Economic Ignorance

We’ve heard a lot recently about “epistemic closure” — the tendency of people to get closed off into informational cocoons of people who think exactly like them. This has particularly (and deservedly) said about the Right, specifically on the subject of global warming. It’s astonishing to constantly encounter talking points — “global cooling”, Climategate, the supposed lack of recent warming, etc. — about which conservatives have yet to hear any contrary opinion. And that’s just one subject. Anchor babies, torture, spending cuts — these also tend to get discussed in an echo chamber into which contrary ideas or facts are not injected or are quickly ejected.

But it’s not unique to the Right Wing by any means. Earlier this year, the Left was atwitter because the AG of California “exonerated” ACORN of any wrong-doing. Of course, he did nothing of the kind, as even a cursory reading of his report would have revealed. But it is still claimed in Left-Wing circles that ACORN was the victim of a Right Wing smear.

I bring this up because three articles from the last week in particular illustrate how the Left is ensconced in its own echo chamber on the subject of economics.

First, there’s Tabarrok’s description of the macroeconomic ignorance of students:

Bill Goffe recently (2009) surveyed one of his macro principles classes and found, for example, that the median student believes that 35% of workers earn the minimum wage and a substantial fraction think that a majority of workers earn the minimum wage (Actual rate in 2007: 2.3% of hourly-paid workers and a smaller share of all workers earn the minimum wage, rates are probably somewhat higher today since the min. wage has risen and wages have not).

When asked about profits as a percentage of sales the median student guessed 30% (actual rate, closer to 4%).

When asked about the inflation rate over the last year (survey was in 2009) the median student guessed 11%. Actual rate: much closer to 0%. Note, how important such misconceptions could be to policy.

When asked by how much has income per person in the United States changed since 1950 (after adjusting for inflation) the median student said an increase of 25%. Actual rate an increase of about 248%, thus the median student was off by a factor of 10.

OK, it’s college students. But these are students who have an interest in economics. And it was students who were riding the wave of Obama’s 2008 victory. Their opinions are highly reflective of what the Left part of our country really thinks.

Moreover, politicians and political commentators are just as ignorant as the students. Besides believing some of the above (e.g., the “obscene” profits of Big Oil or Big Pharma), there are even more dangerous memes afloat among the intelligentsia. Gregg Easterbrook recently tackled the common myth that the recession is hitting seniors hardest:

A year ago, when the Social Security Administration said there would be no COLA for 2010, President Obama backed a second “one-time” bonus check, saying, “We must act on behalf of those hardest hit by this recession.”

As a group, seniors are the least hardest hit. Most are retired, so unemployment, the biggest economic problem associated with the recession, does not impact them. Many consumer prices have fallen, which increases seniors’ buying power.

Two kinds of prices are rising — college education and health care. The former has no impact on seniors, while the latter has limited impact because seniors don’t pay most of their health care costs. Young workers pay those costs via Medicare taxes.

Of course there are individual seniors in need — but for senior-citizen lobbies to depict seniors overall as hard-hit by the recession is political selfishness in the extreme.

To be fair, this isn’t so much ignorance as political pandering — seniors may be the wealthiest demographic in America but they are numerous and they vote like hell. But our supposedly objective media never calls them on this, never points out the reality of the situation. Hell, even the Daily Show hasn’t done a bit on it.

And that’s not the only subject on which there is epistemic closure. The Democrats are still flogging the myth that “every economist” agreed that we needed an economic stimulus.

Epistemic closure is not just epistemic, it’s endemic — to all of politics. That’s why the subject frustrates me so. It’s an arena in which the combatants used facts and data the way a drunk uses a lamp post — for support, not illumination.