Friday, January 27, 2012

Economists vs. Americans

Fascinating stuff from the Wall Street Journal's Real Time Economics blog:
The Financial Trust Index has been tracking public sentiment toward the financial system for more than three years. And sentiment isn’t good...For its latest quarterly survey, the Financial Trust Index took its responses from average Americans to a series of economic assertions and put them up against the responses from an expert panel of economists. The results are striking:

Top marginal tax rate: On the factual assertion, “Permanently raising the federal tax rate by one percentage point for those in the top income tax bracket would increase federal tax revenue over the next 10 years.”

Economists: 100% agree with that statement (regardless of their political orientation)Americans overall: 66% agree (50% of Republicans; 80% of Democrats)

Eliminating tax deductions: “Eliminating tax deductions on mortgages would lead to better financing by individuals.”

Economists: 85% agree
Americans overall: 35% agree (41% of lower-income households agreed, but just 23% of higher-income households)

“Buy American” provisions: “Mandates that Federal government purchases should be ‘buy American’ have a significant positive impact on U.S. manufacturing employment.”

Economists: 10% agree
Americans overall: 75% agree
Readily apparent is that average Americans disagree with economists -- even wildly so -- on issues that economists don't find particularly controversial (or even thoroughly uncontroversial, as with the impact of a tax increase). While striking, this is in no way surprising given that most Americans are neither economists nor have studied the subject in any real depth. They are rationally ignorant.

By itself this is no big deal -- there are better ways to spend one's life than pouring over economics literature (or so it's been rumored) -- but then recall such ignorance also finds its way into the voting booth. This is another reason why limited government is so vital: to protect us from the ignorance of our fellow citizens and the pandering politicians they vote for.

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