the problem is that you consistently advocate for your view in a way that will not convince anyone who doesn’t already agree with you. Step one to having a useful dialogue is taking your opponents’ positions seriously, and advocating that their work be burned is the opposite of that. That is what annoyed me and motivated me to respond with mocking. However, I am sorry that I responded in that way.

mofo. May 24, 2013 at 8:30 am

Serious question, what does New Zealand contribute to the body of medical knowledge per capita VS the US? Is NZ free riding off our efforts in improving medical science? Would it change your views on the US health care even slightly if you found out that the US is paying for the bulk of the advancement in medical science the world over?

Matt G May 24, 2013 at 6:31 pm

New Zealand has two strong medical schools with productive research programmes: Auckland University (43rd ranked in world) and Otago University (ranked between 50th and 100th). It’s not world leading, but considering NZ is a country of 4 million (1/75th the US) it’s a decent contribution.

Tracy W May 24, 2013 at 9:06 am

It’s far better to show that a dissenting view is unsupported by actual data than to burn it. If you burn it, there’s always going to be the sneaking suspicion that perhaps the view was right.

dearieme May 24, 2013 at 6:01 am

“with the quite notable exception of the … NHS, allows for the purchase of additional health insurance”: what on earth makes you think that we’re not allowed to buy health insurance in the UK? It comes automatically with some jobs, optionally for others. Or you can just buy it yourself without any relation to your employer.

prior_approval May 24, 2013 at 7:27 am

How embarrassing to be mistaken, which a few minutes searching around the web showed. Pointing out in a personal way just how silly it is to make pronouncements about another country that one has never lived in.

My memory was that private care in Britain was not allowed, with certain exceptions made for the extremely wealthy. A memory formed, in part, from actually listening to what was said about British health care when I was growing up in the U.S., decades ago. Reinforced by a perception of Harley Street as representing private health care in the UK (a cliche in a certain amount of British literature, sort of like the role the Mayo Clinic plays in its American equivalent), and somehow equating private care with private insurance.

Since the German doctor I know that works for the NHS in the UK has never mentioned anything about private care, it didn’t occur to me just how far wrong I was.

But the fact that the NHS feels (or felt – that program was pretty strange even then, and it might have been really cut back or even discontinued) the need to import doctors (and Germany has no problem exporting them) struck me as the sort of thing that marks the NHS. Good intentions, done fairly ineptly. Which still represents a massive step up from the reality in the U.S.

dearieme May 24, 2013 at 8:23 am

Hell’s bells, we all make mistakes: easy there! The NHS is a flawed system: for example, everyone I’ve met who’s used the French system prefers it. On the other hand, my NHS GP has paid me two house calls in the last fortnight, saturating me with penicillins, laying on hands vigorously, giving me morphine to reduce the pain, and generally being a good egg.

I, of course, am fully qualified to comment on the USA having lived there for all of three months, almost fifty years ago. But I’ll bet it’s still very big, that most of it still has a foul climate, that Sausalito is still a lovely place to live, and that Manhattan is still impressive. I made one use of the US system away back then: a minor industrial injury took me to the clinic my employer paid for, where they stitched me up and told me what a brave fellow I was. I suppose I should have asked which ethnic groups supplied the cry-babies they usually stitched up, but I was too naif to do so. Or too wise. Or too polite, or something.

ChrisA May 24, 2013 at 6:56 am

“with the quite notable exception of the already exceptional NHS, allows for the purchase of additional health insurance” – that’s incorrect, in the UK you can buy as much additional health insurance as you like and can use completely private hospitals if you want. Google Bupa.

In fact I have often argued, that for a rich person, the UK NHS is a great deal, you have emergency care available everywhere that is pretty good, and given you are wealthy, you can jump the queue for more longer term care where quality is more important, rationing keeps the taxation cost down to reasonable levels. And, since we know that medicine works on a 98%:2% basis, basically 98% of the benefit comes from the first 2% of costs, there is little effect on the longevity.

Of course the US system is dysfunctional in terms of its compensation structure (which seems to be a result of bad taxation incentives and poor regulation) but overall the doctors and hospitals are without doubt the best in the world (I am not American and have lived and worked all over the world including the US). If I get a serious treatable illness, that’s where I am heading.

Tracy W May 24, 2013 at 8:24 am

This is what happens when you don’t live in the U.S. and don’t have to deal with its truly exceptional health care system.

And you also have private health insurance.

TMC May 24, 2013 at 12:10 pm

Or Medicare, or Medicaid, or just kind of show up.

Politics Debunked May 24, 2013 at 11:11 am

re: “The higher life expectancy and lower infant rate are an indication,”

That comment indicates you have a rather simplistic view of the healthcare world since obviously lifestyle factors and genetics play a large role in life expectancy since a higher incidence of illness can offset a higher cure rate. Infant mortality rates are measured very differently around the world since e.g. related to whether a child is stillborn, rates of premature deliveries, etc. Yes, are some sources out there with data out there twisted to make our system look worse than it is, though obviously of course it could be far better if people learned basic economics (the topic of this post) and demanded a free market in healthcare. Some who know little about the topic naively look at who pays and naively assume price controls (i.e. single payer) magically work better in healthcare than they do in other areas of the economy when there is no rational reason to believe that. Comparisons between countries are flawed for many reasons, as the link I’ll give explains. For details on the real problems behind the healthcare system, favors for special interest groups limiting competition and ensuring we have nothing remotely resembling a free market in healthcare (which means of course the problems aren’t the result of “free market healthcare” .. since it doesn’t exist) see this page which links to myriad sources to support its arguments and explains basic economic realities:

http://www.politicsdebunked.com/article-list/healthcare

Roy May 24, 2013 at 4:15 am

Whose ECON 101 class are we talking about? Also is it micro focused or macro focused?

I actually had to take that class twice, because of a credit issue after I changed fields, the difference between the two classes was stunning, interestingly the one at the much better university was a lot worse.

In my own field, geology, I wouldn’t let n exceed a year or so, the issues where public ignorance is a problem are almost all well beyond the 101 stage, fracking and atmospheric history are way beyond the 101 level. I honestly don’t care about the public’s opinion of evolution. The only thing that would tempt me is if I could convince highway departments to stop covering roadcuts, but I find most of the people making those decisions actually took intro geology, they just don’t care.

dearieme May 24, 2013 at 4:26 am

Ricardo died in 1823, so that would be approx n = 190.

Ashok May 24, 2013 at 4:57 am

+1

mw May 24, 2013 at 5:08 am

Wow! That’s amazing that New Zealand doesn’t “make” its residents pay for any health product they don’t “want.” It’s especially amazing considering that somehow the government is still paying for 80% of all healthcare there. I guess that means just about everyone in New Zealand must “want” almost precisely the menu of things the government is “making” them “buy” through taxes–free government *run* (no need for price controls if you own it, right?) hospitals and lab tests and xrays and pregnancy care and truly massive subsidies for prescription drugs, gp, and so forth.
I guess all we need to do here in the US is increase the fraction of health spending done by the government from 60 to 80%, and then convince all the rabid libertarians on this blog that in fact they “want” everything the government is buying for them, and we’ll be golden.

I learned one thing from that post–that people only complain about paying for things when it’s transparent. Which is why if Obamacare had been tax-funded single-payer, we’d never hear about freedom-slaughtering mandates again.

Andrew' May 24, 2013 at 5:29 am

You got all that out of NZ allowing high-deductible?

mw May 24, 2013 at 8:46 am

Not only does NZ allow high-deductible, they allow no insurance period. Full stop. Because everyone is already automatically paying for 80% of the healthcare system through taxes. If you wanna go that route you should be more vocal about it.

J Storrs Hall May 24, 2013 at 6:15 am

About 237 years.

Saturos May 24, 2013 at 6:22 am

Surely all of them, economics journals never produced any knowledge so urgent that we couldn’t wait to rediscover it. (Anyone have a counterexample?)

RPLong May 24, 2013 at 7:49 am

Best answer so far.

Claudia May 24, 2013 at 9:53 am

Spoken like someone who has NEVER done real-time economic analysis.

Saturos May 25, 2013 at 3:25 am

Does that (from journals) ever produce info more valuable than teaching everyone Econ 101? Please, I’d like to know.

Slocum May 24, 2013 at 7:58 am

What economically stupid decisions do we think could be avoided (given current political divisions) with universal basic econ knowledge? Government programs that actually implement the broken windows fallacy (‘Cash for Clunkers’)? Trade protectionism? The problem is that many with economic education far beyond the 101 level argue in favor of these programs (but can we hope that they only do so strategically — because they know they will be popular with low information voters on ‘their side’?)

And then there’s the added problem that principles taught in introductory university-level economics courses have been shown not to be sticky (even for many professional economists):

http://www.nytimes.com/2005/09/01/business/01scene.html?_r=0

And especially note this bit:

“When they posed their original question to a large group of college students, the researchers found that exposure to introductory economics instruction was strikingly counterproductive. Among those who had taken a course in economics, only 7.4 percent answered correctly, compared with 17.2 percent of those who had never taken one.”

mw May 24, 2013 at 8:45 am

Tell me about it–even econ university tenure doesn’t seem sufficient to avoid inflation-hawk and bond vigilante fallacies.

ThomasH May 24, 2013 at 8:58 am

If Econ 101 includes macro, the year I finished my PhD. :)

Millian May 24, 2013 at 9:37 am

n=0. Most voters either trust authority figures on economics or vote their self-interest. Econ 101 would not ameliorate the first and would justify the second.

Ben May 24, 2013 at 9:41 am

It’s not clear to me that the greatest benefit would be in public policy. A thorough understanding of Econ 101 requires both basic literacy and some mathematical knowledge, so you’ve granted all voters in (the world?) a stronger education base than they had. That alone should improve productivity pretty significantly.

Robert Olson May 24, 2013 at 9:51 am

Now this question isn’t very interesting at all.

Other question: how dumb would you be willing to make people in order to advance a certain field 10 years? 20 years? 30 years?

Would you be willing to invent a cure for AIDS if the cost was the median person forgot everything about germ theory?
Could you perhaps substitute the usefulness of knowing germ theory with other social norms, like, wash your hands or martians will zap you with space rays?
Is it a bad world if we have flying cars and everyone thinks they are powered by the Machine God?

How much of the useful behavior of the median person is guided not by rational thinkining, but by cultural norms, and at what % does “teaching” become mostly useless?

derek May 24, 2013 at 10:42 am

Rephrase the question. Has there been times in the past where a field has had to overthrow the accepted understanding and practice to advance? Usually it is very difficult due to both large numbers of people using or thinking in that way, as well as the authority and influence of a few who are well regarded. A few examples come to mind, usually in a field where humans are the objects of study. If you burned social studies work at some time during the early decades of the 20th century (maybe burned a few of the luminaries as well) it may have been a net positive. For a long time medicine was a danger to it’s subjects, and burning the common understanding and forcing a rethink using more empirical data than handed down practice would have helped as well. More recently the understanding of the brain required throwing off long held theory,

Is economics at such a point today? We will find out in retrospect.

Kent Guida May 24, 2013 at 11:08 am

The belief that current economics is actually benefitting our political life is quite touching, but I’m not buying it.
It’s only true if you are a genuine progressive in the John Dewey sense — progress will come from application of the results of social science by experts not accountable to the public.
My view is progressivism in this Dewey sense is one of our biggest problems. The results more often than not are disastrous, and it is wholly incompatible with self-government.
I say delete the last 100 years of economic science. At least then the public would be less prone to throw up their hands and turn over their lives to Deweyites. No doubt that would make many economists unhappy, but as good utilitarians they should accept this as in the public interest.

Nathan W May 24, 2013 at 11:09 am

Things would be much worse unless we went back really really far, because then even more people would have simplistic notions about how economies work, leading them to buy into numerous flawed economic arguments more easily under the auspices of “science”, whereas we would simultaneously lose much of the nuance that has developed out of millions of imperfect efforts to understand economic agents and the economy.

So, if everyone gets econ 101 but all knowledge from the most recent economic research is to be burned, I reckon we have to go back to before the field was commonly called economics. 1870s?

Alternatively, I vote against econ 101 for all voters and in favour of “citizenship101: try not to be such an ass, respect then love can lead to peace”, and to keep all of those imperfect efforts to study the economy and economic agents right where they are, on the record. Included in such a civics course could be some basic principles about inflation, interest rates, trade policy, and impacts on such newfangled concepts as “macro” and “micro” issues. Of course this would also require sketching out a few Xs to represent supply and demand.

Understanding economics in such a context should be considered within the realm of good citizenship as a voter and as a member of communities (not talking about prison terms for people whose lifestyles or language/colour irritate you), and thus rapidly becomes much less important than that other, far more relevant area of knowledge for the average person.

Michael Foody May 24, 2013 at 11:23 am

The civic consequences of a better informed populace is only part of the puzzle. A universally educated populace would likely create dramatic future increases in the acquisition of the lost cutting edge knowledge. Basic knowledge is a prerequisite for expertise so universal competence would likely create many more future experts. It would probably function something like a solow model with lost cutting edge knowledge standing for consumption and universal competence standing for investment.

Bryan Caplan May 24, 2013 at 11:30 am

N=∞. Clearly.

ladderff May 24, 2013 at 11:43 am

Millions of american adults walking around acting like they know something about econ because they’d been trained to the rigorous standard of a freshman course at an american university in 2013? God save us.

Of course, as I believe Lord Keynes pointed out, economics is the one subject which everyone fancies himself an expert anyway. oh well

Joe Smith May 24, 2013 at 11:59 am

Teaching everyone Econ 101 would probably do more harm than good. The Republican Congress demonstrates the danger of knowing just Econ 101.

A better question might be: if you could save just ten economics articles published since the second world war which ones would you save?

MPS May 24, 2013 at 12:32 pm

It would be nice if voters knew more about economics but I’m highly skeptical that “econ 101″ knowledge is going to take us there. First of all, it wouldn’t resolve political disagreement, because even smart economists disagree on policy decisions. One might hope that it helps people discern what are the important issues — to convert issues into the appropriate choice over competing values — but I think it takes more than an econ 101 education to get there… indeed I get the impression that quite educated people often fail on this front.

It should never hurt to give people more real education, but the posing of a question like this brings to mind the adage “a little bit of information is a dangerous thing.” I’m reminded of back when Santorum, when asked about controlling drug prices, said something to the effect of “I think it’s best when the market determines the prices.” That sounds like the answer someone would give if they had an econ 101 education. But in case it’s not clear there are things called patents and other factors that ensure that drug prices are not determined by market forces. That’s really at the crux of the issue, and so in this sense people’s uninformed instincts might serve them better than the false-confidence of incomplete education.

mulp May 24, 2013 at 12:34 pm

Is Econ 101 macro or micro??

There is a big difference.

In micro, price is the sum of all the costs with perfect competition and thus only with shift in supply of inputs can the price change.

In macro, price defines the cost, and thus the cost of a new house can be $100,000 one month and $200,000 the next month, and then $50,000 the month after.

In micro, workers are consumers.

In macro, consumers can spend more based on others having higher priced assets which result from workers earning less, implying workers and consumers are totally independent, and the way to increase consumption is to lower the minimum wage.

Rohan May 24, 2013 at 1:03 pm

Does basic economics include basic mathematical literacy? Say simple probability and statistics?

If it does, that would make basic econ much more valuable, and probably worth trading for.

Brian May 24, 2013 at 3:10 pm

I think John Bates Clark Medal winners from the last decade or two might answer this question a lot differently than the general economics community.

Max May 24, 2013 at 3:43 pm

Huh. What does Econ 101 tell voters when it comes to equal marriage rights, global warming, a makers and takers economy, massive immigration by unskilled laborers, a foreign policy of fighting terror with terror, a war on drug users, a war on blacks, a war on gun owners, a war on fetuses, a war on women, a war on men, a war on minorities, a war on majorities, technology which might render all unskilled labor permanently obsolete, a society in which too many resources are taken from the young to pay for life-extension for the very old, and the distinct possibility that this entire economy is a pyramid scheme that will collapse like the Tower of Babel before your grandchildren ever learn to speak?

ohwilleke May 24, 2013 at 5:48 pm

In the spirit of a little knowledge is a dangerous thing, I don’t think that lots of voters with an Econ 101 level of knowledge would be a good thing. It would be a problem. Indeed, it is a problem that exists right now in the ranks of conservative political circles.

The trouble is that Econ 101 makes lots of assumptions about the world being perfect that are then deconstructed in the rest of the econ curriculum one by one to get closer to the real world. Econ 101 leaves you with a Panglossian sense that we live in the best of all possible worlds and that markets never fail. Reality is rather more bleak.

So, at any N this is a bad bargain. Having some people who really no what they are doing and others who know that they don’t know, is a better situation.

John May 24, 2013 at 7:03 pm

Seems to me the entire thought experiment is misguided.

When Smith talked about markets producing social/public goods it was not because the individual actors had been properly educated. It was about institutional structure.

Changing the knowledge level of the voters — who seem to be assumed hold sufficient economic knowledge to perform market actions without problem — will change political outcomes seems to miss entirely the structure of most democratic polities. How’s the saying go — if you want the game to change don’t change the players, change the rules.

byomtov May 25, 2013 at 3:33 am

I think n=0.

I doubt there would be any gain, and quite possibly a loss, from having voters learn basic economics, not least because it’s far too easy to turn the material into ideological indoctrination, or sometimes self-indoctrination, that leads to cartoonish views of how the economy works.

Dirk May 26, 2013 at 5:58 pm

If you were to delete all economic journal articles of the last n years without getting anything in return, how large does n have to result in a loss?

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