What economists do

Greg Mankiw with a graphic of the current internet viral meme...

The first one reminds me of when my son and his friend came to my office one day. They'd visited his friend's dad's office (who is an architect) and presumably seen lots of drawings and models.  When they came to my office, the first question was "So where's all the money then?"

IGM Forum - what economists think.

The IGM forum is a group of economists that publish opinion pieces on major policy issues.  It all sounds very academic - but the topics that they address are pretty interesting and very relevant.

For example:

• Buy American requirements in the 2009 stimulus bill did not have a big impact on US manufacturing employment.
• Investors cannot reliably forecast stock prices.
• A 1% increase in the top Federal tax bracket would half cumulative budget shortfalls.

Lionization of small business

Much is made of how small businesses are the main source of job growth in the economy.  Turns out this is not really true.  Start ups create jobs (and also destroy jobs if the fail), but existing small businesses as a group don't contribute that much to the overall jobs picture.  As usual, my favorite finance blogger, Felix Salmon has the scoop.

Supply and Demand for Corn

And then there is corn.   The Government subsidizes corn production, mandates its use in ethanol and imposes import restrictions.   The amount of corn being used for ethanol now exceeds that being used for food.  At the same time, ethanol production is doing nothing for the environment or oil prices.  Brilliant.

Reposted from Felix

Supply and Demand for Chicken

The USDA is buying $40 Million of chicken because, apparently there is an oversupply.   I have no comment.

Who knows more about economics - the right or the left? The sequel.

About a year ago a blogged about a study (that got a lot of press) that purported to show that those on the left seemed to have a poorer understanding of basic economics than those on the right.  A criticism of the study was that most of the correct answers were what you might call "pet issues" of the right or those with a more libertarian leaning.  

Like all good researchers, the authors of the first study saw an opportunity for a follow up study which also included questions that might play to left or progressive leaning individuals.  A nice summary of the new findings is here, and the link to the full article is here.

The bottom line:  when the correct answers to the questions are consistent with more liberal view points, the leftward leaning survey takers do a lot better than their conservative counterparts.   In fact, the authors conclude:

However, the new test consisting of all 17 questions yielded results that vitiated prior evidence of the left being worse. Now, all groups do poorly, with each group tending to do relatively poorly on the questions challenging its positions

Hopefully the Wall Street Journal will publish a follow up to their original article...although I'm not betting on it.


Via: Tyler Cowan, Marginal Revolution.

Economic Misconceptions

The marginal revolution blog has an interesting post about students' misconceptions about economic theory.  The comments following are also pretty interesting.

Who knows more about economics - the right or the left?

According to a recent survey, right wingers (libertarians and republicans) understand basic economics better than left leaning liberals. The differences were really quite dramatic.

As a bleeding heart I'd like to say that I am shocked and sure it can't be true, but truth be told, the findings are not surprising to me. The article is summarized in the Wall Street Journal here, and the full article is here.


The questions asked are as follows - you can do the test yourself...



1. Restrictions on housing development make housing less affordable.

2. Mandatory licensing of professional services increases the prices of those
services.

3. Overall, the standard of living is higher today than it was 30 years ago.

4. Rent control leads to housing shortages.

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

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

7. Free trade leads to unemployment.

8. Minimum wage laws raise unemployment.




The unenlightened (wrong) answers are as follows...

1.Disagree
2.Disagree
3.Disagree
4.Disagree
5.Agree
6.Agree
7.Agree
8.Disagree