Saturday, December 30, 2006

Does econ make you conservative?

Harvard University’s economics Professor Greg Mankiw is known for his popularity, especially as he seems to actually enjoy teaching introductory economics courses (while most of his peers tend to favor spending time with advanced, post-graduate students). He even runs a blogsite so that he can keep in touch with his students, now dispersed worldwide.

One student posed a question on that site recently that’s actually quite central to the kind of ideological divide we see in Finnish politics today: does the study of economics make people more conservative (or more classically liberal, in academic terms)?

I believe the answer is, to some degree, yes. My experience is that many students find that their views become somewhat more conservative after studying economics. There are at least three, related reasons.

First, in some cases, students start off with utopian views of public policy, where a benevolent government can fix all problems. One of the first lessons of economics is that life is full of tradeoffs. That insight, completely absorbed, makes many utopian visions less attractive. Once you recognize, for example, that there is a tradeoff between equality and efficiency, as economist Arthur Okun famously noted, many public policy decisions become harder.

Second, some of the striking insights of economics make one more respectful of the market as a mechanism for coordinating a society. Because market participants are motivated by self-interest, a person might naturally be suspect of market-based societies. But after learning about the gains from trade, the invisible hand, and the efficiency of market equilibrium, one starts to approach the market with a degree of admiration and, indeed, awe.

Third, the study of actual public policy makes students recognize that political reality often deviates from their idealistic hopes. Much income redistribution, for example, is aimed not toward the needy but toward those with political clout.

These are lessons certainly lost on Finland, where entrenched socialist ideology sees any challenge to its moral precepts as a threat. In fact, most of Finnish counter-arguments focus on the demonization of any contending models to the welfare-state, even to the extent of employing state-sponsored bigotry to ensure the status quo.

2 Comments:

Anonymous Grokodile said...

Interesting. Though, I would counter that some of the implementations are more flawed than the ideals. Following this, I'd propose that modern policies could be used to help make the ideal more attainable, without incurring the entitlement based welfare state.

For example, instead of paying people because they don't have enough income, traditional welfare, perhaps we can find ways to make it easy for people to improve their integration into the economy.

After all, the more people we have in an economy earning higher incomes, the less of a per capita tax burden is required. So, it is inherently in our interest to help the non-productive segments of society become more productive.

Traditional welfare seems to have the naive assumption that giving people money will allow them to find ways to become more productive over time, but that has turned out to be somewhat flawed. It seems that perhaps these traditional welfare policies were created during a period of time that the public had a strong work ethic. That period is well behind us at this point.

Anyway, just some thoughts on the general issues... it's a topic I'm fairly interested in.

1:37 AM  
Blogger USpace said...

Real good points you make, well said, it's refreshing to read a European free-marketeer...


absurd thought -
God of the Universe hates
supply meeting demand...
.

4:37 PM  

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