Wednesday, May 11, 2011

One step two step red step blue step

Joe is a reasonable person. Joe does not have time to learn a bunch of economics. Hey, that's okay; no one has time to do everything. So what does Joe do when he wants to have an opinion on an economic issue? He asks an economist, of course! Joe is short on time, so it makes a lot of sense to let the economists specialize in economics, and consult them for their economic opinions when necessary.

But here's a question: which economists to listen to? They are coming to different conclusions, and for today let's say that's because they start with different notions of what's important. For example, liberal economists may care more about "fairness" (however defined), while conservative economists might care more about "efficiency." So who does Joe listen to?

Naturally, Joe picks an economist who's at about the same place as him on the liberal-conservative spectrum. Just for concreteness, let's say that Joe's preferred economist is the decidedly liberal Paul Krugman.

Now, unbeknownst to Joe, it happens that if you actually do bother to go study some economics yourself, you will tend to come out more conservative (on economic issues) than you began. So actually, if Paul Krugman's opinions are what Joe substitutes for studying economics himself (and forming his own opinions), and if Paul and Joe are at the same point on the liberal-conservative spectrum, we have a problem. Joe should be listening to someone who's more conservative than Joe himself is.

In some sense this is just a silly, alternative way of saying: If you are informed today that learning economics would probably make you more economically conservative, you should become more conservative right now, today. And then pick an economist in the spectrum who really truly matches up with your new level of conservativeness. But that doesn't happen, I think we can all agree. So alternatively we can prescribe the following course of action for noneconomists who like to have opinions on the economic issues in the news:
  1. Line up the economist writers on the liberal-conservative spectrum
  2. Pick the one you like the best
  3. Take a step to the right. Read that guy instead.
Actually it would be really useful to see a study that captured the trends in more detail. (How many steps do you take, and in what direction? It surely depends on where you started out)

To put it one final way, the prediction is that most of the people who feel like they're really on Paul Krugman's wavelength would not end up agreeing so strongly if they actually learned everything he learned. As they absorbed more of his knowledge, the wavelengths would actually drift apart instead of getting closer...

12 comments:

  1. Interesting idea.

    I'm not sure this is unambiguously true for all issues. After studying economics, I have become more conservative on some issues (issues of fairness-efficiency) and more liberal on others (issues of freedom-liberty).

    This might be a person-specific fixed effect for me, but there are plenty of reasons (put forth by Glaeser, http://economix.blogs.nytimes.com/2011/01/25/the-moral-heart-of-economics/) that I think it is a more general trend.

    That said, I think you make an interesting point that probably still applies issue-by-issue.

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  2. You're right, of course. It would be really nice to see an involved study that actually broke it down in some detail.

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  3. NOTE: You may have noticed that Blogger had some massive technical difficulties Thursday/Friday which evidently resulted in this post being temporarily deleted, and its comments permanently deleted. I am reposting the comments that were here, below.

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  4. Tony:

    Interesting idea.

    I'm not sure this is unambiguously true for all issues. After studying economics, I have become more conservative on some issues (issues of fairness-efficiency) and more liberal on others (issues of freedom-liberty).

    This might be a person-specific fixed effect for me, but there are plenty of reasons (put forth by Glaeser, http://economix.blogs.nytimes.com/2011/01/25/the-moral-heart-of-economics/) that I think it is a more general trend.

    That said, I think you make an interesting point that probably still applies issue-by-issue.

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  5. You're right, of course. It would be really nice to see an involved study that actually broke it down in some detail.

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  6. I think Krugman's response would be that you were brainwashed when you were studying economics, in other words what you learned is not the truth but propaganda.
    If it's true that studying economics shifts the distribution of students' ideology unambiguously to the right, the question is how you want to model this shift. You could say there is an objective truth in economic ideology, call it theta and agent i's ideology is theta_i, with distribution F(theta_i). Saying that 1) learning economics shifts the distribution to the right and that 2) this is a good thing in the sense that ex ante (i.e. before studying economics) people should anticipate that the truth is further to the right basically says that the support of F(theta_i) lies to the left of the true value theta. That is, the upper bound of the support is to the left of theta. I don't really believe that. It doesn't seem very likely that the truth is to the right of the most right-extreme non-economist.
    Another model would be a totally subjective ideology spectrum. So we're talking about non-stable preferences: studying economics leads to an update of by beliefs which changes my preferences for economic policy. There is no "true" value theta, all we're talking about is personal tastes. But in this case it is not clear to me why ex ante it is utility maximizing to support policies that are only optimal given my ex-post ideology, after studying economics. I don't really know how to think about welfare economics when preferences are not stable. When there is a true value theta, this exercise is much easier.

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  7. Philipp,

    I'm going for a mix of your two models. In the stylized story above, Joe is allowed to decide how much he cares about underlying things, but how best to achieve them (i.e. the optimal policy) is determined by economic reality.

    For example, Joe is allowed to decide for himself how much he cares about Chinese people versus Americans. But taking his level of concern as given, should he support sweatshop labor in Nike factories? Part of my claim is that if you take an economist and noneconomist who care about Chinese people the same amount, the noneconomist is likely to be more strongly against sweatshop labor. Economists are trained to focus not just on the fact that sweatshop conditions are miserable, but also on the possibility that the alternative might be worse.

    If the liberal-conservative spectrum were represented by this one issue -- how much one supports allowing Nike to operate as it does in China -- then we could easily have a situation where: (a) pre-economics, individuals locate themselves on the spectrum according to how much they care about Chinese people, (b) post-economics, everyone takes a step to the right, because for any given level of caring about Chinese people, economic arguments make sweatshop labor more palatable. Of course this is an egregious simplification (see Tony's comment above), and it would be nice to see a much more thorough breakdown of where people at different points on the spectrum move when they learn some economics. As you say, there will likely be people on the right end who don't move or perhaps actually move left...one size does not fit all. But in the absence of more precise data, if you had to give the same instructions to everyone, perhaps "take a step to the right" is about right.

    Another way of putting the claim is that people systematically underestimate how much economists care about Chinese people, when they read about the policies they support. So Joe will mess up when trying to find an economist who cares the same amount.

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  8. I don't think this is necessarily true. I was a democratic socialist before studying economics, and I currently still am. Yes, economics tends to tamper you to the "greatness of the free market" and a rational approach to everything, but it's not true that it automatically shifts you to the right. There's a lot about market failings that stipulate a regulatory solution (externalities, social marginal cost vs. private marginal cost, information asymmetry, dangers of monopoly etc.)

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  9. I still believe in the free market and many of its' tenets (reasonable taxes, no subsidies, no tariffs) but it has to be constrained somewhat.

    What I want is a public/private health-care system like France, a great education system, a basic support system for the poorest among us, a reasonable pension setup, minimal spending on military budgets, somewhat heightened spending on development aid (but nowhere near the reduction in military budgets), good spending on violent crimes, but a complete overhaul on non-violent crimes (most notably the War on Drugs), no more USDA, dirty oil subsidies, and taxes as low as possible to balance budgets. I also want a government that is able to regulate industry, but is not overly burdensome (a good example being an actually-functional SEC that wouldn't regulate bank to death, but would make sure there would be no 2008 v2.). This places me squarely on the left of American politics.

    Even after studying economics, this has remained unchanged. Admittedly, I suffer from some personal biases, and a few positions of mine have wavered (most notably on the efficiency implications of unemployment insurance and welfare payments), but by and large, I am ideologically the same.

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  10. Roger, thanks for the comment.

    You're surely correct that everyone doesn't move right. But if you pulled a person at random and had to guess what direction economics would move them, I hypothesize the answer will be "right" more often than "left." I could be wrong :)

    To make this precise, we would have to nail down what it means to move left or right on net. It could be argued that awakening oneself to the raw power of free markets is a considerably bigger paradigm shift than recognizing externalities for what they are. But that is hardly the final word.

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  11. "To make this precise, we would have to nail down what it means to move left or right on net. It could be argued that awakening oneself to the raw power of free markets is a considerably bigger paradigm shift than recognizing externalities for what they are. But that is hardly the final word."

    True. I guess economics would also drill into my head that the anecdotal evidence I bring from myself isn't really valid, but it hasn't quite drilled it in that far.

    Still, I can't help but think that you apply your own world perspective to whatever system you're given. Economics tends to attract a certain type of person---even-keeled, rational, and very concerned about numbers. As such, your hypothesis might be true for many economics students who will tend towards an economically conservative ideology, if they hadn't already.

    However, an average person with say an environmentalist bent might realize the power of the unrestricted free market is not worth the marginal social cost, and call for stronger government intervention, if they place the environment as a key issue.

    I guess what I'm trying to say is that studying economics in of itself should not really cause you to shift ideologies (i.e moving left or right on net), since you're going to be coming in with inherent biases, and leaving with them. You might shift on a few issues, but there's not going to be a drastic "oh I studied economics, now I'm a totally different person" change. Economics tends to be very open-ended, and always reinforces the differences between individuals and their preferences. In that kind of a framework, I can't see many people changing---it's the kind of framework that can see a Hayek and a Keynes both be brilliant and respected in their field despite their wildly divergent views.

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  12. Roger, so sorry but I just noticed your latter comment in blogger's spam filter (so it is appearing now, 9/21/2011). I have no idea why and there's no way to turn off the filtering, but I told them it wasn't spam so hopefully the problem goes away.

    You probably thought I was censoring you, but I don't even have "approve comments before posting" turned on.

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