Saturday, July 12, 2008

Americans ignorant of basic economics

The Adam Smith Institute Blog is justifiably worried about the public's ignorance of basic economic principles:
Only one third of Americans believe free-trade agreements are good for the economy, the lowest figure in the developed world. On the other hand, a famous study in 1992 ... found that 93% of economists support free trade. Why is there such a discrepancy, not just in America, but worldwide?

Economics, in general, is not exactly intuitive. Most people don’t naturally come to the same conclusions that Ricardo and Smith came to without instruction and explanation. It is much easier to comprehend, "We should have tariffs because if we don’t, people will buy sugar from Jamaica instead of America. Plus — it could be contaminated since it comes from a developing nation."

The problem is that most people never really learn economics. Some high schools offer one course as an elective class, but most students go through high school knowing nothing of supply and demand and absolutely nothing of comparative advantage. In university, students generally only take economics if it is a required course — meaning many students graduate college without ever studying economics — even those who aspire to be high school teachers. If high schools did start to offer economics, who would be qualified to teach it?

The general lack of understanding carries grave implications. If voters oppose free-trade agreements, then politicians will certainly pander to fill their need. The doors open wide for demagoguery —meaning free-trade advocates are portrayed as insensitive and greedy.
Unfortunately, most people "learn" about the economy from watching the news, but since most journalists have little understanding of basic econ, it's like the blind leading the blind. College economics professors end up playing the role of Yoda, saying "You must unlearn what you have learned."

1 comment:

  1. And even worse are those purport to understand Adam Smith better than the general public yet remain ignorant to his writings. Adam Smith made no singular statement opposing tariffs. Neither did he champion a total lack of regulations. Nor did Adam Smith say that the self interests of individuals would create an excellent economic system.

    All that Adam Smith said was that, at the very least, we can depend on an economy functioning at some basic level as a result of the self interest of individuals.

    In fact, Adam Smith was opposed to big businesses and disliked East Indian Trading Company with its ties to the English aristocracy. He would be just as abhorred by the current US government's lack of market regulation.

    Like the Nazi's, taking the concept of "survival of the fittest" and rationalizing genocide, to many take Adam Smith's "self-interest" and rationalize their selfishness and ignorant ideas.