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Top economic misconceptions of the lay people you wish you could correct?
That was the first request.
Economic misconceptions interact with values to skew overall judgment, but the value judgments are usually the main problem. Consider how "anti-foreign bias," to borrow Bryan Caplan's term, often causes people to oppose free trade. The main problem isn't bad economic understanding, though that often is present. Rather the person has an emotional commitment to whatever economics, and other positive arguments, make the protectionist position sound higher status and more justified.
Consider an analogy with political scandals. It's not quite right to pinpoint "mistaken beliefs about John Kerry's wartime record on Swift Boat matters" as the main problem, even though the beliefs are indeed mistaken.
Better thinking may do us more good than "better economic understanding" per se.
Both Alex and I have blogged that nationality (or sometimes ethnicity or regional background) is often the best predictor of a person's economic views and yes that includes among economists. Given the diversity of economists' views across nations, we are part of the problem too, thereby again illustrating the essential unity of mankind.
Still, I do believe in right and wrong and that means that the viewpoints of some nations (grossly construed) are better than others. So the top economic misconception out there in the world is "unjustified dislike of the United States," noting that there are also justifiable reasons to dislike many aspects of this country.
Posted by Tyler Cowen on August 21, 2008 at 04:17 AM in Economics | Permalink
Comments
thats where rational patriotism might come in.
if you are patriotic for one of the best nations, like australia, new zealand or the usa, then this might be a reasonable position given that most people identify with a nation and that most international relations is conducted between nations (tautology notwithstanding)
Posted by: cato at Aug 21, 2008 5:29:34 AM
I think a lot of people out there do dislike America in the sense that the would prefer to live in some other country. A majority of these people do not, however, dislike the fact that Americans live the way they do, when they live in their own country.
The basic economic issues are, however, almost irrelevant. What matters is American foreign politics. In politics, things are by definition what they seem. And they seem horrible.
Posted by: Tiedemies at Aug 21, 2008 5:51:52 AM
Given the diversity of economists' views across nations, we are part of the problem too, thereby again illustrating the essential unity of mankind.
I am not surprised that Tyler does not consider himself a philosopher king. Now if only some of the commenters, and the world's most obnoxious blogger ("right here in River City"), would be as humble.
Posted by: at Aug 21, 2008 6:58:47 AM
Please hyperlink to previous discussions of right and wrong, good and evil, and the rest.
Posted by: at Aug 21, 2008 7:33:26 AM
I re-reviewed your "justifiable reasons" and I think many point to one thing that stems from another.
Americans are ignorant because the division of labor allows them to be. It's this same division of labor that allows the prosperity.
We don't want to think about raising food, teaching kids, or the prisoners once we lock the cell. We don't want to think about the poor and disgruntled in the rest of the world. We want them squared away, so we can be experts in making pinheads (no pun intended).
So, the leftist argument is that this leads to the downward spiral of striving to be the lowest cost provider and the attendent exploitation of externalities. However, when they discuss factory farms etc., why not just the externalities? Why do they bring up contamination, hormones, etc.? Because, intuitively, they know there is also competition and differentiation on quality.
And who is the biggest monopolizer of differentiation based on quality? Is there some entity that gives its stamp of approval on quality, essentially saying to the division of labor-minded, "these are all about the same, so you don't have to worry about it."
P.S. As for hatin' on guns, try living out here in the boonies and not bein' terrified, forget happy.
Posted by: Andrew at Aug 21, 2008 8:06:53 AM
There is a big correlation between foreign travel and views on foreigners, isn't there?
(I think generally if you go hang with people, you've got to be a hard soul to keep disliking them.)
Posted by: odograph at Aug 21, 2008 8:30:40 AM
I think the two vmost common (and most damaging) misconceptions about economics are the broken window fallacy, and the lump of labour fallacy.
Posted by: Philip Hunt at Aug 21, 2008 8:38:56 AM
My ears perk up ... I think I've most seen the broken window fallacy misapplied lately, to pretend that environmental damages are not there until we "see" them.
Posted by: odograph at Aug 21, 2008 8:48:53 AM
I was very excited to see what you think the most common fallacies of economics are in your view - of the people and of economists. I very disappointed to see you push it ALL off on bias. hope you return to the main question (or link to where you've addressed it).
to a comment:
"We don't want to think about raising food, teaching kids, or the prisoners once we lock the cell. "
What if there is profit to be had in these areas? Currently these areas are all subsidized or government run.
Posted by: liberty at Aug 21, 2008 9:05:41 AM
That was a thoughtful answer, but Phillip Hunt's was more concise.
Posted by: josh at Aug 21, 2008 9:10:33 AM
Excellent Subject Tyler, a question as fascinating as it gets. I too have pondered the question of the depth of antipathy towards the U.S. and despite my many, many, many (down from at least five, and up one, since bush II's reign began) misgivings about the country, it strikes me that very low weighting is given to key beneficial systemic effects upon the world from the American century, and very heavy weighting given to symbolic and political issues that parallel closely with group or tribal social responses.
Some basic examples; I once stood in a room of 400 people "enjoying" a vehemently anti-american musical experience, with every single one of us, like billions of others worldwide, sporting a 1" inch patch of dead skin on our arms, evidencing a U.S. inspired and funded vaccination campaign, that has saved more lives from the most effective mortal enemies of humanity than all the military campaigns in all of history.
I can rattle off literally dozens of examples of this bias away from far more powerful but abstract, or not easily quantifiable, agents of positive transformation, and towards simple negative imagery. In economics, the role of the U.S. dollar as an anchor currency during the post bretton woods accords. it can be argued that a global reserve currency has done more to transform the lot of the citizens world in many small but profound ways, by example facilitating world trade, than most grandiose economic projects. We maybe ripe for a basket now, but that has come about by that key role.
Without the massive economic prosperity of the west in the post WWII era how much deeper would world poverty have been, and how much larger the world population.
In culture, the spread of revolutionary culture around the world has been one of the most profound. I know their will be howls of protest to this one, but where I come from, and more relevant than ever i think, is the ease with which the enlightenment ideals took hold at the center of American thought and continue to threaten systems of control worldwide. The feminist and civil rights movement, are deeply entrenched in the American system. If you watched enough American originated cultural output you would be exposed to a litany of rather liberating concepts.
I think relative perspectives are what escape most people. had a negotiated peace with Nazi Germany or imperial Japan taken place how would the world look. What where the alternative models to the current order. One of my pet peeves is the extent to which the world in general and Russians in particular have never reconciled the extraordinary damage done to Soviet Client states from their relationship to that Union. There are thousands of books, lectures and papers, on America's dirty wars, and much hand wringing within America of it's darker periods in the cold war. There is not a person who has not graduated from an American institution of higher learning that is not aware of this history. Yet take a simple look at every single soviet client state in Africa for example, and look at the enormous hole they have had to climb out of. You cant find a single Russian who is contrite. They are just victims apparently.
I geuss people have an aversion to authority figures, especially ones who are somewhat hypocritical. Sorry for the polemic, but the subject drives me nuts.
Posted by: nyongesa at Aug 21, 2008 9:31:16 AM
Maybe 5:30 am isn't the best time to write polemics, I have engaged in my own pet peeve, people who write long screeds on subjects only tangently relevent to the main article. I will try to write while awake in the future!!!
Posted by: nyongesa at Aug 21, 2008 9:35:51 AM
I would like to convince people that when some one says that such and such (alternative energy is a common example) will create jobs that that is not a good thing.
Posted by: floccina at Aug 21, 2008 9:46:55 AM
So the alternative to the US is the socialist paradise of Cuba?
Posted by: jorod at Aug 21, 2008 9:49:50 AM
Andrew: "We don't want to think about raising food, teaching kids, or the prisoners once we lock the cell."
Who is this "We", Andrew? Do you really think the majority of parents in this nation are unconcerned about the quality of education their children receive? Do you know many realtors? Most would tell you that quality of school systems is a big a factor as any in home-buying decisions. That's true even for childless couples and empty nesters, who are concerned about the resale value of their homes.
How Important Is the School District? provides some answers from blog commentators about just how important education is to home buyers.
If Americans did not care about the teaching of their kids, why would issues such as creationism and evolution remain important political questions?
Posted by: John Dewey at Aug 21, 2008 10:11:51 AM
I have countless frustrations, and I won't bore everyone with them all. High on my list though is when people see the good things that government [i.e. taxpayers] does without balancing it with:
1) the bad things that government does (you can't have one without the other), and
2) without balancing it with (or even seeing) the good things that would have come if not for government usurpation of private resources, and
3) without seeing that government [i.e. taxpayers] is a substitute for charity and that the bulk of good things that government accomplishes would have been accomplished anyway if government had never tried to "do something".
Economists in particular seem to often overlook the substitute aspect of government/charity, and claim that government is needed to step into the breach of selfish "market failure". This attitude completely ignores that the very same impulse that leads people to call for government [i.e. taxpayers] "to do something" is also the same impulse that leads to private selfless charitable giving.
By the way, most people are intuitively aware of fungibility when it comes to their own charitable dollars, even if they seem to overlook it when it comes to government budgets. Thus they won't fund something if they think the government [i.e. taxpayers] is "doing something". Therefore to say that "the private sector isn't doing anything so government [i.e. taxpayers] can't stop funding it" is blatantly false.
Posted by: happyjuggler0 at Aug 21, 2008 10:25:11 AM
It would cause a golden age of wealth if we could eliminate the general misconception that systematic soldiering aids the trade in general by providing more jobs to do the same work.
Posted by: jrandomamerican at Aug 21, 2008 11:14:08 AM
"It's not quite right to pinpoint "mistaken beliefs about John Kerry's wartime record on Swift Boat matters" as the main problem, even though the beliefs are indeed mistaken. "
What mistaken beliefs? I keep see this lately, but not usually on econ blogs. Kerry served with 254 men and could get only eight to stand up with him. The military is generally 60/40 Republican, so in his group (Dem =101) he gets 8% support. The leader of the Swift Boaters is a registered Democrat.
When I hear the term 'Swift Boating' I apply it as those who were there un-rewriting history.
Posted by: Tom at Aug 21, 2008 11:14:45 AM
Ha! Tom got trolled.
Posted by: odograph at Aug 21, 2008 11:41:59 AM
How did they get 254 men on that one small boat?
Posted by: spencer at Aug 21, 2008 11:56:47 AM
Did I misread?
Posted by: Tom at Aug 21, 2008 11:59:29 AM
I just knew the Kerry thing would be taken up! I completely agree the issue isn't the beliefs about the service or what have you, but the tactic and where that leads political dialogue. Tom provides the perfect example of what I think you were referring to. And off into the frickin' weeds again he goes. Just spot on perfect.
Posted by: babboba at Aug 21, 2008 12:31:02 PM
Coincidently, I'm sure: IndyMac Swift Boaters Strike Back!
Posted by: odograph at Aug 21, 2008 1:25:13 PM
Again a bastardization of what swiftboating is.
Swift boaters were actual people who served with him, led by a democrat. If you can't discredit their agruement, then discredit their name. Kerry can still answer their arguments, but has chosen not to. Kerry's Cambodia trip has been discredited by them, among other items 'seared' in his memory.
Sorry to redirect the post, but Tyler's use of this analogy proved that he is also susceptible to biases.
"Tom provides the perfect example of what I think you were referring to."
I didn't provide it, just pointed it out.
Posted by: Tom at Aug 21, 2008 1:44:38 PM
"Cause and effect are commutative."
I cannot count the number of people who simply get cause and effect backwards. Speculators begin speculating when they see a highly volatile market where you can make a lot of money fast. Then the media come along and go "OMG, the market is so highly volatile, what is causing it?" - and they look over and see bunches of speculation.
So they say speculation causes price volatility.
It would take a much longer post to explain why I don't identify this as "correlation is not causation", but the short version is that when you reverse the cause and effect, people don't understand the difference. If you suggest the volatile prices have actually caused the speculation, they stare at you blankly and say "that's what I just said".
Posted by: Caliban Darklock at Aug 21, 2008 1:53:21 PM
