Does economic literacy encourage polarization?

Hume’s revenge!

Previous research highlights the role that political knowledge plays in forming political positions and how financial literacy influences personal economic decisions. But even among economists, how economic knowledge affects policy views remains little studied. We measure economic literacy among a representative sample of U.S. residents, explore the demographic and socioeconomic correlates of this measure, and examine how respondents’ policy positions correlate with their economic knowledge. We also estimate counterfactual policy positions as if respondents were fully economically literate. We find significant differences in economic literacy by sex, race/ethnicity, and education, but little evidence that respondents’ policy views are related to their level of economic literacy on average. Examining heterogeneity by political party, we uncover an interesting if polarizing pattern: estimated fully economically literate policy views for Democrats and Republicans are farther apart than respondents’ unadjusted views.

And:

We find that men, older Americans, Americans without children, Republicans, and the more educated have higher economic literacy. Family income is unrelated to economic literacy, though Black and Hispanic Americans have lower economic literacy (including conditional on education and income).

Here is the full paper by Jared Barton and Cortney Stephen Rodet.

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