Monday, November 28, 2011

Thoughts on Daniel Klein's studies of economic literacy

A little while back economist Daniel Klein, a professor at George Mason University and editor of Econ Journal Watch, and Zeljka Buturovic, a researcher at Zogby International, published an article entitled "Economic Enlightenment in Relation to College-going, Ideology, and Other Variables" which presented data from a survey about how people of different ideological stances view economic questions that, Klein argued, inidcated that people who identify as politically left-wing showed less undertsanding of basic economics than those identifying as libertarians or conservatives. He's now calling his own prior claims "partially vitiated" in a new article by  Buturovic and himself, "Economic Enlightenment Revisited," based on the results of another survey which he believes shows that people of different ideologies are in fact about equally likely to believe falsehoods about economics, depending on how comfortably the answer to a particular question fits with their other beliefs. He attributes his prior results to a survey that was biased by including too many questions on issues the Left tends to be bad on and his own eagerness to believe something that supported his own assumptions. (Klein is himself a libertarian.)

I greatly admire Klein's willingness to publicly state that he believes himself to have been mistaken on a matter that he had been quite outspoken about. However, after reading his new article, I don't think he actually was wrong; at any rate, I don't think the additional data he presents tells against his own prior conclusion in the way he believes.

In each study, Klein gave the test subjects a list of statements about economics, such as "free trade causes unemployment." The survey subjects, all of whom were American adults, would then write an answer stating that they (strongly or somewhat ) agreed or disagreed with it, or weren't sure. Klein then compiled the figures for how often respondents of different political persuasions agreed with false statements or disagreed with true ones to get a sense of how well people of different beliefs understood economic issues. Conservatives and libertarians did better than liberals on the first survey. Concerned about the possibility that this result might be caused by an ideological slant to the survey items (cherry-picking subject matter so that most or all of the statements concerned areas people on the Left were especially likely to get wrong, for instance) rather than an actual difference in knowledge, he did a second survey, this time with questions intentionally designed to poke at potential conservative or libertarian blind spots. This time the results were reversed, with conservatives and libertarians scoring much lower than on the first survey.

I agree that the first survey is imperfect. In particular, the survey item "Third-world workers working for American companies overseas are being exploited" is problematic because, depending on how one interprets the word “exploited, ” agreement can be either a sign of economic ignorance (i.e. you believe that the workers would benefit economically if they had to fall back on whatever second-best option they had themselves judged inferior to the sweatshop) or an answer to a question- in this case, a moral one- other than the one the survey meant to ask and is intended to assess. (Though if you changed it to something more economics-specific, such as whether sweatshop make their workers worse off than they would be in their absence, I imagine the percentage of wrong answers would still be pretty high.) I also like the fact that the second survey includes an item about the economic effects of immigrant workers, an important and heated subject that was absent the first time around.

However, the first and second sets of questions differ in some important ways that are likely to make the first set more genuinely revealing than the second, because there were serious problems with the second set that make it questionable whether it measures what it is supposed to be measuring.

The first issue is that with the exception of the statement about sweatshops noted above the first survey consists of fairly clear, unambiguous statements like "Rent-control laws lead to housing shortages." This isn't the case with several statements on the second survey, and the result is that several statements on the second survey can't be trusted to measure what they're supposed to.

If some of my points here seem like semantic hair-splitting, it's because such hair-splitting is incredibly important in order to make sure that a survey is actually measuring what it's supposed to. Klein and Buturovic's interpretation of the new data hinges on certain quite specific assumptions about how survey takers interpreted the survey statements. If some of the survey statements are worded in a way that allows for multiple plausible interpretations of what's being asked, some of which could entail a different answer from the one treated as correct by the survey for reasons unrelated to economic ignorance, then responses to that statement on the survey can't be presumed to measure what it's trying to measure, especially if members of some of the the different groups being assessed are especially likely to take a particular interpretation. This is, I believe, the case on at least three of the survey items. One could argue about whether the word meanings I think were most likely being used by the typical respondent are the best way of using those words or not, but like the interpretation of “exploit” in the first survey that's not a question of economics.

Two statements to which the majority of libertarians gave what was judged to be a wrong response response were "Drug prohibition fails to reduce people’s access to drugs" and "Gun control fails to reduce people’s access to guns." The survey treats these statements as false, since prohibition makes the prohibited item more costly, so agreeing with them is counted as an incorrect answer in the respondent's score is.

But is it false? It depends on what "reducing access" means.

It could mean increasing the overall cost of getting drugs or guns, which is presumably the intended interpretation- but it could also be taken to mean, and in typical language is probably more likely to be taken to mean, eliminating the ability to acquire something at all or at least making it so insurmountably difficult that it is effectively impossible. Klein and Buturovic do acknowledge this problem, somewhat, but argue in defense of their interpretation of the responses that “it is reasonable to include price effects as a dimension of 'access'.”

It is reasonable, but it's also quite reasonable not to and instead treat access as basically binary, and I think it very likely that this is what most respondents- of all ideological types- were doing. In typical usage the latter meaning is probably more common- it would sound odd to most people if I said that an increase in the price of a particular class of products that I had previously been able to buy had lowered my “access” to them, unless the increase was so large that paying it was now completely out of reach. Gun and drug laws in the United States have done no such thing. Some illegal guns can be bought for less than $100, sometimes significantly less, and even people who literally own nothing but the clothes on their backs can and frequently do support illegal drug habits. The non-monetary cost of is high, due to prohibition- you have to be willing to break the law and possibly associate with dangerous characters- but it's also one that anybody can pay if they choose.

Klein and Buturovic also state they believe that their interpretation would be sound even if one doesn't interpret “access” in the way they had in mind. They don't specify what they mean by this. My assumption is that they're referring to the marginal gun owner or dug user in the absence of legal restrictions- even if “access” is treated as purely binary the total number of people with access in that sense would be decreased by prohibition because there would be some people for whom drugs or guns are now completely inaccessible who would have had access if the laws were less restrictive. Again, this is a perfectly valid way of interpreting the statement, but it's not the only valid way or the typical way. In contexts like this the word “people” is almost always means, and will be taken to mean, people in general or on average or the great majority of people- almost no one will interpret “reducing people's access” to mean depriving a few extreme outliers of access or slightly lowering the total sum total of people who have it.

Guns are readily accessible even in jurisdictions that forbid them, some of them at prices so low that anyone who can't afford one now likely couldn't have afforded one even in the total absence of gun control, and illegal drugs are so ubiquitous that the government can't even keep them out of its own prisons. In everyday English the statements "Drug prohibition fails to reduce people’s access to drugs" and “Gun control fails to reduce people’s access to guns” are true, even if there are other valid ways of interpreting the statement under which it would be false. In the absence of any indication that the respondents were assuming the definition the creators of the survey had in mind, there's no reason to assume that choosing “agree” indicates economic ignorance.

Another statement on which the study indicates libertarians were more likely than liberals or progressives to give the wrong answer was "A dollar means more to a poor person than it does to a rich person,” which the study treats as true.

If we take this to be basically a statement about the declining marginal utility of money, then this is true, but in that case it would be better to phrase such a question in terms of a single person at different levels of wealth rather than two different people. As is, the statement entangles declining marginal utility, a pretty fundamental concept that can rightly be considered a matter of basic economic understanding with the more complicated and contested subject of the validity of interpersonal utility comparisons. People who would choose “disagree” because the question uses two different men and they don't think such comparisons are possible or meaningful may or may not be correct, but even if they're mistaken being on the wrong side of a complex philosophical dispute is quite a different thing from not understanding basic economic concepts.

The other and probably bigger problem is, again, one of ambiguity: There are common uses of “means more” that do not entail that the statement is true. To say that "a dollar means more" to person A than to person B can just as easily be taken to mean that A is more frugal than B, or drives a harder bargain, or is more miserly, or makes wealth a greater priority in his life, none of which necessarily suggest that A has less money. My suspicion is that the differences in answers between people of different political persuasions boils down to philosophical differences, with libertarians being more likely to think of people in terms of their actions and liberals/progressives more likely to think of them in terms of their needs. In any case, agreement and disagreement are both defensible answers to the question as written.

Aside from ambiguous language, there's another problem with comparing some of the statements from the first survey with the second one. The statements about economics in the first survey were, with the exception already noted, quite straightforward claims on the effects of economic policies, and "agree" and "disagree" each represented distinct , dichotomous positions. You believe that minimum wages or free trade cause unemployment, or that they do not, for instance, and disagreeing with a statement from the first survey is a pretty clear statement of what you do believe. Thus, disagreeing with a wrong statement is a pretty solid indication that your beliefs on the subject are in fact correct, while agreeing with a wrong statement means that you are solidly wrong, as opposed to largely but not entirely correct, and that those who disagreed are closer to the truth than you are. This is not the case with some of the second survey.

After the gun control and drug prohibition questions, the statement which the greatest number of libertarians gave a response counted as wrong to was “When two people complete a voluntary transaction, they both necessarily come away better off.” This is something that had no analog of the first survey- it is an incorrect statement designed to closely mimic a correct one. All voluntary transactions take place because both participants believe they will come away better off from it, and- since they have direct knowledge of their own preferences, usually know more about their own situation than anyone else, and have more incentive to figure out whether the transaction is a good idea or not than anyone else- they are usually correct. The great majority of voluntary exchanges do benefit the participants- but not all, since sometimes people do things that, with the benefit of hindsight, were not a good idea even according to their own preferences and values at the time. Agreeing with the statement from the survey is thus pushing things too far.

Disagreeing with the statement, on the other hand, can mean believing anything from "They almost always come away better off" to "they never come away better off." We have no reason to believe that the typical person who correctly chose "disagree" did so because their own beliefs about the benefits of voluntary exchange are more accurate than people who chose "agree." Indeed, I would be surprised if this were the case. The claim that all voluntary exchanges turn out to be mutually beneficial is too strong, but it comes much closer to the truth than the belief common among statists, particularly of a leftist bent, that people frequently or routinely enter into voluntary agreements that cause them harm.

To a lesser extent I would make the same criticism of another item, "When two people complete a voluntary transaction, it is necessarily the case that everyone else is unaffected by their transaction." This is false, but there's no way to tell whether a person who answered "disagree' and got marked as correct was merely thinking "No, transactions can have externalities," or believes that externalities not only exist but are so common and so large that most or all seemingly private agreements are actually a public/government concern,, or chose "agree" because they believe that they or society as a whole is harmed in some moral or spiritual sense if voluntary interactions they don't like are allowed to occur.

The fact that at least one of the questions on the second survey was, by design, a "trap" set for people of a particular ideological bent in a way none of the first survey's items were is a serious problem. This is especially the case when the format is a essentially a series of true/false questions where a correct answer of "false" encompasses a broad spectrum of widely held possible answers, a great many of which are even less accurate than the false statement in the survey. Such a survey item is worse than useless for assessing how knowledgeable different groups are, because the best way for a particular group of people to be rated as highly enlightened on the subject by getting the correct answer is abject ignorance- it's only when you're in the ballpark of being right that you're at risk of agreeing with the not-quite-right claim and being marked as wrong in the survey results. It's like a test of scientific knowledge where respondents have to agree or disagree with the statement “The Earth is 5 billion years old,” which overstates the Earth's age a bit- giving the wrong answer requires knowing that the Earth is several billion years old, while someone who believes that the entire universe is only a few thousand years old will give the correct answer by disagreeing.

I think Klein and Buturovic's concern about possible bias against people on the political Left in the original survey led them to overcompensate in the second survey, resulting in the problems described. If anything, the fact that Klein and Buturovic's attempts to balance against possible bias against people left of center required them to downplay the first survey's focus on straightforward claims about the effects of economic policy in favor of more abstract and/or ambiguously worded questions and come up with questions that were specifically designed as traps for other ideologies only seems to underscore the results of the original survey; at any rate, it doesn't make Klein's original conclusion that people on the Left knew less about economics seem less plausible.

So I think Klein is wrong now about being wrong before. He attributes what he believes to be his error to confirmation bias, pouncing too eagerly and uncritically on data that seemed to reinforce his existing beliefs. Based on the two survey articles, my own impression is just the opposite. Klein goes so far to guard against his own possible bias against liberals and progressives that he ends up biasing things in their favor and against his own (at the time) interpretation of the first survey. Given Klein's demonstrated willingness to scrutinize his own position and even publicly criticize his own past conclusions, this is unsurprising. Monitoring yourself for bias in your own favor involves the same trade-off as detecting other things: the more vigilant you are to ensure that nothing gets past you and the more sensitive you are to possible signs of your quarry, the greater the chance of a false positive. The direction in which I believe Klein has actually erred is just the sort you'd want in a person involved with a publication like Econ Journal Watch- would that more people's mistakes were the result of going too far to be fair to their opponents!- but in this case his desire to ensure a level playing field has backfired.

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Friday, November 04, 2011

Kick him when he's down

There's a very interesting article by Art Carden and Steven Horwitz at The Freeman Online called "Eugenics: Progressivism’s Ultimate Social Engineering" about Progressive Era legislation and the arguments made in favor of it by its original supporters, some of whom supported economic statism not because they didn't understand what its real effects would be but precisely because they did. As Carden and Horwitz put it it:
In other words, what we today think of as the unintended consequences of laws supported by today’s well-meaning but economically uninformed Progressives were actually the intended goals of some of their intellectual ancestors a century ago. Early Progressive economists understood the effects of these interventions, but they thought those effects were desirable.

For instance, one of the principle arguments against minimum wage laws is that increasing the minimum wage will make workers whose productivity is not high enough to make them worth hiring at the new minimum unemployable. Thus, they are deprived of both their wages and the opportunity to gain skills and experience that might help them improve their lot. The victims will be disproportionately found among those who are already at a disadvantage, which opponents of minimum wage laws regard as a bad thing- but not everyone has agreed.

As you probably already know,  many leading Progressives were eugenicists. (As were as many of their close cousins, such as Fabian socialists in Great Britain. For the purposes of this post, I'm using "Progressive" in a somewhat broadened sense so that I don't have to write "anti-market, anti-individualist, nominally democratic advocates of extensive government economic planning and social engineering controlled by expert government technocrats" over and over.) They supported government action to control the gene pool by discouraging or preventing people they typically considered inferior and thought America and the world could do with less of- blacks, Chinese, Southern and Eastern European immigrants, the mentally ill, the psychologically abnormal or socially maladjusted, people with congenital disabilities or deformities- from reproducing

As Horwitz and Carden explain it, the problem they faced was that too many of the people eugenicists considered unfit weren't, and were doing too well in the relatively free markets in the United States at that time. They were successfully competing with (the right kind of) white workers, which lowered the latter's wages through competition and- even worse- allowed them to survive and raise families, propagating bloodlines the eugenicists would have preferred to see die out. Restrictions on immigration, while popular among eugenicists, would not solve the problem of the millions of immigrants who had already arrived, the black population, or “defective” persons of more acceptable racial stock who were able to find employment.

Making these things a problem that needed to be solved required some rather extreme liberties to be taken with the English language. This resulted in idiosyncratic definition for words like “unemployable” and “parasitic,” by which Progressive eugenicists meant something like “Not making enough to singlehandedly support a family at a standard of living native-born whites would consider acceptable." (Called, familiarly enough, a “living wage.”) Thus, an itinerant worker with no permanent abode who supported himself doing odd jobs was “unemployable” no matter how much work he did, a “parasite” taking work from the more deserving. If an immigrant family was completely self-supporting but depended on the wages of more than one family member, it was a family of unemployable parasites no matter how much work they were actually doing.

(This also reflected the disapproval of many Progressives for native-born white women working outside the home, something that simultaneously roused conservative- which many Progressives were, in a paternalist, aristocratic way- fear of weakened traditional roles, chivalrous horror at the prospect of subjecting women to the cold, unfeeling world away from hearth and home, and eugenic objections to having the “Mothers of the Race” distracted from their more vital task of outbreeding the mercilessly industrious wolf baying at America's door.)

The industrious and frugality common among immigrant workers was seen not as a benefit for the country, but a curse, because these were seen by eugenicists as inherent racial traits that would allow these groups- considered morally and intellectually inferior to the Anglo-Saxon but better-suited to drudgery, subordination, and squalor- to outbreed their superiors, damaging the gene pool and eventually bringing about the “race suicide” of the higher races. Too many of the unfit were working hard and being productive, and free markets were rewarding that behavior.

It wasn't just a matter of race or ethnicity, of course. The free market was also doing too much to support defective members of the white, Western/Northern European-derived population as well. Many "feeble-minded" or otherwise unacceptable people were still capable of working, taking wages away from the sort of workers the eugenicists liked and- in the worst cases- propagating their own kind. People who are self-supporting are people who aren't desperately crawling into the government's waiting arms, and that was a problem.

Some of the commentary on this issue was amazingly perverse. Consider what Sidney and Beatrice Webb had to say, in their classic Industrial Democracy, on the matter of how "the sick and the crippled, the idiots and lunatics, the epileptic, the blind and the deaf and dumb, the criminals and the incorrigibly idle" and the "deficient in strength, speed, or skill" were best dealt with:

These physical and moral weaklings and degenerates must somehow be maintained at the expense of other persons. They may be provided for from their own property or savings, by charity or from public funds, with or without being set to work in whatever ways are within their capacity. But of all ways of dealing with these unfortunate parasites the most ruinous to the community is to allow them unrestrainedly to compete as wage-earners for situations in the industrial organisation.

Note, again, the perversion of language: A disabled person who supports himself by working for wages in a competitive market, like any other worker, is being "maintained at the expense of other persons."

And yet, if you accept the premise that the class of workers that eugenicist Progressives and socialist considered "fit" favor ought to have a monopoly on wages, without competition from their inferiors, it actually makes sense. In that case, the wages earned by the defective worker actually rightfully belong to his betters, and archaic individualist quibbling about the fact that he earned them with own productive labor for a willing employer doesn't change that.

(It also makes sense if you hold whoever you've identified as defective in such contempt that their attempts to participate in human society as if they were actual people are an unacceptable affront to you, of course.)
That was the problem. Minimum wage laws offered a possible solution. Workers from “unfit” populations were generally less valuable to employers than native white labor on an hour-to-hour basis ,for various reasons, but since they were generally willing to work for less there were many situations where hiring them made economic sense. If working for such low wages became illegal, they would be stripped of their advantage, becoming less attractive compared to costlier higher-skilled workers or, if their value to an employer is less than the minimum, completely unemployable. They can't work, can't earn a living, can't support themselves, can't propagate their kind. It would also, by creating a readily identifiable, economically dependent class of permanent “unemployables,” make it easier to single such people out for stricter control, isolation from society at large, or sterilization.

In short, if making a living was especially hard for you, the goal of many Progressives was to make it even harder -ideally, impossible- until they had forced you out of the labor force entirely and stripped you of whatever income, autonomy, and dignity being able to work had given you. This would raise wages for the workers who were left, redistributing resources upwards. The fact that minimum wages are disproportionately harmful to the employment prospects of the most disadvantaged members of society was a benefit because it was the most disadvantaged members of society that eugenicist Progressives wanted to harm.

The “problem” that the minimum wage was supposed to solve for many of its supporters was that a free market in labor was too good for the people on the bottom. Even in an only relatively free market operating in a society where racism was rife in both law and culture, there was still too much money being made by the poor, too much opportunity for outsiders, too much of a tendency to reward people for their productivity instead of irrelevant characteristics, too much acceptance of difference, too many chances to gain experience, skills, or savings that might allow the people so many "reformers" despised to make better lives.

The advocates of this were not fringe figures. Eugenics was a recurring theme of the still-extant and eminently respectable American Economic Association, a progressive institution through and which proclaimed at its birth that “the doctrine of laissez-faire is unsafe in politics and unsound in morals.” Proponents of the idea included: Richard T. Ely , the Progressive leader and Social Gospel leader who was a founding member of the American Economics Association and the Christian Social Union, served as AEA president, and actually has a feast day on the Episcopalian liturgical calender. Henry Rogers Seager, another president of the American Economics Association and one of the country's most influential proponents of social insurance- his entire book on the subject is available at the Social Security Administration's official website, in honor of his memory. Sidney Webb, pillar of the Fabian Society, Labour MP and author of the original version of Clause IV of the Labor Party's constitution. And many more.

(If this post seems especially acerbic and unpleasant, I imagine that's why. Spending hours immersing yourself in the thoughts of people who despised you and what you are to the point of making ridding the world of your kind an integral part of a political philosophy to which they dedicated their lives can do that, particularly when the people in question are widely hailed as moral visionaries and their efforts to create a world that nobody would have to share with anyone like you are considered a noble struggle for decency, humanity, and "social justice.")

It's bitterly amusing to think that Herbert Spencer- a libertarian who endorsed charity and mutual aid, and believed that a free society based on voluntary interactions would lead people to develop greater and greater sympathy for others by making fulfilling the needs and desires of others essential to your own economic self-interest- is slandered so often by people on the Left for supposedly believing that the "unfit" should be abandoned to their fates so that they would be removed from the gene pool. Slandered, in other words,by people whose own recent ideological forebears would in many cases have considered even the position falsely attributed to Spencer to be too kind, and wanted the state to actively prevent the "inferior" from being able to support themselves out of the fear that they wouldn't die out if left on their own.

I should note that I certainly don't think that the typical American left-liberal or self-identified progressive today would endorse the sort of program that originally accompanied and animated some of their ideas, or is driven by the same  motives. Instead, it's an example of how incredibly flexible justifications for statism can be: Liberal/progressives support for the minimum wage is rock-solid a century later despite the fact that the arguments given in its support have not merely changed but actually inverted.

Still,  the fact that so many early Progressives were both economic statists and eugenicists was not an aberration or a fluke or an incidental result of the fact that racism in general was more acceptable at the time. Why would someone who had a strong confidence in the desirability of “rational” government management of society under government-appointed intellectuals, trusted in the mainstream science of his times as a guide for his country's technocrats, and rejected the classical liberal/libertarian conception of rights have been anything else? The eugenicists were more consistent thinkers than most people are today; they did not declare that coercive government management of human life was better than the chaos of laissez-faire, reject individualist objections to using state coercion to interfere in peaceful people's lives, and then arbitrarily declare that the gonads were off-limits just because. Coercive eugenics was simply Progressivism applied directly to the human body.

What I hadn't previously appreciated was the way in which Progressive support for eugenics not only sprang from the same basic philosophical roots as Progressive economic statism, which is immediately obvious, but helped motivate it. Makes sense, in retrospect, but it's still a bit jarring to learn; residue of public school propaganda about American history that still hadn't been scraped out, perhaps. (I recall once saying to someone that the purpose of liberal economic interventions like minimum wages seemed to be singling out people with almost nothing and taking it away from them, but it was supposed to be a joke.)

Of course, the fact that many of some form of market intervention's biggest intellectual advocates happened to be despicable assholes with appalling motivations who supported the law precisely because they knew that it would serve the appalling motivations that made them despicable assholes in the first place does not, in itself, prove that the intervention is a bad thing. But a huge amount of economic statism's persuasive appeal, at least in the United States, is built less on the arguments for individual policies than it is on the popular mythology of the noble, righteous reformers who fought to create the modern interventionist state and saved us from the horrors of laissez-faire, and one of the most pervasive and pernicious effects of that mythology is that it encourages the presumption that greater government interventionism in the economy is something that favors the weak against the strong.

I strongly encourage you to read the entire article, available at The Freeman. There are several papers written or co-written by Thomas C. Leonard available online, Economics and Eugenics in the Progressive Era, Excluding Unfit Workers: Social Control versus Social Justice in the Age of Economic Reform, and More Merciful and Not Less Effective: Eugenics and American Economics in the Progressive Era, that are also worth checking out.

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