by Alexander Green, Chief Investment Strategist
Wednesday, August 18, 2010: Issue #1326
Could reading Investment U cause you to switch party affiliations or change your vote?
Hardly. Political affiliations are generally a combination of values and interests. Few individuals seriously question their notions of right and wrong or have trouble identifying those policies that further their own self-interest.
That’s why political discussions – even the few conducted at relatively low decibel levels – seldom result in anyone changing his or her mind. But according to Dr. Daniel B. Kline, a professor of economics at George Mason University, perhaps some of us should…
How Would You Fare on This Question?
In the May issue of Econ Journal Watch, Dr. Klein cited a recent Zogby International survey, which found that self-identified liberals do very poorly on questions of basic economics.
Zogby asked 4,835 American adults to answer eight survey questions on simple economics and asked respondents to also identify their own political leanings from liberal/progressive to conservative/libertarian.
Consider one of the questions: “Restrictions on housing development make housing less affordable.”
Survey participants were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree: or 5) are not sure.
An answer was only considered wrong if it was flatly unenlightened. (In this instance, “somewhat disagree” or “strongly disagree” were considered wrong. Answering “not sure” was never counted as incorrect.)
An “F” for the Left
Of course, basic economics acknowledges that whatever redeeming features a restriction may have, anything that increases the cost of production or reduces supply will increase the cost to consumers.
Yet 60.1% of respondents who identified themselves as liberals missed this question, as did more than two-thirds (67.6%) who called themselves “very liberal.”
And so on…
Respondents who identified themselves as very conservative or libertarian missed an average of 1.38 of the eight questions. Those who identified themselves as very liberal or progressive missed an average of 5.26 (a clear “F”.)
The Most Dangerous Economic Myth
Of course, everyone is entitled to their own opinion. But everyone is not entitled to their own facts.
Klein concludes that, “The left has trouble squaring economic thinking with their political psychology, morals and aesthetics.”
I have a strong suspicion that most readers agree. Why?
Because our mail shows that the overwhelming majority of investment readers -perhaps more than 90% – identify themselves somewhere on the conservative/libertarian end of the spectrum.
In some ways this is mystifying. After all, we all have financial needs. We all dream of retiring comfortably some day. But, here again, liberals and conservatives have different views about how this goal should be achieved.
Conservatives have a strong conviction that it is their own responsibility to work, save and invest to ensure some measure of financial independence. Yet surveys regularly show that the majority of liberals feel it is the responsibility of their employer or the federal government to provide for them in retirement.
Of all the economic myths, this one may be the most dangerous. Yet the fact that you’re even reading this column suggests there’s not a 1-in-10 chance you believe it.
Perhaps you should pass it along to someone who does.