Zeljka Buturovic and Dan Klein have a new paper about which Americans understand basic economics. Todd Zywicki summarizes:

  • 67% of self-described Progressives believe that restrictions on housing development (i.e., regulations that reduce the supply of housing) do not make housing less affordable.
  • 51% believe that mandatory licensing of professionals (i.e., reducing the supply of professionals) doesn’t increase the cost of professional services.
  • Perhaps most amazing, 79% of self-described Progressive believe that rent control (i.e., price controls) does not lead to housing shortages.

And adds:

Note that the questions here are not whether the benefits of these policies might outweigh the costs, but the basic economic effects of these policies. Those identifying as “libertarian” and “very conservative” were the most knowledgeable about basic economics.  Those identifying as “Progressive” and “Liberal” were the worst.

Tyler Cowen cautions:

My own view is that "who in the general public understands economics best" is very sensitive to which questions we ask.  Libertarian-leaning voters have a better understanding of government failure, but left-leaning voters are more likely to understand adverse selection or aggregate demand management.  Which is a more important topic?  That may depend on the researcher's own point of view.  What's the closest we can come to a value-neutral test of whether elites or the "common man" understand economic reasoning better?

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