The average voter’s beliefs about how the economy works are deeply misguided. That
is the central conclusion of new research by Professor Bryan Caplan of George Mason
University, published in the latest issue of the Economic Journal. His detailed statistical
analysis of the economic beliefs of 1,510 average Americans and 250 PhD economists
reveals that economists and non-economists systematically disagree, a phenomenon
that can have highly damaging consequences for the quality of economic policy. What’s
more, the evidence decisively rejects efforts to question economists’ objectivity, which
claim that the economic ‘world view’ derives from self-interest or ideological bias.
Caplan notes that people interested in economic policy frequently blame foolish
economic policies on the voting public's weak grasp of basic economics. A standard
example is protectionism, the popularity of which is often blamed on a confused ‘zerosum’
view of international trade. But this account of policy failure has strangely received
almost no attention in academic research, which usually presumes that at least on
average, voters correctly understand how the economy works.
Caplan’s work bridges this gulf between informal observation and academic inquiry.
Analysing the Survey of Americans and Economists on the Economy, a 1996 data set,
he shows that here are clear patterns of disagreement in predictable directions.
Compared to economists, non-economists are:
?? Much more pessimistic about the economic effects of free trade, immigration and
other dealings with foreigners.
?? Much more sceptical about both the short- and long-run economic benefits of
flexible labour markets.
?? Dramatically more likely to attribute price rises to business conspiracies and ‘greed’
rather than market forces.
?? Far less likely to think living standards rose over the past two decades or are going
to rise in the future.
These basic facts might be taken as proof of the public's econo mic confusion. But in
fact, critics of the economics profession have often maintained that the supposed
‘experts’ are wrong. Caplan's most original contribution is to examine empirically the
two main versions of the critics' position: self-serving bias and ideological bias.
Self-serving bias
Economists' incomes are well above average, and they normally have high levels of job
security. Critics of the economics profession have often said that economists merely
favour economic policies beneficial to financially well-off people like themselves; they
think that ‘whatever is good for economists is good for the country’.
Caplan tests this hypothesis by statistically controlling for respondents' income, job
security and other measures of personal interest. He finds that economists' income
level has literally nothing to do with their distinctive beliefs about how the economy
works. Millionaires without economic training reject the ‘economic way of thinking’; they
share the economic beliefs of the rest of the public, not economists.
Ideological bias
Economists are often seen as conservative ideologues, and critics discount their policy
recommendations as products of zealotry rather than insight. Caplan empirically tests
this hypothesis as well, and finds no support whatever. In fact, in US political terms, the
typical economist is a moderate Democrat.
The truth is that economists across the political spectrum agree on a diverse set of
‘extreme’ right- and left-wing views. Liberal economists are more likely than
conservative non-economists to take the ‘right-wing’ view that downsizing is
economically favourable. Conservative economists are more likely than liberal noneconomists
to take the ‘left-wing’ view that immigration is economically favourable.
Thus, Caplan tests and decisively rejects the two main attempts to question
economists' objectivity. It is reasonable to interpret the public's array of systematic
disagreement with economists as intellectual errors. These errors can be plausibly
linked to a variety of inefficient economic policies, from protectionism and price controls
to labour regulations and industrial policy.
In democracies, policy at least roughly follows public opinion. Because public opinion
suffers from severe economic illiteracy, democracies tend to supply economic policies
that leave much to be desired.
ENDS
Notes for Editors: ‘Systematically Biased Beliefs About Economics’ by Bryan Caplan
is published in the April 2002 issue of the Economic Journal. Caplan is Assistant
Professor of Economics at George Mason University, Fairfax, Virginia.
For Further Information: contact Bryan Caplan on +1-703-993-2324 (fax: +1-703-993-
2323; email: bcaplan@gmu.edu (website: http://www.bcaplan.com); or RES Media
Consultant Romesh Vaitilingam on 0117-983-9770 or 07768-661095 (email:
romesh@compuserve.com).