Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Tuesday, June 08, 2010

Another Poor Quality Wall Street Journal Article

So the WSJ published an article claiming that Liberals do poorly on "basic economics." Here are the questions with the "wrong" or "unenlightened" answer in parentheses, according to the askers. You will notice these are not "basic" questions but highly ideological questions.

1) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree).

If the listener is thinking only in terms of 'sticker price' then yes. But the liberal listener is likely to respond to the hidden costs of untrained professioanls. Is an unlicensed quack doctor cheaper than a board-certified surgeon? Depends on what you mean by "cheaper."

2) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree).

Is the standard of living higher? Depends what you mean. Health care, education, and housing were all relatively cheaper in 1980 - much, much more so. Most families in 1980 were one-earner households; now they need two earners to survive. The minimum wage is lower, in real terms, than it was in 1980. The argument that the standard of living has gone up is clearest if you are in an upper-income group. For them, taxes have plummetted and incomes gone up dramatically.

3) Rent control leads to housing shortages (unenlightened answer: disagree).

Depends what you mean by a housing shortage. Rent control protects the available housing of people who could not otherwise afford it. Removing rent control raises rents - it doesn't lower them. From the point of view of a renter, higher rents are a shortage - a shortage of affordable housing. Today we have whole neighborhoods of near-empty houses ringing our cities with overcrowded apartments and streets full of the homeless. Is this a shortage?

4) A company with the largest market share is a monopoly (unenlightened answer: agree).

This just requires knowledge of what a monopoly is, technically. The corollary is always true: a monopoly is a company with the largest market share. The willingness to call a big company a monopoly is political: the term "monopoly" to a consumer means "a company that has too much power over me." Consumers will feel this helplessness even if the company is not a technical monopoly.

5) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree).

I have no idea how this is calculated, but it is plainly a moral question, not an economic one.
The fact is that third world workers are paid less than American workers - often much, much less, like 50cents an hour - would be paid for doing the same job, even though the wages may be above-market for their country Whether this is exploitation depends on what you think exploitation is. Some people think all workers are exploited, even in the USA, as a moral matter.

6) Free trade leads to unemployment (unenlightened answer: agree).

This is the worst question in the bunch. Free trade definitely leads to unemployment. It has idled millions of American factory workers . Free trade kills industries. You can't buy an American TV anymore. See Detroit! What the authors of the question want you to acknowledge is that the expectation is that, over the long term, there will be a net growth in employment. Okay, but that wasn't the question.

7) Minimum wage laws raise unemployment (unenlightened answer: disagree).

There's no proof that minimum wage laws have ever raised the unemployment rate. The statement should be "without a minimum wage, more people would be employed, although at lower wages." This is correct. As written, however, it implies that when you pass a minimum wage hike, it increases the unemployment rate - something never seen. What happens actually in the real world is that it slows hiring for a period of time in some industries that are low-margin, and not in others where it just results in slightly higher prices or profits.

8)Restrictions on housing development make housing less affordable. (unenlightend answer: disagree).

Most people on hearing this question are going to ask: do restrictions on housing development lead to higher prices? We haven't seen any connection in recent years between housing prices and... well... anything tangible. Nor has the housing bust been associated with loosening of regulations. So while there may be a theoretical possibility that restrictions lead to higher prices, we know that those aren't the forces moving the markets today.


Raised By Republicans said...

I remember when the WSJ was less partisan (a long time ago). Now they are just a right wing rag.

I notice that the economist, Daniel Klein, behind the poll (along with Zogby) is at George Mason University - hardly a top research department in economics. I looked up the guy's CV online and it's a long list of unimpressive publications. Basically, this op-ed in the WSJ is the highest profile thing he's published and its a load of crap from a methodological/scholarly perspective.

Nate Silver goes after the poll's methodology.

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