Denialism

Is it economics they want taught or religion?

—

by

MarkH
in

The Wall Street Journal comments on some select results from the National Assessment of Educational Progress (NAEP) testing which this year included some questions on economics.

Pop quiz. Which has been most important in reducing poverty over time: a) taxes, b) economic growth, c) international trade, or d) government regulation?

Now this is an interesting question, does it have a simple answer? Here’s what the WSJ says.

We know what our readers would say. But lest you think American young people are slouching toward serfdom, you’ll be pleased to know that 53% of U.S. high school seniors also answered “b.” The latest version of the National Assessment of Educational Progress (NAEP) asked this question, among others on economics, and the results will not please members of the Socialist International, or for that matter the Senate Finance Committee.
…
NAEP reported this week that 79% of twelfth graders passed this first-ever national economics test. Holy Hayek.

What is the evidence that economic expansion is what has reduced poverty over the years, and in which countries? Are they saying that Social security has nothing to do with the drastic reduction in the elderly dying in poverty? Are they saying that basic public health, public education, and basic workers’ rights have had nothing to do with the improvement in conditions since the industrial revolution? It has nothing to do with unions? Organization of labor? Minimum wage etc.? It has just been “economic expansion”? I would like to see the solid proof of that.

Is it just me or is answering “b”, correct for an economics class but incorrect for history?

Here’s a sure sign of a problem Cato thinks that 53 isn’t enough, and that 38% answering taxes or government regulation is a frightening trend.

So here’s the half-empty analysis: Some 38% of high school seniors think either that taxes or government regulation has been the most important factor in reducing poverty over time.

That’s just plain scary. Add it to the very, very long list of reasons why we need to reform our government-mandated system of government youth indoctrination and support educational freedom through tax credits.

That’s it. Now I’m positive “b” is the wrong answer.

Comments

  1. B.B.

    How about all of the above?

    Reply
  2. Matt Penfold

    It strikes me that international trade is likely to lead to economic growth.

    Reply
  3. Owen

    Interesting that the question states “Which has been most important”, implying that they all made some contribution, and then the article treats it as if a) and d) were both actually harmful to growth. First rule of exams – Read the question!

    Reply
  4. MarkH

    Absolutely all of the above would be correct if not for the word “most”. I wouldn’t say that economic expansion hasn’t been helpful for reducing poverty, but “most” helpful?

    I’d say regulation, has had the most effect. How else but with the aid of government through public health, social security, public education, and workforce protection do people have a chance at economic success – or even without it adequate protection from poverty? Did they think that workers rights, fair wages, an end to child labor, etc., would have just sprung magically from the kindnesses of unregulated business as the economy expands?

    Reply
  5. Beneath you

    Denialism from a WSJ Ed or OpEd? I’m shocked.

    Reply
  6. plunge

    I await with bated breath to find out if Murdoch owning the WSJ can actually make the ed page crazier. My bet is that he’ll make it slightly LESS crazy, if only because he isn’t a gold bug as far as I know.

    Reply
  7. factician

    It’s not often that you see essay-style questions being given multiple-choice answers. I think this is a clear case where someone wants so badly for the world to be a simple place that they’re willing to put blinders on to everything else…

    That question is wrong on so many levels…

    Reply
  8. Bob O’H

    Hmmm. Seeing as taxes and international trade need government regulation, and economic growth is unlikely to work without some form of regulation (e.g. to punish the dishonest), I think the answer is trivial. Of course, it explains everything so it explains nothing, but I didn’t set the question.

    Bob

    Reply
  9. Ted

    1. I don’t know where the notion that the WSJ Oped page is the only crazy part of the paper comes from.

    I used to read the WSJ routinely and even the non-oped pages were used for policy and consensus shaping, albeit more subtly. I admit that this perception may be crazy connect-the-dots paranoia but every time some political event loomed on the horizon there would be a swath of stories to influence the outcome (I remember the death tax and the number of stories related to enterpreunership and the goodness inherent in dynastic passing of wealth infrastructure — such as comparing the wineries of California vs. Old Europe and why death taxation shouldn’t hamstring us vs. them needlessly).

    2. There are expected answers on every test and the less nuances you know, the clearer the answer. The simple example is that when you’re tested on the subject by a professor that wrote the book you’re using (supplemental income, that), he’s probably not looking for a differently nuanced answer. You give the expected answer. Yes, economic growth — anything else is just crazy socialism, communism has demonstrably failed, etc, etc.

    3. Americans commonly overestimate future prospects and assign cause differently from Europeans because of the insular nature of US politics and differences of social structures (and impact of war on infrastructure):

    Furthermore, while, according to a recent poll, Europeans have a fairly accurate view about their countries’ economic performance and rank in the world, both in the present and the near future, including their personal prospects, Americans tend to overestimate their own situation. This might contribute to their aversion to taxation and budgetary spending on welfare. As Judt concluded, “the US is not, as it was, ahead of Europe — but it is clearly different.”

    Reply
  10. Colugo

    No, there is a correct answer, and it is b). These other factors are of course important. But economic growth is primary. Without economic growth, all regulation and taxes can do is slice up a very small pie. True, economic growth alone will not guarantee theoretically minimal levels of poverty. But the smaller the economy, the less potentially effective government policy can be.

    The German revisionist school of Marxism, associated with Eduard Bernstein, adjusted to the fact of the absolute rise in industrial wages in the late nineteenth century.

    Also see:

    Paul Krugman
    http://www.slate.com/id/1918

    Krugman argues for a better effort by government to reduce poverty – and criticizes US policy compared to the UK, for example – but of course he knows that growth is necessary to reach First World levels of overall wealth.

    Jagdish Bagwati
    http://www.nytimes.com/cfr/international/slot3_011904.html

    Obviously, international trade is an important factor driving economic growth. (As is technological development.) And government regulation and taxes can help determine levels and severity of poverty in an economy of a given strength and level of growth. No, I am not against government regulation, social safety nets, unemployment benefits, minimum wage, public services, labor laws, etc.

    But raising living standards – and reducing poverty – is not merely a right wing fantasy of the WSJ editors. Do many people have too simple a view of the relationship between growth and poverty? Sure.

    And government regulation and growth are not necessarily locked in a zero sum game. Regulation and other government policies can be conducive to growth by, for example, enforcing contracts, enhancing human capital [education, health etc.], ensuring quality of goods and services, and investment in technological innovation.

    MarkH: “I’d say regulation, has had the most effect.”

    For all of Amartya Sen’s criticism of using economic growth as a sole measure of development or causal factor in reducing poverty, I can’t imagine that he – or any other economist I would take seriously – would accept that. (Maybe you could selectively quote him to make it look like he’s saying that.) That statement only makes sense if you already assume a given size of an economy.

    Reply
  11. MarkH

    No, there is a correct answer, and it is b). These other factors are of course important. But economic growth is primary. Without economic growth, all regulation and taxes can do is slice up a very small pie. True, economic growth alone will not guarantee theoretically minimal levels of poverty. But the smaller the economy, the less potentially effective government policy can be.

    Really? So there is no money without growth? That’s interesting. A slowly growing or stagnant economy of great wealth can not provide money via taxes? Can’t pass regulations? Isn’t this the complaint about every European government? I disagree with your fundamental assumptions.

    The German revisionist school of Marxism, associated with Eduard Bernstein, adjusted to the fact of the absolute rise in industrial wages in the late nineteenth century.

    Beyond inflation? Is there an upper limit? How does it explain the relative difference between highest paid and lowest paid workers over time which suggests worker compensation is decreasing relative to the wealth of companies? Is this rise due solely to the formation of wealth or the inevitable organization of labor?

    Krugman argues for a better effort by government to reduce poverty – and criticizes US policy compared to the UK, for example – but of course he knows that growth is necessary to reach First World levels of overall wealth.

    I actually read this when if first came out, being a big fan of Krugman albeit not quite as strong a believer in the absolute good of globalization. However, isn’t this is a sign that globalization or “c” is more important to reduction of poverty? Without international trade, these workers economies would never have grown, as all they have to offer is cheap labor to a world market. It kind of kills your initial argument that growth is the seed of all good – well if trade plants the seed…

    You then acknowledge this:

    Obviously, international trade is an important factor driving economic growth. (As is technological development.)

    But then I think this is where the critical mistake is made. Just because growth occurs or even needs to occur first (assuming of course the question refers to a developing economy) this does not mean necessarily that workers will see the benefits of their economy or the poor any benefit. I agree, growth is good, it increases the probability that workers may receive money and programs to help the poor will be put in place since their is more money, but that does not mean that it will happen! It is not a guarantee, it like international trade before it, merely sets up the preconditions.

    And government regulation and taxes can help determine levels and severity of poverty in an economy of a given strength and level of growth.

    Exactly. If everyone is poor, of course, no poverty measure will work. Duh. But you can have huge amounts of growth – look at India or China – and still see an incredible disparity between rich and poor. Alternatively you can see very little growth – the infamous Europeans for whom the WSJ always pooh-poohs their economies – and far lower poverty.

    But raising living standards – and reducing poverty – is not merely a right wing fantasy of the WSJ editors. Do many people have too simple a view of the relationship between growth and poverty? Sure.

    And government regulation and growth are not necessarily locked in a zero sum game. Regulation and other government policies can be conducive to growth by, for example, enforcing contracts, enhancing human capital [education, health etc.], ensuring quality of goods and services, and investment in technological innovation.

    Now this question was about a quantitative difference between each of these items in their role of improving poverty. I don’t disagree with what you’ve said, but I don’t see how economic growth more than any other variable is critical. So far we’ve seen international trade is critical in some economies. In others there is growth but huge disparity. I think the linchpin in each case is a progressive government which prevents people from dying in poverty, ensures basic rights, and enables the population to have some social mobility. I think history has shown this to us, and I have not seen convincing evidence otherwise. I want to see data showing that growth alone eliminates poverty in the absence of some kind of progressive government. I just don’t believe it. Without someone to restrain the excess of industry, they will exploit people mercilessly. Business and industry have to be forced to behave, they won’t do it automatically, not as long as more profit is to be made.

    For all of Amartya Sen’s criticism of using economic growth as a sole measure of development or causal factor in reducing poverty, I can’t imagine that he – or any other economist I would take seriously – would accept that.

    Remember, again we’re discussing which has the “most” effect on poverty. Not which is critical to making a healthy economy that could potentially help the poor.

    (Maybe you could selectively quote him to make it look like he’s saying that.)

    WTF? You saying I use the tactics? Point to an example.

    Reply
  12. Colugo

    I’ve got to run, but let me just address this issue for now:

    Mark H: “WTF? You saying I use the tactics? Point to an example.”

    Although it was in response to your statement, the “you” was intended a generic rhetorical “you” – the way the word “one” is sometimes used. A better phrasing would be “Maybe one could selectively quote him to make it look like he’s saying that.” My bad.

    Reply
  13. MarkH

    Ahh, that’s good. I should have read that more charitably I guess.

    I think ultimately what we’ve demonstrated is this is a stupid question. It is too simplistic, and is more a measure of one’s underlying assumptions than knowledge of a specific fact. It would be far more appropriate, clearly, as an essay question (to which the right answer would be either “all” or “none” as clearly poverty reduction has specific preconditions and requirements that no single factor can create).

    Reply
  14. Chi

    Well, economic growth is usually measured exponentially, ie a steady 2% per year. Can you measure Worker’s rights like that? Regulation which eliminates poverty? To me, this suggests the real answer to the question, and this is why I think it is reasonable when real economists tell me that is what the correct choice was.

    On the margin, 10 (100, 231) years from now, a public would be better off with a little bit more of what? Is the main thing missing from wherever poverty exists extra taxes, regulation, or international trade?

    Reply
  15. Colugo

    MarkH: “It would be far more appropriate, clearly, as an essay question”

    We can agree there. Indeed, despite our differences, there is considerable overlap in our views on the role of these factors in poverty reduction. (I also note that in these discussions it’s important to distinguish between long term economic growth trends on the one hand and current growth rate on the other, and between relative and absolute deprivation.) And on further consideration, Sen’s views are more nuanced than my previous post suggested, including reform as both a condition for and determinative of distribution of economic growth. So I’ll take my lumps on that.

    Reply
  16. Suricou Raven

    I am reminded of a debate I got into on a blog titled The Midnight Sun a few weeks ago. It started with the (indirect) linking to a story by a teachers’ publication website detailing the events of a primary school in which students started to construct a lego town in a semi-cooperative way.

    The students managed to form a sort of mini-economy based on the hoarding of rare pieces. Those students with the pieces were happy to play, but the teachers noticed some of the piece-deprived students were unable to participate. After a chance accident destroyed the town, the teachers decided to use the town to teach the children about the importance of shareing and social responsibility – moulding them into a cooperative group in which the students were responsible for distributing the rare pieces according to rules ensuring some level of fairness. In doing so a lot was taught about responsibility and community cooperation.

    When the story reached TMS – a blog with a political affiliation that could be charitably described as ‘extreme right’ – the response was to immediately denounce the teachers for indoctrinating the children into the evils of Communism, and undermining American Values. I cannot really describe some of the posts that were made there, but they are something any debater in the field should be familiar with now. The standard talk about how the liberals/marxists – which TMS regulars know to be synonyms – are using public education to indoctrinate children into communist values, and only abolishing public education entirely can save America from being overrun by ‘moonbats.’ The ‘debate’ – if it can be called that – remains for the curious. Oh, and there was something about the whole thing being some sort of Moslim (sic) conspiricy, but thats a manditory part of any thread at TMS.

    Reply
  17. factician

    I wonder how the WSJ would explain the fact that there has been both growth in the economy and growth in the number of people living below the poverty line during the period from 2001 to 2005. Hmmm… How could that be?

    Reply
  18. TW Andrews

    For a blog concerned with (rightfully) pummeling denialism, there’s more than a trace of it here with regards to economic growth and poverty.

    While regulation and taxes can both make big differences in ensuring resources are distributed equitably, in order to alleviate poverty, those resources have to be available in the first place.

    In the United States, and most of the developed world, sufficient resources are already present that regulation and taxes could be used to reduce poverty. It’s hard to imagine however, how additional taxes or regulation will lift people out of poverty in rural India, China or Africa.

    Reply
  19. MarkH

    Wow, way to not read any of the discussion TW.

    As it should be clear from my exchange with Colugo, the issue is that it’s too simplistic to say it’s just one thing. I acknowledged the importance of the economic preconditions (which for the countries you list are dependent first on international trade by the way), but also pointed out that without honest government and social justice, it’s entirely possible to have high growth and high poverty.

    It’s hard to imagine however, how additional taxes or regulation will lift people out of poverty in rural India, China or Africa.

    Hard to imagine? Really? You cite two of the worst examples for your position. China and India have undergone the fastest growth over the last few decades than almost any other country. China’s growth is about 4 times ours. “economic growth” it would seem does not instantly provide for lower poverty and social justice. What is needed, especially in the case of China, is a free and just government that is responsive to the people. Something they sorely lack.

    Reply
  20. Maria

    “economic growth” it would seem does not instantly provide for lower poverty and social justice.

    Well, I would argue that nothing instantly provides for lower poverty and (presumably higher, heh) social justice. Regulation, taxes and international trade don’t have instant effects either.

    Part of the problem, as has been mentioned already I think, is that there’s a confusion of poverty in the sense inner cities in the US are poor, and poverty in the sense rural India is poor. It’s quite reasonable that in the US, changing the rules of the game (via taxes, regulations, or targeted social programs – which are none of the above yet are conspicuously absent from the options in the test) could reduce poverty. Then again, I don’t really know and I don’t think anyone does – I’d just rather believe that something *can* be done.

    A second problem is the confusion of causes and consequences. How “economic growth” can be considered the cause of anything is quite beyond me. At best, policies/institutions/conditions that encourage growth may be said to also bring about reductions in poverty. Or the converse: policies that reduce growth may result in lower rates of poverty reduction.

    It seems obvious that reducing poverty in extremely poor countries requires economic growth – there just isn’t that much to go around to begin with. And I should say that in India and China it seems that growth has achieved a reduction in poverty – even if inequality has also risen and life conditions are still for the most part appalling.

    But what is the counterfactual here? Take the Chinese/Indian political structure and add more regulations or taxes? I agree with Mark in that a more participatory regime would probably improve conditions in China. But would it do so “instantly”? Or even measurably fast? Indonesians have had a more open government for 10 years and it still seems impervious to reform. Can this process be accelerated? I don’t really think so.

    Since I seem to be rambling, I’ll just add that while Mark and I would probably disagree on the role of some of the regulations mentioned in the post, I agree that all of the answers are, taken separately, wrong. And I think some of the true answers are missing.

    Reply
  21. TW Andrews

    Wow, way to not read any of the discussion TW.

    True enough–I didn’t, and your comments in the discussion are considerably more nuanced than the original post.

    I’ll agree with you about a “free and just government” being another of the preconditions for effective reduction of poverty, but I don’t really consider that synonymous with more regulation and/or higher taxes. Such a government may produce more regulation and raise taxes, but that’s not what makes it free/just.

    In any case, it just seemed like the implication of the original post was that anyone who thought that, of the four items listed, growth was the most important factor in reducing poverty was just wrong, and that seemed more than a little silly to me.

    Reply

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