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Friday, October 30, 2015

'On Misunderstanding Economics'

Chris Dillow:

On misunderstanding economics: Most of us have long lamented the general public's lack of understanding of economics. A new paper by David Leiser and Zeev Kril sheds interesting light upon this. The human mind, they say, "is not particularly equipped to think about economics"...
Faced with this..., say Leiser and Krill, people resort to metaphors - the most notorious being that governments should manage the public finances as if it were a household. Worse still, they are often overconfident about the applicability of these metaphors. ...
There is, though, another heuristic laypeople use, which Leiser calls the "good begets good heuristic" (pdf). He shows that people believe that good things cause good things to happen, and bad things to cause bad things. For example, they think a rise in unemployment is associated (pdf) with a rise in inflation because both are bad... What might be more problematic is that people think government spending is bad, and so associate it with rising unemployment.
I've got three observations here. First, the poor public understanding of economics is NOT a partisan matter. It leads both to anti-market attitudes and to anti-Keynesian ones.
Second, the issue here is not confined to the UK...
Thirdly, our political and social institutions do not adequately correct these problems, and might exacerbate them. Politicians and the media tend to pander to misconceptions rather than correct them... It's not just economists who should lament this, but everyone who cares about the quality of our democracy.

    Posted by on Friday, October 30, 2015 at 11:25 AM in Economics | Permalink  Comments (64)


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