May 2019 – Difficult Run

The Economic Illiteracy of Journalists: Venezuela Edition

May 31, 2019 by Walker

Modern journalism often makes me want to go lay down in the middle of I-35 during rush hour traffic. I’ve complained about economic illiteracy before, but I think this one from Pacific Standard takes the cake. It begins,

These days it seems you can’t talk about socialism without being required to talk also about Venezuela—largely because certain people on the right bring up the failures of Venezuela every time the word “socialism” appears. Right-wing pundits claim incessantly that socialist policies are to blame for the terrible conditions that Venezuelans are now living through.
But this story is fundamentally false.

And who does the author consult to establish the falsity of this story?

A Marxist (Wolff), which is about as fringe as fringe can get in economics. Marxists are the anti-vaxxers of mainstream economics.
A supporter of Modern Monetary Theory (Galbraith), which has virtually no support among mainstream economists.
Noam Chomsky.

The author declares,

Most crucially, it was a government rife with corruption that shattered Venezuela…Anat Admati, a professor of economics and finance at Stanford University, tells me that corruption can devastate any country. Regardless of the ideology that inspires your economic policies, Admati says, if there’s too much corruption, the country will fail…Corruption, not socialism, is the malignant tumor on democracy worldwide—in Venezuela, yes, but also here at home.

First off, to say socialism has nothing to do with Venezuela’s collapse is absurd. A 2018 report from the Council of Economic Advisers provides a rundown of some of Venezuela’s socialist policies, from the nationalization of industries (such as oil) to heavy taxation on earning and spending to price controls. Using a synthetic control methodology, economists Kevin Grier and Norman Maynard compared Venezuela’s performance under Hugo Chavez to its expected performance based on similar oil-producing, non-socialist Latin American countries. They find that “after 1998 (the year of Chavez’s successful presidential campaign) synthetic and actual Venezuela sharply diverge. By 2003, Venezuelan per-capita income is more than $3500 below that of synthetic Venezuela, and the gap exceeds $2500 in all subsequent years. It appears that Chavez’s leadership and policies were quite bad for the overall level of wealth in Venezuela” (pg. 8). They conclude, “We find that although average incomes rose somewhat during his time as president, they lagged far behind where they might have been if Chavez had not taken office” (pg. 14). In short, the oil boom masked Venezuela’s socialist underbelly. When the oil prices collapsed, the rot was exposed.

Even still, to say that “corruption, not socialism” led to Venezuela’s downfall reminds me of a quip by the assassin Vincent (played by Tom Cruise) in the film Collateral. After a dead body falls on his cab and the realization sinks in that Vincent is responsible, a shocked Max (Jamie Foxx) says, “You killed him!” Vincent, unfazed, responds, “No, I shot him. The bullets and the fall killed him.” It’s a distinction without a difference.

In their book Why Nations Fail: The Origins of Power, Prosperity, and Poverty, Daron Acemoglu and James Robinson distinguish between inclusive and extractive institutions, with the former creating the conditions for prosperity. “Inclusive economic institutions,” they write,

…are those that allow and encourage participants by the great mass of people in economic activities that make best use of their talents and skills and that enable individuals to make the choices they wish. To be inclusive, economic institutions must feature secure private property, an unbiased system of law, and a provision of public services that provides a level playing field in which people can exchange and contract; it also must permit the entry of new business and allow people to choose their careers…Inclusive economic institutions foster economic activity, productivity growth, and economic prosperity (pg. 74-75).

In other words, inclusive institutions are largely free-market economies. On the other hand, extractive economic institutions lack these properties and instead “extract incomes and wealth from one subset of society to benefit a different subset,” empowering the few at the expense of the many (pg. 76).

The Fraser Institute’s Economic Freedom of the World (EFW) Index, published in its annual Economic Freedom of the World reports, defines economic freedom based on five major areas: (1) size of the central government, (2) legal system and the security of property rights, (3) stability of the currency, (4) freedom to trade internationally, and (5) regulation of labour, credit, and business. According to its 2018 report (which looks at data from 2016), countries with more economic freedom have substantially higher per-capita incomes, greater economic growth, and lower rates of poverty. This makes economic freedom an excellent proxy for Acemoglu & Robinson’s “inclusive institution.” What’s more, Venezuela comes in dead last in the list of 162 countries.[ref]It’s also 188 of 190 in the World Bank’s latest Doing Business report.[/ref] Drawing on the EFW Index, Georgetown political philosophers Jason Brennan and Peter Jaworski point to a strong positive correlation between a country’s degree of economic freedom and its lack of public sector corruption.[ref]This could be in part due to economic growth undermining corruption and economic freedom promoting growth.[/ref]

“Corruption,” writes economist Joseph Connors, “is institutionalized exploitation and…it becomes institutionalized in the least capitalist countries. Transparency International, the creator of the Corruption Perception Index, is an organization dedicated to eradicating corruption. According to its metric of corruption, people who live in capitalist countries experience significantly less corruption than people in less capitalist countries. Market competition helps explain why this is true. Market competition diffuses power, and corruption thrives on centralized power. Thus, capitalism provides the environment that allows markets to keep corruption at bay.”[ref]Joseph Connors, “Is Capitalism Exploitative?” in Counting the Cost: Christian Perspectives on Capitalism, ed. Art Lindsley, Anne R. Bradley (Abilene, TX: Abilene Christian University Press, 2017), 130-131.[/ref]

Granted, a lack of corruption could very well give rise to market reforms and increased economic freedom instead of the other way around. However, recent research on China’s anti-corruption reforms suggests that markets may actually pave the way for anti-corruption reforms. Summarizing the implications of this research, Lin et al. explain,

Reducing corruption creates more value where market reforms are already more fully implemented. If officials, rather than markets, allocate resources, bribes can be essential to grease bureaucratic gears to get anything done. Thus, non-[state owned enterprises’] stocks actually decline in China’s least liberalised provinces – e.g. Tibet and Tsinghai – on news of reduced expected corruption. These very real costs of reducing corruption can stymie reforms, and may explain why anticorruption reforms often have little traction in low-income countries where markets also work poorly. China has shown the world something interesting: prior market reforms clear away the defensible part of opposition to anticorruption reforms. Once market forces are functioning, bribe-soliciting officials become a nuisance rather than tools for getting things done. Eliminating pests is more popular than taking tools away … A virtuous cycle ensues – persistent anticorruption efforts encourage market-oriented behaviour, which makes anticorruption reforms more effective, which further encourages market oriented behaviour.

There is also evidence that suggests that more government fingers in the pies increases corruption. For example, a 2017 study finds that larger municipality councils in Sweden result in more corruption problems. A 2009 study finds that more government tiers and more public employees lead to more bribery. Finally, a 2015 study shows that high levels of regulation are associated with higher levels of corruption (likely because of regulatory capture).

So while some may think socialism couldn’t have crippled Venezuela because Sweden, they’re wrong. And wrong in a big way.

More on Trump’s Trade War

May 31, 2019 by Walker

I’ve touched on one of these papers before, but NBER Digest has a nice rundown of recent work on Trump’s trade war. One study finds

that the costs of the new tariff structure were largely passed through as increases in U.S. prices, affecting domestic consumers and producers who buy imported goods rather than foreign exporters. The researchers estimate that the tariffs reduced real incomes by about $1.4 billion per month. Due to reduced foreign competition, domestic producer prices also increased. The prices of manufactured goods rose by one percentage point relative to a no-trade-war scenario. The reduction in real incomes represents the welfare cost of higher consumer prices, less the government revenue collected by the tariffs and the additional income of domestic producers who were able to sell their products at higher prices.

This could end up being “especially costly for multinational companies that have made substantial sunk-cost investments in supply chains in other countries, for example by relying on facilities in China or other impacted countries. The study estimates that around $165 billion worth of trade has been rerouted to avoid them.”

Another study

estimate[s] that the new tariff regime reduced U.S. imports by 32 percent, and that retaliatory tariffs from other countries resulted in an 11 percent decline of U.S. exports. They use these responses to estimate import demand and export supply elasticities, and then apply these estimates to calibrate a general equilibrium model of the U.S. economy with detailed input-output linkages. They estimate that higher prices facing U.S. consumers and firms who purchased imported goods generated a welfare loss of $68.8 billion, which was substantially offset by the income gains to U.S. producers who were able to charge higher prices ($61 billion). The researchers estimate the resulting real income decline at about $7.8 billion per year, a value broadly comparable to the net income decline estimated in the previous study.

What’s more, “The average real wage of workers in tradeable sectors declined by 0.7 percentage points, with a standard deviation of 0.4 percentage points across counties, with workers in the Midwest suffering more than those in other regions.” The protectionist policies also appear to be (of course) political. It turns out that “the U.S. tariffs protected industries that tended to employ workers in the most politically competitive counties. Foreign governments imposed retaliatory tariffs in sectors based in more Republican-leaning counties. The researchers estimate that counties with at least an 85 percent Republican vote share bore losses over 50 percent greater than counties in which the Republican vote share was less than 15 percent.”

Surprise, surprise.

Some Thoughts on the Tolkien Movie

May 28, 2019 by Nathaniel

I could have sworn there was a quick image of a cross in one scene, but I couldn’t find it online. So here’s a generic screen shot from the movie instead.

I saw Tolkien last week, and I really enjoyed it. This was surprising to me, because religion was absolutely essential to J. R. R. Tolkien’s life, to his motivations for inventing Middle Earth and all that went with it, and to the themes and characters of all the works he wrote in Middle Earth. Hollywood, on the other hand, is utterly incapable of handling religion seriously. So, how did Tolkien manage to be a good film anyway?

By basically ignoring religion.

Don’t get me wrong. They do mention that he’s Catholic, depict his relationship with the priest who was his caretaker after his mother died, and talk about the tension when Tolkien–a Catholic–wanted to pursue a relationship with Edith, who wasn’t Catholic.

You might think that’s religion, but it’s not, any more than Romeo and Juliet coming from different houses was about religion. His Catholicism is treated as a kind of immutable faction that he was born into and so is stuck with it.

Now, if the movie tried to explain anything deep about Tolkien’s character or his work while omitting religion, it would have failed utterly. It succeeds because–after redacting religion from Tolkien’s life–it also studiously avoids trying to say anything deep about his life or his life’s work.

As far as this film is concerned, all you need to understand how Tolkien’s life led him to create Middle Earth are a series of simplistic and primarily visual references. Tolkien left behind a boyhood home of rolling green hills. That’s the shire. Once, he saw the shadows of bare tree branches on the ceiling of his childhood room at night. That’s ents.

And of course there’s World War I. German flamethrowers attacking a British trench became the balrog. Shattered and broken human corpses mired in a denuded wasteland reduced to mud and water-filled craters became the Dead Marshes. And a kind of generic sense of impending, invisible doom became a dragon and also Sauron’s all-seeing eye.

As for the most famous aspect of Tolkien’s writing–the fact that he invented entire languages–that’s basically written off as a kind of personal obsession. Some people juggle geese. What are you going to do?

None of this is wrong, and that’s why the movie is so enjoyable. It’s fun to see the visual references, even if they are a bit heavy-handed. The rise-from-ashes, boyhood camaraderie and romantic plotlines are all moving. But for the most part the movie avoids all the really deep stuff and just tells a light, superficial story about Tolkien’s circle of friends growing up. And I’m fine with all of that.

Not everything has to go deep, and a movie is far from the best way to investigate what Tolkien meant by “subcreation” or a “secondary world” and all the theology that goes with that, anyway. Even if Hollywood could do religion. Which, seeing as how they can’t, just makes me grateful that in this film they didn’t try. That saves it from ruin and makes it a perfectly fun movie that every fan of J. R. R. Tolkien should see.

Does Religion Lead to Good Sex?

May 25, 2019 by Walker

Drawing on a new IFS study, David French writes in the National Review,

How many happy, sexually vibrant religiousmarried couples have you seen on popular television shows or movies — even in this era of fragmented, targeted entertainment? Now, compare that number (which is very, very close to zero) with the number of times you’ve seen liberation from religion portrayed as the key to sexual fulfillment.
How many times, amid the celebrations of sexuality on college campuses, do you hear the speakers at the various “sex weeks” say something like, “If you really want to improve your odds of enjoying a sexually satisfying life with a faithful partner, you might want to check out church”? Or how many wonkish progressives — the very people most likely to share charts and graphs about the effects of public policies or to pass around the latest social science about race, gender, and gender identity — will dwell on charts such as these, from the invaluable Institute for Family Studies:

He continues:

The global data reflected the U.S. reality. Highly religious couples “enjoy higher-quality relationships and more sexual satisfaction” compared with mixed or entirely secular couples. Moreover, in the global study, religion has an increasingly positive influence on fertility. Religious couples had “0.27 more children than those who never, or practically never, attend.”
Sadly, however, religious practice was “not protective against domestic violence.” There was no statistically significant difference in risk between secular and religious couples.
The IFS study doesn’t just explode progressive cultural stereotypes of unhappy, sexless religious prudes. Conservatives often think of feminists (especially secular feminists) as angry and joyless. But the study indicates otherwise. There was a “J-Curve in overall relationship quality for women.” It turns out that women in “shared secular, progressive relationships enjoy comparatively high levels of relationship quality.” They were surpassed only by “women in highly religious relationships, especially traditionalists.”

Less sex may also be contributing to less happiness. “IFS senior fellow Bradford Wilcox and IFS research fellow Lyman Stone followed Julian’s work by examining whether the sex recession was related to the measurable decline of happiness in America’s young adults. They concluded that “changes in sexual frequency can account for about one-third of the decline in happiness since 2012 and almost 100 percent of the decline in happiness since 2014.”” In short, the sexual revolution has brought about

its own brand of unhappiness, including — ironically enough — sexlessness…Sexual liberation has all too often brought neither sex nor liberation, and thanks to the work of the IFS, we can respond to felt need with real data. Are you seeking love in this life? The church doors are always open, and while matchmaking isn’t its purpose, the connection to a holy God carries with it connection to his flawed people, and in those connections you can find profound joy.

Stuff I Say at School – Part XIII: Political Ignorance and Policy Preferences

May 24, 2019 by Walker

This is part of the Stuff I Say at School series.

The Assignment

A critical literature review of political ignorance among the public. This section briefly (though not exhaustively) shows how political knowledge affects political preferences and, therefore, potential policy outcomes.

The Stuff I Said

Somin writes, “Ignorance of the structure of government suggests that voters often not only cannot choose between specific competing policy programs but also cannot easily assign credit and blame for policy outcomes to the right officeholders.”[ref]Ilya Somin, Democracy and Political Ignorance: Why Smaller Government is Smarter, 2nd ed. (Stanford, CA: Stanford University Press, 2016), 20.[/ref] As discussed earlier, Lupia is skeptical of the common measurements of political knowledge, arguing that the ability to recall particulars on a survey is not necessary to achieve “high-value social outcomes.”[ref]Arthur Lupia, Uninformed: Why People Know So Little About Politics and What We Can Do About It (New York: Oxford University Press, 2016), 204.[/ref] However, this is an empirical question. The summary of Caplan’s work in a previous section has already shown that economic information and education changes one’s views about economic issues. Summarizing the work of Martin Gilens[ref]Martin Gilens, Affluence & Influence: Economic Inequality and Political Power in America (Princeton, NJ: Princeton University Press, 2012).[/ref] and Scott Althaus,[ref]Scott L. Althaus, Collective Preferences in Democratic Politics: Opinion Surveys and the Will of the People (Cambridge, UK: Cambridge University Press, 2003).[/ref] Brennan demonstrates that political knowledge influences policy preferences. As noted above, high-income is strongly correlated with high degrees of political knowledge. Compared to wealthier Democrats, low-income Democrats “more strongly approved of invading Iraq in 2003. They more strongly favored the Patriot Act, invasions of civil liberty torture, protectionism, and restricting abortion rights and access to birth control. They are less tolerant of homosexuals and more opposed to gay rights.”[ref]Jason Brennan, Against Democracy (Princeton, NJ: Princeton University Press, 2016), 34.[/ref] When demographic factors like race, income, and gender are controlled for, high-information voters “favor overall less government intervention and control of the economy…They are more in favor of free trade and less in favor of protectionism. They are more pro-choice. They favor using tax increases to offset the deficit and debt. They favor less punitive and harsh measures on crime, and are less hawkish on military policy, although they favor other forms of intervention. They are more accepting of affirmative action. They are less supportive of prayer in public schools. They are more supportive of market solutions to health care problems. They are less moralistic in law; they don’t want government to impose morality on the population.”[ref]Ibid.[/ref]

Relying on a 2017 survey, Oxford economist Max Roser finds “a connection between our perception of the past and our hope for the future.” The numbers suggest “that the degree of optimism about the future differs hugely by the level of people’s knowledge about global development. Those that were most pessimistic about the future tended to have the least basic knowledge on how the world has changed.”

At first blush, this may seem unrelated to policy. However, recent evidence suggests that declinism—a negative view of the state and evolution of society—and nostalgia for a supposedly better past are predictive of populist support.[ref]Mark Elchardus, Bram Spruyt, “Populism, Persistent Republicanism and Declinism: An Empirical Analysis of Populism as a Thin Ideology,” Government and Opposition 51:1 (2016): 111-113; Katie Simmons, Laura Silver, Courtney Johnson, Kyle Taylor, Richard Wike, “In Western Europe, Populist Parties Tap Anti-Establishment Frustration but Have little Appeal Across Ideological Divide,” Pew Research Center (July 2018): https://www.pewglobal.org/2018/07/12/in-western-europe-populist-parties-tap-anti-establishment-frustration-but-have-little-appeal-across-ideological-divide/[/ref]

Even though the data suggest more knowledgeable citizens are more likely to vote, there is also evidence that “more knowledgeable citizens are far more likely to falsely report voting than less knowledgeable ones…People who are knowledgeable and interested in politics but still choose not to vote are more likely to feel guilty for doing so, and therefore less willing to admit their nonvoting to the pollsters. As a result, the voting population is probably significantly closer in knowledge level to the general public than might be supposed.”[ref]Somin, Democracy and Political Ignorance, 45.[/ref]

While all policy decisions ultimately rely on value judgments (which go beyond the blunt empirics), the evidence in this section suggests that degrees of political knowledge do influence policy preferences. If one is concerned about policy outcomes, one should also be concerned about voter knowledge.

Stuff I Say at School – Part XII: The ‘Why’ of Political Ignorance

May 23, 2019 by Walker

This is part of the Stuff I Say at School series.

The Assignment

A critical literature review of political ignorance among the public. This section summarizes the scholarly explanations for the lack of political knowledge among the average citizen.

The Stuff I Said

Though political ignorance is rampant among American citizens, scholars are quick to distinguish between ignorance and stupidity. Despite rising educational attainment and IQ scores, political knowledge among the general public has remained largely stagnant since the 1930s.[ref]Ilya Somin, Democracy and Political Ignorance: Why Smaller Government is Smarter, 2nd ed. (Stanford, CA: Stanford University Press, 2016), 21, 73.[/ref] In fact, Somin determines (in agreement with previous economic theories of democracy) that most political ignorance is rational.[ref]Ibid., Ch. 3. Brennan follows suit. See Against Democracy (Princeton, NJ: Princeton University Press, 2016), Ch. 2.[/ref] Political knowledge is costly in time and effort with little payoff in terms of political influence. At best, an American voter has a 1-in-10 million chance of changing the outcome of a presidential election. This optimistic number occurs only within a few swing states and only if the voter votes for one of the candidates in the two major parties. On average, however, the chance is 1-in-60 million.[ref]Andrew Gelman, Nate Silver, Aaron Edlin, “What is the Probability Your Vote Will Make a Difference?” Economic Inquiry 50:2 (2012): 321-326.[/ref] Numbers improve when it comes to U.S. Congressional elections (1-in-89,000) and state legislator elections (1-in-15,000), but the probability of changing the outcome still remains insanely low.[ref]Casey B. Mulligan, Charles G. Hunter, “The Empirical Frequency of a Pivotal Vote,” Public Choice 116:1-2 (2003): 31-54.[/ref] Brennan argues that, from a strictly mathematical standpoint, the disutility of merely driving to the polls (i.e., the probability and cost of getting into an auto accident) is higher than the utility of the vote cast upon arrival.[ref]Jason Brennan, The Ethics of Voting (Princeton, NJ: Princeton University Press, 2011), 19-20.[/ref] Given these hard data, political ignorance appears to be a rational trade-off. As Somin puts it, “Even a 100 percent altruistic person—someone who always chooses to prioritize the welfare of others over his own whenever the two conflict—would not rationally devote much of his time to acquiring political information for the sake of casting an informed vote. No matter how great the benefits to others of a “correct” electoral outcome, the altruist’s ballot has almost no chance of bringing it about; in a large electorate the change that his vote will be decisive is vanishingly small.”[ref]Somin, Democracy and Political Ignorance, 77.[/ref]

Caplan’s explanation for voter ignorance extends beyond rational ignorance to what he calls rational irrationality: “Since delusional political beliefs are free, the voter consumes until he reaches his “satiation point,” believing whatever makes him feel best. When a person puts on his voting hat, he does not have to give up practical efficacy in exchange for self-image, because he has no practical efficacy to give up in the first place.”[ref]Bryan Caplan, The Myth of the Rational Voter (Princeton, NJ: Princeton University Press, 2007), 132 (italics original).[/ref] Not only does the acquisition of political knowledge provide a low return on investment, but irrationality can provide self-satisfaction at virtually no cost. This makes the choice to be seemingly irrational when it comes to politics understandable and arguably—if paradoxically—rational.

Image result for the case against education

Caplan elsewhere provides another likely explanation for voter ignorance: poor information retention. Drawing on literature in educational psychology, Caplan finds the “transfer of learning” in our educational systems to be less than impressive. Most students are unable to retain or apply their newfound methodological reasoning outside of the classroom and can usually only do so within the classroom after being instructed to apply a particular principle to their problem-solving.[ref]Bryan Caplan, The Case Against Education: Why the Education System is a Waste of Time and Money (Princeton, NJ: Princeton University Press, 2018), 51-59.[/ref] “Telling subjects to use a principle is not transfer,” says psychologist Douglas Detterman. “It is following instructions.”[ref]Ibid., 51.[/ref] This insight complements the rational ignorance theory by demonstrating the difficult and costly nature of true education. This lack of transfer in learning shows up in various surveys of American adults who typically received public K-12 education:

The American Revolution Center tested 1,001 adult Americans’ knowledge of the American Revolution. Eighty-three percent earned failing grades. The Intercollegiate Studies Institute tested over 2,500 adult Americans’ knowledge of American government and American history. Seventy-one percent earned failing grades. Newsweek magazine gave 1,000 Americans the U.S. Citizenship Test. Thirty-eight percent scored too low to become citizens of their own country. On the 2000 American National Election Study, the typical person got 48% of the factual questions right; you would expect 28% by guessing…How many American adults know the Bill of Rights is part of the Constitution? The American Revolution Center reports a dismal 57%, but the truth is far worse. Since there were only four response options, you would expect roughly 25% of the ignorant to guess the right answer by chance…Not knowing the three branches of government isn’t like not knowing Hamlet; it’s like not knowing the letter “h.” If you don’t know that the Civil War came after the Declaration of Independence, you don’t understand American history. If you don’t know which parties control the House and the Senate, you don’t understand American politics.[ref]Ibid., 44.[/ref]

Ian Anson of the University of Maryland introduces a more disturbing angle on the persistence of voter ignorance. In a 2018 study, Anson points to what is known as the Dunning-Kruger effect: “[a] widely cited phenomenon in social psychology [that] holds that individuals with low levels of competence will judge themselves to be more competent than they really are, while those with high levels of competence will underestimate their excellence.”[ref]Ian G. Anson, “Partisanship, Political Knowledge, and the Dunning-Kruger Effect,” Political Psychology 39:5 (2018): 1173.[/ref] This overestimation of one’s abilities and/or knowledge “affect[s] the ability of low achievers to overcome their incompetence because they are unaware that they lag behind others until their objective performance is measured and reported to them.”[ref]Ibid.: 1174.[/ref] After surveying two groups (a total of 2,606 American adults) on political knowledge, Anson had participants evaluate their performance after priming them with partisan cues. The results showed that the worst performers (i.e., the most politically ignorant) were more likely to overestimate their performance. What’s worse, this overconfidence was exacerbated by partisanship. “This result is normatively worrying from the perspective of citizens’ ability to self-correct,” writes Anson, “as it may be that rationally ignorant Americans are especially confident that they are better informed than many of their (partisan) peers. The rationally ignorant fail to overcome their ignorance not just because they face steep costs and lack incentives to improve, but because they are unaware that they are relatively ignorant. They become increasingly hardened to the possibility that they are uninformed when partisan identities are activated, a commonplace feature of most contemporary political discussion.”[ref]Ibid.: 1187.[/ref] Anson’s findings are bolstered by a recent study, which found that (1) “people choose to hear from those who are politically like-minded on topics that have nothing to do with politics…in preference to those with greater expertise on the topic but have different political views,” (2) “all else being equal, people are more influenced by politically like-minded others on nonpolitical issues,” and (3) “people are biased to believe that others who share their political opinions are better at tasks that have nothing to do with politics, even when they have all information they need to make an accurate assessment about who is the expert in the room.”[ref]Joseph Marks, Eloise Copland, Eleanor Loh, Cass R. Sunstein, Tali Sharot, “Epistemic Spillovers: Learning Others’ Political Views Reduces the Ability to Assess and Use Their Expertise in Nonpolitical Domains,” Cognition (forthcoming), 10. https://doi.org/10.1016/j.cognition.2018.10.003.[/ref] This partisan selection process lowers the quality of the obtained information, further inflaming voter tendency toward ignorance and misinformation. Most scholars adhere to a theory of rational ignorance among voters: due to the poor incentives provided by a democratic system, most citizens determine that the costs of political knowledge (including the difficulty of making it stick) outweigh its benefits. Furthermore, the poorly informed suffer from “the double burden of incompetence”[ref]Anson, “Partisanship, Political Knowledge, and the Dunning-Kruger Effect,” 1187.[/ref] due to ignorance of their own ignorance, making change unlikely.

Stuff I Say at School – Part XI: The Extent of Political Ignorance

June 8, 2019May 22, 2019 by Walker

This is part of the Stuff I Say at School series.

The Assignment

A critical literature review of political ignorance among the public. This section specifically explores the academic literature on the extent of political ignorance, demonstrating that Americans know very little when it comes to politics and policy.

The Stuff I Said

What makes this particular skit humorous is how much it reflects reality. According to political scientists Christopher Achens and Larry Bartels, there is a “folk theory” of democracy that is widespread in American culture. This theory paints average citizens as engaged, well-informed participants in the political process, deliberating policies and selecting leaders who represent their well-reasoned preferences. “Unfortunately,” write Achens and Bartels, “while the folk theory of democracy has flourished as an ideal, its credibility has been severely undercut by a growing body of scientific evidence…That evidence demonstrates that the great majority of citizens pay little attention to politics.”[ref]Christopher H. Achen, Larry M. Bartels, Democracy for Realists: Why Elections Do Not Produce Responsive Government (Princeton, NJ: Princeton University Press, 2016), 1.[/ref]

Image result for michael delli carpini and scott keeter

Michael Delli Carpini and Scott Keeter have defined political knowledge as “the range of factual information about politics that is stored in long-term memory.”[ref]Michael Delli Carpini, Scott Keeter, What Americans Know About Politics and Why It Matters (New Haven: Yale University Press, 1996), 10.[/ref] Most of the surveys on which claims about political knowledge are based consist of recall questions, which “are designed to measure whether or not a person has selected declarative memory.”[ref]Arthur Lupia, Uninformed: Why People Know So Little About Politics and What We Can Do About It (New York: Oxford University Press, 2016), 191.[/ref] Drawing on Carpini and Keeter’s work, Achens and Bartels display the ignorance of the typical American on these kinds of questions. For example, in 1952, “only 44% of Americans could name at least one branch of government. In 1972, only 22% knew something about Watergate. In 1985, only 59% knew whether their own state’s governor was a Democrat or a Republican. In 1986, only 49% knew which one nation in the world had used nuclear weapons.”[ref]Achens & Bartels, Democracy for Realists, 35.[/ref] Recent survey evidence continues to support these findings. A 2018 poll found that 67% of Americans cannot name all three branches of government. Another poll found that a sizeable minority (39%) of Americans think or are not sure if low GDP is better for the country than high GDP. The Woodrow Wilson Foundation recently found that only 1-in-3 Americans can pass the U.S. Citizenship Test, with less than half the population of all but one state (Vermont) being able to pass it. A 2014 Barna survey found that 84% of Americans are unaware that extreme poverty worldwide has decreased by more than half in the past three decades. Sixty-seven percent said they thought global poverty was actually increasing during that time. Similarly, a 2016 study found that only 8% of Americans believe extreme global poverty has decreased in the last 20 years.[ref]Martijn Lampert, Panos Papadongonas, Towards 2030 Without Poverty: Increasing Knowledge of Progress Made and Opportunities for Engaging Frontrunners in the World Population with the Global Goals (Amsterdam: Glocalities, 2016), 8.[/ref] (A 2017 study placed the percentage slightly higher at fifteen.) The late statistician Hans Rosling often tested his audience’s knowledge of the state of the world. Overall, he found that only 5% of Americans could answer a multiple-choice question about global poverty correctly: worse than chimpanzees picking at random.[ref]Hans Rosling with Ola Rosling and Anna Rosling Ronnlund, Factfulness: Ten Reasons We’re Wrong About the World—and Why Things Are Better Than You Think (New York: Flatiron Books, 2018), 6-9.[/ref] This ignorance not only extends to basic facts about government, politics, and the economy, but to party makeup as well. A 2018 study found that “Republicans, Democrats, and independents, all overestimate the share of party-stereotypical groups in both the major parties.”[ref]Douglas J. Ahler, Gaurav Sood, “The Parties in Our Heads: Misperceptions about Party Composition and Their Consequences,” The Journal of Politics 80:3 (2018): 979.[/ref] For example, respondents thought 39.3% of Democrats belonged to a labor union (actual: 10.5%), 38.2% of Republicans earned over $250,000 a year (actual: 2.2%), and 31.7% of Democrats were gay, lesbian, or bisexual (actual: 6.3%).[ref]Ibid.: 966.[/ref]

Georgetown political philosopher Jason Brennan divides the spread of political knowledge into four quartiles: “the top 25 percent of voters are well informed, the next 25 percent are badly informed, the next 25 percent are know-nothings, and bottom 25 percent are systematically misinformed.”[ref]Jason Brennan, Against Democracy (Princeton, NJ: Princeton University Press, 2016), 188.[/ref] According to data from the 1992 American National Election Studies, “93.4 percent of people in the top quartile, but only 13.1 percent of people in the bottom quartile, know that Republicans tend to be more conservative than Democrats. Among people in the lowest knowledge quartile, only 12.2 percent and 9.7 percent knew which party controlled the House of Representatives and Senate, respectively. The bottom 25 percent of citizens does worse than a coin flip when it comes to political knowledge—they are systematically in error.”[ref]Jason Brennan, The Ethics of Voting (Princeton, NJ: Princeton University Press, 2011), 164.[/ref] When it comes to the demographics of these quartiles, political knowledge within the U.S.

is strongly positively correlated with having a college degree, but negatively correlated with having a high school diploma or less. It is positively correlated with being in the top half of income earners, but negatively correlated with being in the bottom half. It is strongly positively correlated with being in the top quarter of income earners, and strongly negatively correlated with being in the bottom quarter. It is positively correlated with living in the western United States, and negatively correlated with living in the South. Political knowledge is positively correlated with being or leaning Republican, but negatively correlated with being a Democrat or leaning independent. It is positively correlated with being between the ages of thirty-five and fifty-four, but negatively correlated with other ages. It is negatively correlated with being black, and strongly negatively correlated with being female.[ref]Brennan, Against Democracy, 33.[/ref]

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Legal scholar Ilya Somin’s work scours both the academic literature as well as a sweeping array of public surveys, including (but not limited to) the Annenberg Public Policy Center, Kaiser Health Tracking Poll, Pew Research Center, Bloomberg, Public Policy Research Institute, Reason-Rupe, and American National Election Studies. Voter ignorance is not merely in regards to “specific policy issues but about the basic structure of government and how it operates.”[ref]Ilya Somin, Democracy and Political Ignorance: Why Smaller Government is Smarter, 2^nd ed. (Stanford, CA: Stanford University Press, 2016), 20.[/ref] He concludes, “Extensive evidence suggests that most Americans have little political knowledge. That ignorance covers knowledge of specific issues, knowledge of political leaders and parties, and knowledge of political institutions. The evidence extends to many of the crucial issues at stake in recent elections from 2000 to 2014. Moreover, much of the widespread ignorance relate to fairly basic issues about the politicians, parties, issues, and the structure of politics.”[ref]Ibid., 46.[/ref]

Relying on the 1996 Survey of Americans and Economists on the Economy (SAEE), GMU economist Bryan Caplan compares (1) the average belief of the general public on economic issues, (2) the average belief of Ph.D. economists, and (3) the estimated belief of a category Caplan labels the Enlightened Public. This latter category is the result of Caplan testing for both “self-serving” and “ideological” bias among economists by controlling for family income, job security, race, gender, age, and income growth. The Enlightened Public essentially are the answers to the questions “What would the average person believe if he had a Ph.D. in economics?” or “What would Ph.D. economists believe if their finances and political ideology matched those of the average person?”[ref]Bryan Caplan, The Myth of the Rational Voter: Why Democracies Choose Bad Policies (Princeton, NJ: Princeton University Press, 2007), 55.[/ref] Caplan discovers that the answers of economists/Enlightened Public differ greatly from the general public on most economic issues. For example, the general public is far more concerned about the supposed negative economic effects of taxes, foreign aid, immigration, business tax breaks, the number of people on welfare, affirmative action, business profits, executive compensation, technology in the workplace, job outsourcing, and corporate downsizing.[ref]Ibid., Ch. 3.[/ref] Caplan’s controls and comparisons indicate that (1) economic information and education changes one’s views about economic issues and (2) the general public is lacking in these qualifications. This gap between economists and the general public is further confirmed by a 2013 study by Paola Sapienza and Luigi Zingales.[ref]Paola Sapienza, Luigi Zingales, “Economic Experts versus Average Americans,” American Economic Review: Papers & Proceedings 103:3 (2013): 636-642.[/ref] Drawing on the Economic Expert Panel (EEP) and Financial Trust Index (FTI)—both from the University of Chicago—the researchers find that, “[o]n average, the percentage of agreement with a statement differs 35 percentage points between the two groups.”[ref]Ibid.: 637.[/ref]

Despite the strong consensus on the typical American’s political ignorance, Arthur Lupia of the University of Michigan is skeptical of the explanatory power of these survey data. He argues that in many cases, it is “not demonstrate[d] that recalling the items on [the] survey is a necessary condition for achieving high-value social outcomes”[ref]Lupia, Uninformed, 204.[/ref] and, therefore, not a good standard for measuring relevant political knowledge. He also questions the legitimacy of the American National Election Studies, showing that obviously correct answers were sometimes marked as incorrect due to an overly-rigid grading system.[ref]Ibid., 206-212.[/ref] Finally, he notes that “decades of surveys and experiments provide evidence that “don’t know” responses are mixtures of several factors. Ignorance is one such factor. Low motivation, personality, and gender also affect responses.”[ref]Ibid., 216.[/ref] However, Achens and Bartels point out that “insufficient motivation is endemic to mass politics, not an artifact of opinion surveys[.]”[ref]Achens & Bartels, Democracy for Realists, 37.[/ref] Furthermore, they hold Lupia’s feet to the fire for the vagueness of statements like “high-quality decisions” or “high-value social outcomes.”[ref]Ibid., 72-78.[/ref] Uninformed voters are supposedly capable of these things, yet Lupia provides no concrete examples. Brennan also argues that public polls actually overstate how much Americans really know about politics and policy. The first reason is because these polls “usually take the form of a multiple-choice test. When many citizens do not know the answer to a question, they guess. Some of them get lucky, and the surveys mark them as knowledgeable.” These polls “count a citizen as knowledgeable if they know that we spend more on social security than defense, but they typically don’t check if they know how much more we spend.” Finally, these questions are about “easily verifiable facts…While most voting Americans cannot answer such questions, these questions do not require specialized social scientific knowledge.”[ref]Jason Brennan, Against Democracy, 28.[/ref] Unfortunately, greater question complexity is associated with greater ignorance. According to Carpini and Keeter, “as the amount of detail requested increases and as less visible institutions or processes are asked about, the percentage of the public able to correctly answer questions declines.”[ref]Carpini & Keeter, What Americans Know, 72.[/ref]

In sum, the scholarly consensus appears to recognize that the average American citizen knows very little about the major players, institutions, and processes of their government. What’s more, there is a significant gap between expert views on policy-related issues and that of the average American.

Do Minimum Wage Hikes Drive Some Restaurants Out of Business?

May 15, 2019 by Walker

From a recent NBER paper (quoting from an earlier draft):

As theory would suggest, we find robust evidence that the impact of the minimum wage depends on how close a restaurant is to the margin of exit, proxied by its rating. Looking at city-level minimum wage changes in the San Francisco Bay Area (the “Bay Area”), we present two main findings. First, at all observed minimum wage levels, restaurants with lower ratings are more likely to exit, suggesting that they are less efficient in the economic sense. Moreover, lower rated restaurants are disproportionately affected by minimum wage increases. In other words, the impact of the minimum wage on exit is most pronounced among restaurants that are closer to the margin of exit.

…Our results suggest that a $1 increase in the minimum wage leads to an 14 percent increase in the likelihood of exit for the median 3.5-star restaurant, but no impact for five-star restaurants (the point estimate is in fact negative, suggesting that the likelihood of exit might even decrease for five-star restaurants, but the estimate is not statistically different from zero). These effects are robust to a number of different specifications, including controlling for time-varying county characteristics that may influence both minimum wage policies and restaurant demand, city-specific time trends to account for preexisting trends, as well as county-year fixed effects to control for spatial heterogeneity in exit trends.

…Overall, our findings shed on the economic impact of the minimum wage. Basic theory predicts that the minimum wage will cause firms that cannot adjust in other ways to cover their increased costs to exit the market. We find that lower rated firms (which are already closer to the margin of exit) are disproportionately impacted by the minimum wage. After a minimum wage increase, they are more likely to exit the market altogether and more likely to raise their prices (pg. 2-5).

This matches previous research, which finds that labor-intensive restaurants tend to exit and make room for capital-intensive restaurants.[ref]This same research finds that consumers bear the costs of minimum wage hikes (as my last post also showed). Lastly, the authors found “a short-run disemployment effect of just under −0.1 that likely grows by three to five times in the long run” (pg. 71).[/ref]

Who Bears the Cost of the Minimum Wage?

May 13, 2019 by Walker

From a forthcoming article in the American Economic Review (quoting from the draft version) on Hungarian minimum wage hikes:

Most firms responded to the minimum wage by raising wages instead of destroying jobs. Our estimates imply that out of 290 thousand minimum wage workers in Hungary, around 30 thousand (0.076% of aggregate employment) lost their job, while the remaining 260 thousand workers experienced a 60% increase in their wages. As a result, firms employing minimum wage workers experienced a large increase in their total labor cost that was mainly absorbed by higher output prices and higher total revenue. We also estimated that firms substituted labor with capital and their profits fell slightly. These results suggest that the incidence of the minimum wage fell mainly on consumers. Given the relatively small effect on employment, our results also suggest that minimum wages can redistribute income from consumers to low-wage workers without large efficiency losses. Our findings also indicate that the optimal level of the minimum wage is likely to vary across industries,cities and countries. In countries where low-wage jobs are concentrated in the local service sector (such as Germany or the U.S.) raising the minimum wage is likely to cause limited disemployment effects or efficiency losses. Moreover, in cities where mainly rich consumers enjoy the services provided by low wage workers this redistribution will be from rich to poor. The heterogenous responses across industries also underline the advantages of sector-specific minimum wage polices used in some European countries such as Italy or Austria. For instance, setting a higher minimum wage in the non-tradable sector than in the tradable sector can push up wages relatively more where it will generate more modest disemployment effects (pg. 23-24).

Passing the costs on to consumers fits with previous evidence. This also makes evident that the kind of industry (e.g., tradable vs. non-tradable) also matters when it comes to positive/negative effects of the minimum wage.[ref]One of the study’s authors has found this elsewhere as have other scholars.[/ref]

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