Sunday, May 9, 2010

Economic Enlightenment and Political Ideology

Economic Journal Watch has a new article by Buturovic and Klein on economic enlightenment and political ideology that is generating a lot of commentary. Their conclusion is that self-described "progressives" are much less enlightened when it comes to economics than conservatives or libertarians. I'm somewhat of an agnostic on these findings. I would by no means consider them conclusive - there are massive problems with the paper (which is ironic, since EJW was intended as a journal to raise scientific standards in economics), but I'm certainly willing to entertain the idea that liberals aren't as "economically enlightened". Ultimately, a great deal of political disagreements come down to normative differences rather than positive differences. However, people often have a hard time differentiating between normative and positive positions. Since conservatives and libertarians generally hold normative positions that aren't in as great conflict with the positive conclusions of economics, if they are unable to separate their normative views from their positive understandings, it shows up in the survey as "economic enlightenment". If liberals have an equally hard time separating their normative from their positive views, it will show up as a lack of enlightenment.

Tyler Cowen also raises an extremely important point. The eight questions asked here are largely microeconomic questions. If you had a similar survey with macroeconomic questions, I think conservatives and libertarians would prove relatively unenlightened and liberals would look more enlightened. Again, the reason for this isn't because liberals know more macroeconomics than conservatives. It's because the boilerplate liberal normative position conflicts less with positive economics on macroeconomic questions than the boilerplate conservative normative position.

Some of these were just bad questions. For example:

1. Restrictions on housing development make housing less affordable. (Unenlightened: Disagree)

What kind of restrictions? If it's low-income housing restrictions, that makes certain housing more affordable. Building codes can cut down on asymmetric information and lower costs for consumers. As a general rule, the enlightened answer would be to agree, but liberals are likely to raise extremely enlightened caveats that will get counted as unenlightened. The better question is:

4. Rent control leads to housing shortages. (Unenlightened: Disagree)

But even this has major problems. Shortages assume limited building space and rent control imposed on all housing. Without those assumptions (which generally don't hold true in the U.S.), rent control will result in lower turnover for people living in rent controlled apartments but shouldn't have a particularly strong effect on housing supply.

7. Free trade leads to unemployment. (Unenlightened: Agree)

This probably needs to be caveated considerably. Most research suggests that among the three populist unemployment boogey men of technological development, free trade, and immigration, only technological development appreciably impacts unemployment. But that doesn't mean that free trade doesn't have important displacement effects in certain industries. In my opinion, this question is too vague to be useful. Are we talking about short term or long term? Are we talking about concentrated unemployment (ie - in a region or sector)? Generally speaking, I would "disagree", but it's not an issue that's best captured in a five word question.

8. Minimum wage laws raise unemployment. (Unenlightened: Disagree)

Again, generally speaking I'd "agree", but this is way too general. There are solid arguments for why this isn't true in certain labor markets. And there's some very famous empirical evidence on this. I'm unconvinced by a lot of that pro-minimum wage empirical work, but I'm also unconvinced by people who attribtue all our unemployment problems to minimum wage laws. Still, I think it's fairly perverse to call someone "economically unenlightened" because they might be familiar with Card and Krueger.

Finally, these three questions shouldn't have even been in the paper:

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

# 3 is probably OK, but it's a little ambiguous. Absolute mobility has been strong over the last 30 years. Relative mobility has weakened considerably, and inequality has increased (yes, yes, we all know that the family/individual distinction reduces some of that trend). The phrasing "standard of living" pretty clearly points to absolute mobility, but one has to ask (1.) will that be clear to readers, and (2.) why ask about absolute mobility rather than relative mobility or inequality - or why ask about "overall" conditions, rather than conditions for low-income families? The deck seems pretty consciously stacked. If a different phenomenon had been asked about along these same lines the results could be completely different -that doesn't make for very robust or credible results.

# 5 and # 6 are terrible questions. They don't rely on economic enlightenment at all, and instead rely on the reader's definition of "monopoly" and "exploitation". The sixth question is by far the worst. This isn't a question of economics, it's a question of fact. Maybe companies are beating and raping their workers overseas. Maybe they're cheating them. A respondent's cognizance of these conditions or their ethical understanding of what's going on overseas has nothing at all to do with the economics of multinational corporations.

So some of these questions are good and some are bad, but ultimately I think the survey generates more heat than light. It's not very convincing as evidence itself, although I think their underlying argument is plausible. Ultimately, I guess what bothers me most is that what is called "enlightened" here is actually the most general, introductory, un-nuanced, rule of thumb version of all these issues. To me, that's not really "enlightenment".

It's an interesting paper, but I hope nobody takes too much out of these results. I guess I just find it unfortunate that they even took the time to write this up. I would have looked at the survey and said "wow - this data is essentialy useless" before analyzing or writing anything. I'm kind of curious why they didn't have the same reaction.


  1. Also, on 6, if the 'unenlightened' liberal has also studied Marx (or just John Roemer, David Harvey, Jon Elster or Gerry Cohen) then they could strongly agree with Marxist exploitation of labour going in the third world and in the developed world. But asking only about the third world, the person asked would reply "Yes". The question is stupid unless the interviewers explain what they mean by exploited, which itself would have normative implications.

    Also, the question about minimum wages is also phenomenally important. Even Chicago-schoolers like McCloskey agree that in certain situations (specifically a Monosponistic employer back to Joan Robinson) a price floor (minimum wage) can increase employment (it being the inverse of optimal price regulation in monopoly). Also, see Krueger's work on the minimum wage, or Sam Bowles's work theoretically on the impact of free trade on employment in the US and Mexico.

    I'm afraid that in this paper we might simply see Klein's predilection for painting libertarians as smarter without considering the normativity of what's going on in the economics he expounds.

  2. Ya - the monopsony was what I had in mind. Even if you don't agree with that argument or the Card and Krueger empirical work, simply being aware of those objections is to be enlightened.

  3. "Building codes can cut down on asymmetric information and lower costs for consumers."

    They can also benefit insiders and thus raise costs. Which do you suspect is more common?

  4. Anonymous -
    I am not familiar enough with building codes to say - I could see it going either way, and I'm sure it depends on what jurisdiction we're talking about.

    My guess is that the vast majority of building codes cut down on asymmetric information and lower costs (in a welfare economics sense). However, my guess is there are certain jurisdictions where insiders are especially political powerful and reap considerable economic rent from building codes that they push through.

    You present what I think is in many ways a false strategy for thinking about this. I'm thinking in terms of rules about wiring, insulation material, width between joints, etc. etc. I can fully agree with you on the problem of the rent-seeking behavior of insiders and it doesn't say a thing about these other sorts of building codes I'm identifying.

  5. "I'm thinking in terms of rules about wiring, insulation material, width between joints, etc. etc."

    All of which are subject to rent seeking. You seem to be arguing that there is one set of best practices in these areas that are not subject to abuse.

  6. I argued no such thing. Perhaps there are "best practices" in some of these areas, perhaps not. And where there are "best practices", perhaps building codes coincide with those actual "best practices" and perhaps they don't coincide. I don't recall coming down on any side of any of these questions, but feel free to point out where I did if you disagree.

    Theoretically, I suppose the lumber industry could be behind the building codes dictating the width between joists. The narrower the distance, the more rents they can enjoy. Theoretically this is possible. I've never said it wasn't possible. Since we're both equally ignorant on whether this is actually true, I see common sense on my side and ideological imperative on yours. That's what this boils down to. Don't try to twist what I've said into a statement that rent seeking never happens or that regulators are perfect or that nothing is ever subject to abuse. You never read such a thing in any comment I ever wrote.

  7. "Since we're both equally ignorant..."

    You really don't know what level of experience I have, do you?

    "Since we're both equally ignorant on whether this is actually true, I see common sense on my side and ideological imperative on yours."

    Sorry, but this claim makes no sense at all. Why exactly is your "guess" (your word) commonsensical and my position is not?

  8. "You really don't know what level of experience I have, do you?"

    You've been painting quite a vivid picture for me the last couple weeks.

    "Sorry, but this claim makes no sense at all. Why exactly is your "guess" (your word) commonsensical and my position is not?"

    In fairness to you, you still haven't stated exactly what your position is - you've simply imputed several to me.

  9. Last couple of weeks? I only started commenting on your site 4-5 days ago to the best of my recollection.

    My position is that the vast majority of building codes have some rent seeking involved in them; that they are not merely neutral decisions divined from the laws of nature.

    Also, I think there is fairly broad agreement on this point amongst planners and those who oppose "planning" alike; that the current urban, suburban, etc. landscapes, etc. exist not due to some laissez-faire ideal, but as a result of previous planning mentalities. IMHO, if we did take such a laissez-faire approach, we'd have very different types of buildings than we have today, more and less "sprawl" depending on the area, greater exurban expansion, etc.

  10. You certainly have the right to comment anonymously, but this is one of the consequencess - someone else has been commenting here anonymously with a very similar tone and perspective.

    I agree completely with your second and third paragraphs.

  11. Well, you don't use FB or DISQUS and be damned if I am going to create another online presence through Typepad or what have you.

  12. Re: 4 - "Housing shortage" does not imply those things nor is it the same as "housing supply."

    A shortage is simply demand exceeding supply. Lower turnover, as you mention, is all you need to create a shortage.

  13. With all due respect to Tyler Cowen's point, macro is witchcraft :)

  14. Your first point about normative and positive seems true but everything else is nonsense.

    Is it ok to murder someone? (enlightened disagree) DK - "but what if it was to save 10 trillion bajillion people?" Questioner - "Then we would have added that info to the question."

    This study doesn't prove anything but gives more evidence to general theory that progressives are either evil or stupid.


All anonymous comments will be deleted. Consistent pseudonyms are fine.