Monday, November 08, 2010

Economics of "Economics of"

In the three years I've been blogging, I've done over 50 "economics of" posts. What's the value in trying to use economics to explain everything? I've mentioned before that libertarianism is tied to political knowledge. And apparently, the ability to "think like an economist" is tied to intelligence. First let's clarify how economists think:
they're more likely to be optimistic about the economy; to recognise the economic advantages of markets free from government interference, and the advantages of foreign trade and foreign workers; and to appreciate the economic benefits of achieving greater productivity with less man-power.
Here's the results of the study from Bryan Caplan:
Prior research has established that the more time a person spends in education, the more likely their broad economic views are to match that of the typical economist (pdf). Caplan and his colleague Stephen Miller point out that these studies failed to take into account the influence of intelligence. After all, it's known that people with higher IQ tend to spend longer in education and intelligence itself may also directly influence economic beliefs.

To overome this problem, Caplan and Miller have focused on answers to the General Social Survey, a massive US poll of national opinions performed every two years. Crucially, it includes questions about the economy and a small test of verbal IQ.

Caplan and Miller's finding is that the link between educational background and 'thinking like an economist' is weakened when IQ is taken into account because IQ is the more important factor associated with economic beliefs.
Hat tip to best of "economics of", Freakonomics.

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