Economists and the great unwashed

Economists hate people, people hate economists.

It's a prickly relationship, but one which both sides have learned to live with.

Unfortunately though, it seems not all economists are happy with the status quo.

In the Myth of the Rational Voter Bryan Caplan argues the ignorant masses can be turned into economic rationalists, provided they are given the necessary ideological training, and that once provided with a suitable economic education they will then become rational voters.

Yes, we're not stupid after all, just ignorant.

In a glowing review Caplan's work in the Press, ( Saturday, January 5) University of Canterbury economist Eric Crampton latches onto his findings to launch an attack on those "redneck" conservatives and populists who have the impudence to see the world a little differently from mainstream economists:

"Clustering together the differences between the public and economists on a variety of questions, Caplan concludes that the public is severely biased agianst foreigners, biased against markets, biased in favour of make-work projects, and biased towards pessimistic assessments of how well things are going."

Crampton goes on to describe teaching economics as akin to "teaching evolutionary biology to an incoming class of new-Earth creationists."The general public may be ignorant about many things, like the history of western civilisation or how to write a grammatically correct sentence (damn my English teachers!), but one thing they aren't usually ignorant about is basic economics.

Even the most ignorant skinhead in a medium security prison knows about the law of supply and demand, hence his opposition to immigrant labour. Sure, this may not be the only reason for low wages and increasing economic inequality, but no one can automatically say it is economically illogical for the unskilled and uneducated to be in favour of limited immigration.

To illustrate the public's supposed ignorance of basic economics, Crampton picks the odd example of Labour's introduction of an interest right-off for student loans prior to the last election:

"When Helen Clark in 2005 argued that students wouldn't take on more debt at a zero interest rate, folks up and down the corridor in the economics dept tore their hair out at the sheer irrationality. But the statement seemed entirely reasonable to non-economists."

Well as one of those supposed irrational "rednecks" who Crampton ridicules, I can tell you that Clarke's statement didn't strike me as entirely reasonable, nor did it to most other lay people I spoke to at the time, redneck or otherwise.

If memory serves me correctly, most people, including populist politician Winston Peters, thought it was very risking giving students a full interest right-off and that it might have been more prudent to lower the interest rate a little and reduce tuition fees.

In any case, Labour's student loan interest right-off was just one of a number of policies which may have influenced voters, and I don't think it is reasonable to assume it was the primary reason why Labour won the election.

Of course, just because voters have a basic understanding of economics does not mean they will necessarily vote for policies in the public interest. As economists themselves famously point out, people can be selfish and often like to vote for policies which benefit themselves at others' expense. The most obvious example in New Zealand of voters failing to take account the public good is in the area of pensions. Today, It's largely verboten in NZ politics to talk about means testing for pensions, after the perfectly reasonable surcharge for higher income earners was repealed in 1998.

While Crampton insults the intelligence of New Zelanders, Caplan knocks his fellow Americans for having an stingly, irrational view on foreign aid. No mention of course that the estimated 12 million illegal immigrants in the US maybe dampening American enthusiasm for helping out those in the third world.