Sunday, June 13, 2010

Do conservatives know more about economics?

Probably not. But that's what the Wall Street Journal would have you believe.

One problem with the study is that it asks these questions:

Good Questions

1. Restrictions on housing development make housing less affordable. (No problem)

2. Overall, the standard of living is higher today than it was 30 years ago. (Good question that everyone should know the answer to.)

3. Rent control leads to housing shortages.

Questionable Questions

4. Mandatory licensing of professional services increases the prices of the services.

That is a complicated issue. They should just have asked if a quota on taxi medallions increases the cost of taking a taxi.

5. A company with the largest market share is a monopoly

This is a stupid question of semantics.

Bad Questions

6. Third-world workers working for American companies overseas are being exploited.

This is a matter of opinion. Most smart people will agree they aren't--working is better than not working. But research shows that protesting sweat shops improves their conditions--so maybe its fair to say the people are being exploited relative to what they would have if we protested.

7. Free trade leads to unemployment

This is true. Some workers are displaced and others (probably more) gain jobs. The "right" answer is false.

8. Minimum wage laws raise unemployment.

This is disputed in the literature and there are models where minimum wage laws raise unemployment. There is no "right" answer here.


The bigger problem with the study, though, is that the questions are chosen so that conservative ideology will lead you to the "answer" while liberal ideology will lead you astray.

How would conservative fare on this test?

1. Free trade is preferable to a small tariff. (Optimal tariff)

2. Society will be better off if companies must pay for pollution

3. Insurance markets will collapse without regulation

4. Inflation is a bigger concern than unemployment

5. When interest rates are 0%, governments should spend stimulus money to fight a recession.

6. Income tax cuts would increase government revenue by stimulating growth.

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