Top economic misconceptions of the lay people you wish you could correct?

Marginal Revolution: Top economic misconceptions of the lay people you wish you could correct?

That was the first request.

Economic misconceptions interact with values to skew overall judgment, but the value judgments are usually the main problem. Consider how "anti-foreign bias," to borrow Bryan Caplan's term, often causes people to oppose free trade. The main problem isn't bad economic understanding, though that often is present. Rather the person has an emotional commitment to whatever economics, and other positive arguments, make the protectionist position sound higher status and more justified. 

Consider an analogy with political scandals. It's not quite right to pinpoint "mistaken beliefs about John Kerry's wartime record on Swift Boat matters" as the main problem, even though the beliefs are indeed mistaken. 

Better thinking may do us more good than "better economic understanding" per se.

Both Alex and I have blogged that nationality (or sometimes ethnicity or regional background) is often the best predictor of a person's economic views and yes that includes among economists. Given the diversity of economists' views across nations, we are part of the problem too, thereby again illustrating the essential unity of mankind.

Still, I do believe in right and wrong and that means that the viewpoints of some nations (grossly construed) are better than others. So the top economic misconception out there in the world is "unjustified dislike of the United States," noting that there are also justifiable reasons to dislike many aspects of this country.

Emotional attachments to particular views are critical, but I think it goes even much deeper than this. Often our views are identity markers. Thus, if I avow free markets, anthropogenic climate crisis, or same-sex unions, it frequently has little to do with the actual substance of the topic. Rather it serves as a marker for a broader constellation of personal traits I want to communicate to you about myself. Thus, openly exploring these topics with some intellectual rigor and humility often poses a serious threat to the identity I've constructed for myself, forcing me to significantly realign the constellation of traits I've attributed to those who agree with me and those who disagree. This also explains why pressing another on the intellectual substance of a view frequently provokes an emotional response resulting in accusations of stupidity or malevolence.

Comments

[ZZMike]

[the first link is bad - it has the "krusekronicle" URL tacked in front of it]

(I finally figured that that's a question from the "Saddleback Conference" (I didn't see it))

Does anyone have a list of "economic conceptions"? (I didn't see one over at Marginal Revolution - though some are hinted at.)

One might be "The liberal philosophy is to take from Peter Rich to give to Paul Poor" (at which one will be amazed at how many friends named Paul you have). Or another: "Every man has the opportunity to make his fortune or to lose it. Those who lose it are left by the wayside." A middle ground might be "those who fall by the wayside through no fault of their own (flood, fire, famine) deserve to be helped by the rest of society".

I think it's obvious that our economic conceptions are shaped by our beliefs. And I'm assuming you have more to say about this.

I'm interested in your opening choice "... if I avow free-markets, anthropogenic climate crisis, or same-sex unions, ...". I'm opposed to the last on philosophical grounds, oppsed to the second on science and common-sense grounds, and very much in favor of the first on historical grounds (the history of both free-market system and the alternatives). So I wonder if you put them all on the same side of the fence.

[Michael W. Kruse]

Not sure what happened with the link. Thanks for the heads up. It should work now.

I don’t see the three examples linked except in that they are all issues that tend to provoke passionate responses. I intentionally mixed the ideas (one identified with conservatives and two with liberals) to make the point that this is a universal human reality.

I’d suggest that almost everyone would say their conclusions are based on science, history or practical reasons. Yet we disagree.

My point is that we are not dispassionate objective truth processing machines. We all form personal identities and have mental models of who we are. Based on how our identity was shaped we will frequently have a natural proclivity toward one interpretation of controversy versus another. Often it is that one explanation seems to “hang with” other interpretations we hold. That is why when I say “I believe in free trade” I’m likely signaling to you a whole constellation of other values and beliefs I also hold. My statement of my position becomes a way of communicating to you much more than just my specific position.

Because my identity was formed in a community, others from that community are likely to reinforce my attraction to an interpretation and discourage nonconformity. I will likewise tend to seek out communities in future circumstances that reinforce my proclivities thus helping me preserve my identity and helping the group preserve cohesion. Therefore, dialog on such controversial matters is never purely about “just the facts” on such issues. Matters of identity and community are often at stake.

I’m not saying that there is no truth and all things are relative. I’m not saying that every articulation of a position is functioning as an identity marker. Rather I want to be realistic about how I address controversial issues in dialog with those with whom I disagree. If I can imagine how changing my position on a particularly important interpretation to my context will have significant impact on my identity and community, why can I not understand how my opponent faces the same challenges in the face of embracing my position, even if I’m utterly flawless in my perception of the truth?

[VanSkaamper]

I'd love to correct the misconception that the economy is static...that the pie is a fixed size, and that individuals don't change their behavior in response to things like changes in tax policy and regulation.

[Michael W. Kruse]

Van

I deeply share your frustration.

To me, the interesting question to ask is why is it that so many people are seemingly entrenched in static models and unmoved by rational explanations of dynamic forces? That static thinkers are simply stupid or evil is too easy.

Then the disturbing question becomes in what arenas of life am I like the static thinker, un-phased by the truth? Assuming I truly want to live according to the truth, how would I want someone to bring me to the truth and what would it take to do it? What are the obstacles that prevent me from coming to truth? I think much of it has to to do with the issues of identity I've mentioned above.

[Jim Moss]

Interesting post, Michael. I'm curious, though. What would say about a person who doesn not cling to any particular identity, but who enjoys being a contrarian and playing the devil's advocate - someone who takes a liberal stance around conservative folks, and a conservative stance around liberal folks.

[Michael W. Kruse]

I'd say that maybe they've found their identity in being a contrarian. :-)

I think being a contrarian can be a useful clarifying tool for learning. But being a contrarian can also easily become a means of escaping personal responsibility and accountability for acting. Most controversial issues ultimately call upon us to act or not act in some way and you can't have it both ways.

As to "doesn not cling to any particular identity," I'd say it is humanly impossible. Everyone has an identity. It is just that any given issue may not touch us in a way it touches others ... but we all have our issues!

Regardless of how well we have consciously constructed it, everyone has a model of who they are and who they are not, what is shameful and what is not, and to what degree they are in affinity with any other group of human beings. We all have people who are more significant to us than others, whether it is in terms of wanting acceptance or in terms of defining ourselves as an antithesis.

[Van]

What are the obstacles that prevent me from coming to truth? I think much of it has to to do with the issues of identity I've mentioned above.

I don't think it's (necessarily) stupidity or evil either. When we're impervious to facts, it tends to be because of a larger agenda or goal that could also be wrapped up in our sense of personal identity. I like Walker Percy on this topic.

[Michael W. Kruse]

Excellent point.