A small firestorm ignited when the Chair of the President’s Council of Economic Advisers said, “Outsourcing is a growing phenomenon, but it’s something that we should realize is probably a plus for the economy in the long run.” Hearing the comment on the radio (2004), I thought it was a nonevent–an opinion with which many of us would agree.
However, the press, politicians, many citizens and even N. Gregory Mankiw’s boss, President George Bush, quickly distanced themselves from the position.
The reaction, it turns out, was entirely predictable. Comparing answers to a list of common economic policy questions on topics that ranged from free trade to the banking bailout, 2 economists concluded that average Americans not only disagree with but also they care little about economists’ opinions. To make it even worse, when the average Americans in the study were told the economic consensus, the gap remained or grew!
The Economist presented the results for 6 questions:
Our bottom line? Improved financial and economic literacy might make a difference. However, as Zingales and Sapienza point out, individuals could perceive questions more personally than economists. That led me to ask if the real key to the “average American’s” answers is self-interest. And that returns us to Adam Smith and the role of self-interest as a fundamental behavioral incentive.
Sources and Resources: I especially recommend looking at the end of the Zingales/Sapienza paper for the 19 areas on which they focused, then at the discussion of economists’ opinions in the Gordon/Dahl discussion and to Planet Money for an interesting podcast and blog on the topic. H/T to The Economist for their graph (above) and links to the studies. Finally, my Mankiw quote came from a NY Times article.