Bryan Caplan  

Economic Enlightenment and Education: Reply to Arnold

Kid Takes on Ben Barber... Education and Anti-Market Bias...
Arnold approvingly cites the new Buturovich-Klein study finding that people who went to college know less about economics than those who didn't.  But if you read the original piece, the authors graciously distance themselves from this very conclusion!
In commenting on this paper in draft, Bryan Caplan suggested that there is a strong reason to suspect that, among less schooled people, those more economically enlightened would be more likely to complete the survey. The survey was initiated by email, and taking the survey would require a certain level of curiosity, reading compression, and cognitive focus. The survey procedure tends to screen out those of low IQ. The conjecture is supported by the fact that among our respondents, only 7 percent had no college--a percentage far below that of the population. In our view, Caplan has a good point. Although we see no reason to suspect that, among more schooled people, those less economically enlightened would be more likely to complete the survey, we do think that the sort of effect suggested by Caplan is certainly operating to some extent. Meanwhile, as shown by Caplan and Miller (2006), IQ correlates with economic understanding. Thus, we can imagine how Figure 1 would look if somehow the sample were truly representative: The ends at the left would be lower, and so the lines would slope upward, indicating a positive correlation between economic enlightenment and education level.
Buturovich and Klein's reaction to my critique is so transparent and modest that I'm happy to endorse it verbatim: "But we have no simple way to determine, gauge, or confidently correct for any such response bias, so we just proceed to report the data such as they are." 

Arnold then tells us how his recent speaking experiences illustrate the negative effect of education on economic literacy:

At the University of Vermont, an outpost of the established Church of Unlimited Government, I received nothing but pushback from the audience. The typical question from the audience asserted that people have a right to health care, and that settles the issue.

In northern Indiana, inside a Methodist Church where I spoke to many people of Tea Party sympathies, people got what I was saying right away. They asked more constructive questions (I got pushback, but it was of a different nature and on different issues).

If I'd been with Arnold, I'd probable evaluate his audiences the same way.  But what is the right way to interpret the two experiences?  The Vermont audience was probably a little better-educated than the Indiana audience, but not by much - 37% of Tea Party supporters are college grads, versus 25% for the general public. 

But education is hardly the only difference between the two groups.  Above all, the Vermont audience was vastly more left-wing.  In the general population, education and left-right ideology are roughly uncorrelated.  But universities are where highly-educated leftists hang out.  I say Arnold was detecting the effect of ideology, not education.  The Vermont audience was anti-market not because of its education, but despite it.

Arnold concludes:

I think that libertarians ought to be very agnostic about the relationship between educational attainment and grasp of economics. That relationship may not be as strongly negative as Klein claims to have found (I will disclose here that I tend to believe that Klein is right.) However, it is certainly not strongly positive, as it would have to be in order to justify confidence in giving power to the educated elite.

Although I'm not certain that the effect of education on economic understanding is strongly positive, it's highly probable.  Almost all of the evidence confirms that education makes people think much more like economists (see here and here for starters).  Buturovich and Klein themselves admit that they don't have a strong counter-example.  Personally, I'll bet at 3:1 odds that if their survey were given to the general population, education will have its standard positive, large effect on economic understanding.

P.S. None of this means that I want to "give power to the educated elite," especially if "the educated elite" means "highly educated leftists."  Separation of economy and state is my first choice.  Still, if someone's going to wield power, libertarians should prefer the well-educated to the not-so-well educated.  While neither demographic is libertarian, the former is less un-libertarian than the latter.

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COMMENTS (12 to date)
Ray writes:

Boy, that's a lot of speculation surrounding a little bit of data.

So I'll go with the flow here, and posit that those who are more naturally to the left would be more susceptible to confirmation bias since academia is where the highly-educated leftists hang out. Whereas the highly-educated who go out into the real world would, by definition then, be less vulnerable to such confirmation bias.

Ted writes:

If one accepts that we pay a price for bad policy, learning over time may be able to act as education in poorly educated individuals.

Let's assume your thesis is true that individuals with low-education are ignorant of economics. Now, let's put these low-educated individuals into the labor market. Given that they are most likely to be adversely effected by minimum wage laws, shouldn't they learn over time that minimum wage laws are hurting their ability to work and gain human capital on the job, thus concluding that minimum wage laws are, in fact, bad for them? That seems plausible to me.

Given this scenario. I would accept those with average, but still insufficient education, to be ignorant of the effects of minimum wage laws, but those with low education and high education to understand the effects of minimum wage laws. The understanding about the economics of minimum wage could plausibly be non-linear in educational attainment.

Or, let's take something like rent control. Wouldn't those experiencing rent control realize it's negative effects over time, particularly when policy changes induce the negative consequences?

Or protectionism. Low-income consumers would be vastly effected by protectionism, particularly against China, as they would quickly realize they no longer have access to cheap goods. This would probably teach many of them over time that protectionism is bad for themselves. Of course, this requires going from a free trade regime to a protectionism regime to make the learning effect possible. So, if we ever did go protectionist, I suspect people would learn quickly about it's negative consequences.

However, I suspect low-educated workers would be less prone to realize the less-direct consequences of protectionism such as its adverse effects on income growth.

Which leads to my next point. Experience in the market only acts to replace education when the policies effect has direct and transparent causal impact on the person's utility. I think this would explain why higher marginal tax rates on the rich are appealing to the poor, because they don't directly and transparently experience the negative effects that it has on themselves (through lower growth).

So, here's my theory in a nutshell. Low educated people are likely to be economically knowledgeable if they can directly observe the effects of specific economic policy on their well-being in a transparent way.

Frank Howland writes:

I live and teach in Indiana. Here's more mere speculation: My guess would be that the Tea Party folks in Indiana at the Methodist Church are substantially less educated than the Vermont folks, despite the relatively high level of education nationwide for Tea Party people. Indiana's evangelical Protestants, who are a very important component of the population, came largely from the South and since the early 19th century have been strong advocates of individual freedom, local control, and patriarchal families and opponents of progressive reform movements and state and federal government control over their lives. One result was the relatively slow spread of public education in Indiana. A very interesting study of early Indiana is Andrew Cayton's Frontier Indiana (Indiana University Press, 1996). Cayton discusses the attitudes of the people who settled the state.

Jonathan writes:

That's a really nice refutation of Arnold's comment, Bryan. Thanks for that.

Steve writes:

What I want to know is how they came up with those questions?

Did they ask a group of economists about some important and widely agreed upon findings in economics? Or did they pick questions that conservative ideology gives the right answers to?

I suggest this quiz (true/false):

1. Free trade is preferable to tariffs.

2. A higher gasoline tax to prevent global warming will make the U.S. better off.

3. Insurance markets will collapse without regulation

4. Inflation is a bigger concern than unemployment. (Like many questions in their survey, this one is debatable.)

5. When interest rates hit 0% the government should use fiscal stimulus to help the economy. (This is like the minimum wage question.)

6. Foreign aid doesn't help recipients because corrupt governments waste the money. (This is like the "exploitation" question.)

Answers: F, T, T, F, T, F

Ray writes:

Arnold or Bryan will have to clarify, but the way I read that, the speech wasn't given to a congregation of Methodists, but was simply given in a Methodist church.

If I'm correct, then too much is being read into the religious aspect of the speculation. (And Methodists as a group are not typically evangelical.)

Kurbla writes:


    P.S. None of this means that I want to "give power to the educated elite," especially if "the educated elite" means "highly educated leftists." Separation of economy and state is my first choice.

Don't be so shy. You explicitly advocated that:

    Another way to deal with voter irrationality is institutional reform. Imagine, for example, if the Council of Economic Advisers, in the spirit of the Supreme Court, had the power to invalidate legislation as “uneconomical.” ... I suspect that these — and other! — eccentric institutional reforms would be helpful if tried. Unfortunately, there is a catch-22: The majority is unlikely to vote to reduce the power of the majority.

That is one of the reasons that ideology looks pretty much as crypto-fascism to me. Sure, your first choice is something else, but the first choices are affordable; the realistic choices matter.

James A. Donald writes:

Education is in substantial part indoctrination, rather than education.

What people are indoctrinated with is nonsense, and in large part nonsense that runs contrary to economics.

Tom writes:

Uh, Steve, you got the first three wrong, and the rest are significantly more debatable than what were in the original survey. Your a liberal right? And you're just looking to confirm the survey's findings.

David C writes:

When I was in college, I only went to two such guest speaker talks where an individual spoke about a single political issue of some sort and attendance was voluntary and open to the entire student body. In both cases, the question period quickly devolved into people giving the speaker their opinion rather than asking questions. In one case, almost everybody there disagreed with the speaker, and in the other case almost everybody agreed with the speaker. It quickly became apparent that few were there to learn about the issue, and the sort of people who show up to these sorts of events made up their mind long before the speaker said anything. If Arnold had given his speech during a mandatory introductory course that all students are required to take, he probably would have had a very different experience.

JPIrving writes:

I was at UVM the day prof Kling spoke (actually met him in the hall of the econ bulding) and dont make too much of that audience as a sample. Burlington is crawling with full time activists who live for these "right vs left" public debates. It would be interesting to have the same debate in...Pennsylvania or even Massachusetts where the concentration of far left people with time to attend every debate, is closer to the national average. It is possible Vermont has the highest ratio of commies:normal people in the country.

John writes:

Formal public education with degrees is not the only form of education. That type of education is more for restricting competition in the market place. I would argue that people from the tea party type groups are engaged in personal education. There is an energy behind the tea party movement that is largely educational. Tea Party types are reading and learning economics, sociology, and law among other subjects. They are discussing and debating these topics among themselves. Ask youselves, why are people such as Dr. Kling being asked to speak to groups such as these? To throw Tomatos and to make slurs? No.

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