Aaron Steelman

English

Research Papers in Economics

E
conomists are famous — or infa-
mous, some would say — for
being unable to reach agreement
on important issues. Harry Truman, for
instance, famously pleaded, “Give me a
one-handed economist. All my econo-
mists say, ‘On the one hand … on the
other.’”
There is some truth to Truman’s
claim. Economics is a science, and there
will always be disagreement about how
to interpret the evidence. This is espe-
cially true when new, and often
contradictory, evidence becomes avail-
able. Still, it’s easy to overstate the
differences. On many matters, main-
stream economists are in basic
agreement — a point that is confirmed
by several surveys conducted over the
past 30 years. 
In 1976, Brigham Young University
economist J. R. Kearl and three col-
leagues sent a list of 30 propositions to
economists around the country. The
respondents were asked to state what
they thought about those propositions,
by choosing one of the following three
options: “generally agree,” “agree with
provisos,” or “generally disagree.” Kearl
and his colleagues looked at the
responses and concluded that “it is clear
from this analysis that the perceptions
of widespread disagreement are simply
wrong.” Digging a little further, though,
they determined that the strongest
agreement was generally found on
microeconomic issues, while macroeco-
nomic propositions yielded more mixed
results. In short, it was harder to find
consensus on the most pressing issues
of the day — inflation and unemploy-
ment, for instance — and thus not sur-
prising that many people perceived
economists as a disagreeable bunch.
Fourteen years later, Kearl and two
new colleagues sent out a similar survey.
And again they concluded that, across a
wide range of issues, “there is much
consensus among economists.” To cite
just a few, more than 90 percent of
respondents agreed that “tariffs and
import quotas usually reduce economic
welfare;” almost 80 percent said that “a
minimum wage increases unemploy-
ment among young and unskilled
workers;” and more than 70 percent
stated that “inflation is primarily a
monetary phenomenon.”
Enter the Public
Having determined that, among econo-
mists, agreement rather than contention
was the norm on many issues, some
researchers have turned to their atten-
tion to the public. What does the public
believe about economics — and why?
A principal source of data on the
public’s attitude toward economic
issues is a 1996 poll done by the
Washington Post, the Kaiser Family
Foundation, and Harvard University
titled simply, the “Survey of Americans
and Economists on the Economy,” or
SAEE. The survey asked 1,511 members
of the public and 250 economists to give
their views on a series of economic
questions that can be grouped into
three broad categories: views of past
and current economic performance;
expectations for future economic per-
formance; and explanations of why the
economy is not doing better. 
The findings of the survey were
reported at length by the survey’s
authors in a 1997 article in the Journal of
Economic Perspectives. They argued that
the data “show a substantial gap
between how the public and econo-
mists view the economy.” In general,
the public tended to believe that eco-
nomic conditions were not as strong as
stated in official government reports,
and they were more pessimistic about
future conditions than the economists
polled. As for explanations, the public
tended to have a much more populist
outlook than the economists. About
two-thirds of the public said that exces-
sive foreign aid spending was one of the
reasons the economy was not perform-
ing as well as it could, compared to just
1 percent of economists. Similarly, 69
percent of the public thought that high
salaries for top executives were hurting
the economy, compared to only 12 per-
cent of economists.
Although the survey was not
designed to determine the reasons the
public holds widely divergent views
from economists, the authors offered
several possibilities, including the fol-
lowing: “Americans do not have a very
good foundation of knowledge about
how the economy operates, and there-
fore they may be having a difficult time
making accurate assessments of how
the economy is performing.” One ques-
tion, in particular, demonstrated “the
public’s lack of belief in market forces.”
Nearly 70 percent said that when prices
go up, it is mainly due to companies try-
ing to manipulate prices to increase
profits, while only 28 percent said price
34 Region Focus • Fall 2005
The public views many positions favored by economists with skepticism. Why? 
BY AARON STEELMAN APART POLES
RF Fall2005 v10 revisedpg34.ps - 10/14/2005 4:23 PMincreases were mainly due to supply and
demand forces.
In a series of papers, George Mason
University economist Bryan Caplan has
mined the SAEE data to better deter-
mine the sources of the public’s beliefs
on economics. He argues that separat-
ing the questions into two categories —
causal and noncausal — reveals some
important distinctions. Causal ques-
tions ask respondents to describe how a
particular variable — for instance,
immigration — affects the economy.
Noncausal questions, on the other
hand, simply ask people to describe
economic conditions — for instance,
whether average family incomes rose,
fell, or stayed the same during the last
20 years.
How the public responded to the
two sets of questions depended on dif-
ferent demographic characteristics. For
causal questions, the respondents’ edu-
cation and ideology are the dominant
factors. For noncausal questions, the
respondents’ income growth is particu-
larly important. 
Consider immigration, a typical
causal issue. “Education exerts an over-
whelming influence on beliefs about
immigration: As it rises, the estimated
severity of the immigration problem
rapidly falls,” Caplan writes. In con-
trast, for real family income, a typical
noncausal issue, people are significantly
more likely to believe it rose over the
last 20 years if their own income did
and/or will grow.
How do we explain the differences?
Caplan argues that on noncausal ques-
tions, respondents are “intuitive
scientists.” That is, they use their own
experience to form beliefs about the
state of the economy. For instance, if
their company is laying off workers,
they are more inclined to believe that
the economy as a whole is performing
badly.
On causal questions, though,
respondents are more inclined to rely
on expert opinion. People with higher
levels of education and more firmly held
ideological beliefs generally have been
exposed to “a bundle of ‘off-the-shelf’
theories” that are unfamiliar to less edu-
cated and ideological people, argues
Caplan. In addition, these variables also
“prompt individuals to reject — as mere
prejudice or propaganda — theories
they encounter in popular culture. 
This is particularly so with education, 
where much time is spent combating
popular misconceptions of nonacadem-
ic origin.” 
One might expect that personal
experience would affect responses to
causal questions as well. For instance, a
worker whose company has moved pro-
duction offshore might be especially
inclined to believe that globalization is
harmful. But surprisingly Caplan has
found that “interest variables” such as
income growth generally do not play a
large role in the formation of causal
beliefs. 
Bridging the Gap
What does this tell us? At least two con-
clusions can be drawn from the survey
data. First, large segments of the public
remain relatively uninformed about
economics. Second, increased educa-
tion can alter people’s understanding of
causal issues. It would seem, then, that
economists should spend more time
exposing the public to basic economic
concepts. (A complicating factor is ide-
ology, which as we have seen also exerts
strong influence on people’s causal
beliefs. Insofar as the ideologically
faithful have already been “converted”
to a specific set of policy proposals,
exposure to new ideas might do little to
change their minds.) 
The incentives that academic econ-
omists face, though, are not consistent
with an approach that would place
more emphasis on economic education.
Economists are unlikely to gain tenure
by writing for a popular audience or by
teaching introductory principles class-
es. Instead, they are rewarded for
producing papers for peer-reviewed
journals.
How can this problem be recon-
ciled? There are some economists who
are able to do both high-level original
research and speak to the public clearly.
Milton Friedman and Paul Samuelson
are perhaps the two best examples. But
they are rare.
Instead of relying on such excep-
tions, economists, in organizing their
profession, might take more seriously
one of the discipline’s central concepts:
the division of labor. Those economists
who are well disposed to making high-
level technical contributions could
generally focus on original research,
while those economists who are skilled
in presenting more elementary con-
cepts to the public could mainly focus
on economic education. For econo-
mists in the latter category, this might
require swallowing some pride. But if
the profession agreed that it should
place a higher value on speaking to the
public, those economists could find that
they would do well by doing good. RF
Fall 2005 • Region Focus 35
Alston, Richard M., J. R. Kearl, and Michael B. Vaughan. 
“Is There a Consensus among Economists in the 1990s?”
American Economic Review, May 1992, vol. 82, no. 2, pp. 203-209.
Blendon, Robert J., et al. “Bridging the Gap Between the Public’s
and Economists’ Views of the Economy.”  Journal of Economic
Perspectives, Summer 1997, vol. 11, no. 3, pp. 105-118.
Caplan, Bryan. “How Do Voters Form Positive Economic
Beliefs? Evidence from the ‘Survey of Americans and Economists
on the Economy.’”  Public Choice, forthcoming.
__. “What Makes People Think Like Economists? Evidence on
Economic Cognition from the ‘Survey of Americans and
Economists on the Economy.’” Journal of Law and Economics,
October 2001, vol. 44, no. 2, pp. 395-426.
Kearl, J. R., et al. “AConfusion of Economists?”  American
Economic Review, May 1979, vol. 69, no. 2, pp. 28-37.
Klein, Daniel B., et al. APlea to Economists Who Favor Liberty:
Assist the Everyman. London: Institute of Economic Affairs, 2001.
Visit www.richmondfed.org for links to relevant sites.
R EADINGS
RF Fall2005 v10 revisedpg35.ps - 10/17/2005 4:24 PM

Poles apart

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Research Papers in Economics