Educational Achievement and Economic Literacy

Bryan Caplan once again tries to make the argument that, contrary to what many on the right might claim, the relationship between the amount of education people have and the rationality of their economic views is a positive one, and that the only reason it might seem otherwise is due to selection bias on the part of those who argue against the notion. Now, in a certain sense, what Caplan says is true enough: if we simply take, say, having a bachelor's degree as the minimum standard for calling someone "more educated", it will be true that those who have less education will also tend to have less sensible economic views than those who have more, and the same would likely still hold if we made the dividing line the possession of a master's degree.

The thing is, though, that while the above statements might seem to essentially concede Caplan's point, the real factor at work here is not the sheer amount of education one has, but the presence of very large numbers of people with substantial educational exposure to economics in our respective samples, and once we exclude such people, the difference between the economic attitudes of more vs. less educated people will likely vanish altogether - going by my own (admittedly subjective) experience, the average PhD holder outside economics and related fields is not a whit more reasonable in his views on free trade, deregulation, vouchers, unionism, minimum wages and the like than the typical BA holder who enters the job market after 4 years of higher education: if anything, the opposite tends to be the case, with diehard leftist economic views being an aberration most easily indulged in an academic cocoon, and those with PhDs being among the least likely to concede that their expertise in one subject does not in itself confer upon them greater insight into the unrelated field of economics, while that very sense of being an expert in something tends to foster the delusion that expertise is generally superior to just letting things play themselves out as is the case in a free-market scenario. Were we to divide the adult population into educational classes with a single class per number of years of education accumulated, I'm convinced that what we'd find if we were to administer an economic literacy test would be that there would indeed be a skew towards the more educated, but what we'd have would merely be a positively skewed gamma distribution, with the least economically literate people being found on both ends of the educational spectrum, and the skew being almost entirely attributable to the very large numbers of individuals who concentrate on economics, finance and related fields during their years in higher education.

To put it succintly, Arnold Kling has it right, and Bryan Caplan's faith in the superior economic judgment of the academic elite is for the most part misplaced: the all-pervasive liberal values which make the most educated take a less favorable view towards a manifestation of xenophobia such as protectionism are the very same set of values which make their attitudes towards many other economic matters so incredibly - to put it bluntly - stupid.

Comments

[Steve Miller]

How can you say Caplan's "faith" is misplaced, when his conclusion is the result of a hard look at the data and yours is the result of reflection on people you've come across? Your gut disagrees with his data, and that makes him wrong?

[Abiola]

"when his conclusion is the result of a hard look at the data and yours is the result of reflection on people you've come across?"

First of all, nowhere in Caplan's post does he disclose said "data"; secondly, it may come as a surprise to you, but there are times when some data just scream "BS!" to one, and this is one such time. Anyone can collect tons of meaningless data and then torture it into confessing anything whatsoever.

[radek]

Well, what Abiola's proposing - excluding economics related folks - should be easy enough to do with any data set and in fact is something that should be done routinely as a robustness check. Anyone ask him about this?

[dsquared]

People with more education are likely to have higher incomes, and therefore likely to have prejudices in favour of policies that are in the interests of people with higher incomes, which I would suspect a survey like this would code as being "economically literate". And since we have all decided to just pull the conclusions out of our asses here nobody can gainsay me.

[Factory]

Hmm those with degrees are likely to have more money and thus are more likely to have investments, and economic knowledge is prolly more useful to them.
OTOH alot of ppl have degrees nowadys.

[gene berman]

D:

In its elemental essence, the economic reality to which I subscribe (and which is also close to that of Abiola) is simple.

For those people engaged routinely in exerting effort to provide goods and services to others like themselves, "economic policy," of whatever sort, poses merely choice in kind and degree in diminution of sought satisfaction. In nearly all cases, such policy is an interloper in the economic process, whether in the production or exchange phase of seeking said satisfaction. All are divided, essentially reduced in satisfaction, and both diverted and restrained from even more vigorous efforts toward satisfaction of both their and others' wants.

That there exists a conflict between the interests (WRT economic policy) of high and low income individuals or groups may seem "likely" to you--but that would merely be illustrative of the degree to which those of all financial circumstances and, indeed, of the entire spectrum of either intelligence or education are prey to propaganda deliberately fashioned to inculcate and nurture such conflict.

[radek]

Kaplan's data are given in the paper(s) he links to, though I couldn't get the link to work:

http://www2.kff.org/content/archive/1199/econgen.html

Also, at least the first paper compares the beliefs of economists to that of general public, so the difference cannot be due to a high proportion of economists among the general public - it could be due to business majors (though for some reason I have yet to fathom I've encountered quite a many a Marxist finance major - just look at dsquared!) but the difference is high and striking enough so that controlling for business school people would probably not over turn the results.

And he does control for income level, so the "People with more education are likely to have higher incomes" critique seems to be taken care of. Incidentally, higher income does not translate into thinking more like economists, although sense of job security and recent income growth does.

Also I've seen some quite horrible surveys (a few in Education Economics come to mind) which equate "economic literacy" with "pro-market" but this one seems a notch or two above. For example on the first question the respondents are given a list of reasons why the economy is not doing well. "Not important" is coded as 0, "minor reason" is coded as 1, and "major reason" is coded as 2. Among the economists "too much foreign aid" gets a .15 but among the general public it gets a 1.5. Answering this question correctly basically involves knowing that foreign aid is a tiny tiny fraction of gdp, gov budget or whatever, and it's not surprsing that an economist would have a better assesment of the facts here.
You get similar results for "too many immigrants" and even for (though weaker) "taxes are too high" (i.e. economists don't think high taxes are as much of the problem as the general public does).

And the "broken window fallacy" seems to be quite prevalent among the general public - "technology displaces workers" gets 1.26 among general public and a .3 (still high) among economists.

I don't know, overall I don't think these results are implausible. While there's a lot of commies on every campus there's also a lot of engineers, chemists, mathematicians etc. who probably just approach these questions with a bit of common sense.

[Abiola]

"the difference is high and striking enough so that controlling for business school people would probably not over turn the results"

I think you underestimate just how many people at non-selective institutions go for just such concentrations, let alone all the others who study something else before going for professional qualifications in finance, accounting, etc.

"And he does control for income level, so the "People with more education are likely to have higher incomes" critique seems to be taken care of."

In any case, PhDs don't necessarily make more than people with Masters degrees, do they? There are an awfully large number of MDs, MBAs and LL.Ms out there who make more than any professor ever will.

"there's also a lot of engineers, chemists, mathematicians etc. who probably just approach these questions with a bit of common sense"

You'd be shocked at just how many famous mathematicians have turned out to be red-in-tooth-and-claw communists, and let's not forget that the Manhattan Project was positively crawling with Soviet sympathizers ...

[Julian Elson]

There are, perhaps, a few cases where thinking in more sophisticated terms, but not very sophisticated or consistent ones, might lead one away from the most basic intuitions. Call them "Bastiat sophistries." A completely uneducated person in economics knows that breaking windows is a bad thing. Someone with a tiny bit more sophistication might think that there are positive effects on demand and such that might turn breaking windows into a net positive. Someone with a still deeper understanding of economics comes full circle back to the naïve view -- that breaking windows is, indeed, bad. (some Keynesians might say that breaking windows might be preferable to just doing *nothing*, during, say, a depression, but they would still recognize it as bad compared to the other potential things that could be done)