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GMU Econ Professor Flunks Both Philosophy and Statistics

June 9, 2010

I had the pleasure of reading this gem from Nate Silver over at 538.com, where Nate friggin’ shit-cans the hell out of a libertarian ideologue from GMU. Silver’s is a response to a “study” done by economics professor Dan Klein, who is the author both of the aforementioned study and this op-ed in the WSJ, and who also just happens to be the editor of the journal in which his own study initially appears. Since I’m heading into the mountains for the next two days, I figure I’d better write something interesting tonight. Why not then feed my own boot heel to Herr Professor Dan Klein from the philosophical left. (Howard, this is for you.)

Here’s how Klein’s WSJ article begins:

Who is better informed about the policy choices facing the country—liberals, conservatives or libertarians? According to a Zogby International survey that I write about in the May issue of Econ Journal Watch, the answer is unequivocal: The left flunks Econ 101.

Zogby researcher Zeljka Buturovic and I considered the 4,835 respondents’ (all American adults) answers to eight survey questions about basic economics. We also asked the respondents about their political leanings: progressive/very liberal; liberal; moderate; conservative; very conservative; and libertarian.

Actually, what he should write is that the left flunks libertarian economics 101, which isn’t all that surprising, since many on the left aren’t economically libertarian (though, actually, a surprising number are). If his respondents are playing the game correctly, only libertarians should do well at libertarian economics. It’s an idle curiosity that the “very conservative” ended up faring better than the libertarians.

Here’s a sample of one of his questions, pulled from his op-ed:

“Restrictions on housing development make housing less affordable.” People were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure.

Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of production and exchange, making goods and services less affordable. There may be exceptions to the general case, but they would be atypical.

Since this is the question that Klein himself cites, he presumably finds it representative of the strength of his study. But if this is his understanding of basic economics, he either needs to revisit his own discipline or, if this is what his own discipline holds, his own discipline needs to rethink its suppositions.

It should be patently obvious that all restrictions on housing development do not make housing less affordable. Some restrictions plainly can’t do that, like this restriction: a restriction on making housing less affordable. If you restrict making housing less affordable, then it cannot be the case that this particular housing restriction makes housing less affordable. Maybe it shifts resources in another direction, maybe making something else less affordable, but it doesn’t make housing less affordable. That’s not economics. That’s logic, which Klein apparently fails pretty miserably.

To add insult, some restrictions on housing development may even make housing more affordable, like this restriction: price stabilization and/or rent control.

Oh sure, it can be demonstrated that if you have price stabilization and/or rent control in one sector of the market, then you’ll have price inflation in another part of the market — or, alternatively, you may cause price inflation in a different market altogether, resulting in, possibly, price shifting throughout the market (so maybe cheese gets more expensive, or maybe the quality of the housing decreases) — but if you really stabilize housing prices, you’ll have stable prices, which will make housing more affordable. Ask any New Yorker living in a rent stabilized apartment whether their housing is more or less affordable with rent stabilization. Care to wager a guess at the answer?

I might be accused of switching from housing development to housing simpliciter here, but there are plenty of programs that require affordable housing development to accompany any other real estate development. If you have a requirement that every $5 million house built also pump in subsidies to 20 low-income houses, you’ve made housing more affordable.

So if some crackpot economist comes at you with some cockamamie bullshit about how rent control makes housing less affordable, or about how price controls or subsidies make that particular product less affordable, tell them that they don’t understand what they’re saying, that they don’t understand the nature of the mechanism.

This points to another problem with this question, and one that Nate only picks at loosely when he calls the questions “ambiguous.” The questions are not just ambiguous, they’re loaded. They’re written in such a way that if you support the unfettered free market, then you will fare well as knowledgeable about economics. If, for any reason, you support some sort of market intervention, even to correct for a market failure, you fail the question. As it happens, those who are proponents of some market interventions, maybe even to promote the general welfare, tend to lean left and therefore cannot do well on this exam.

I have many other criticisms of the piece as well, and there’s quite a bit more to say about most of the questions in the original “study,” but the night has gotten away from me and, alas, I have to attend a conference.

In other news, philosopher Brian Leiter asks this provocative question about a different economics professor:

Is David Rose the Most Ignorant Economics Professor in the Country?

Quite possibly:  “[C]onsequentialist moral reasoning has been gaining legitimacy since the 1930s and it began to heavily influence legal ethics after the publication of John Rawls’s A Theory of Justice in 1971.”

Frankly, I can’t hold economics professors too terribly accountable for their poor fielding of philosophical questions, and I personally might have given Rose a pass on this line (particularly given his slight qualifier a few lines down), but it does raise some questions about his understanding of the history of philosophy.

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5 comments

  1. Economics isn’t my strong point, and I agree that Dan Klein was nicely skewered by Silver. But at least with respect to rent control, I get the impression that most economists do agree that it’s a bad idea on the whole. Take Paul Krugman, definitely no conservative and probably not a crackpot, in the New York Times:

    “The analysis of rent control is among the best-understood issues in all of economics, and — among economists, anyway — one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ”a ceiling on rents reduces the quality and quantity of housing.” Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand.”
    (http://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html)

    None of this means that Klein’s poll and study were valid (they weren’t). But at least with respect to rent control, the little I’ve read suggests that on the whole it is a bad idea.

    Thoughts?


  2. The thing is, it may be a bad idea from one standpoint — from the standpoint of quality, say — but if you limit your analysis to affordability, which is what the question asks, then it is not the case that it makes housing less affordable.

    And there’s the rub with the survey: that you can get answers to his questions that are right, that are not ignorant of economics, but that do not jive with his rigged understanding of the world.

    If you want affordable housing, control the rents. You may (and this is a big ‘may’) have crappier places to live, and there may be some pushback in other areas of the market, but you will certainly have cheaper housing.


  3. Rent controls are thought to limit availability, not affordability. OTOH, public housing can expand availability, which is what operates in NYC


  4. I don’t think it’s obvious either way what effect rent controls have on affordability. While rent controls certainly lower the rent on rent controlled apartments, it may cause the prices in the neighboring areas to increase. This is especially likely if the rent controls cause landlords to abandon their buildings because they are no longer profitable (tenants must then seek housing in non-controlled areas leading to an increase in demand in those areas).

    I’m not sure what effect there is if rent controls lead to a mere shortage, as opposed to complete abandonment.


  5. But I agree with your conclusion. The study is awful. This question is especially bad: “Third-world workers working for American companies overseas are being
    exploited.
    Answer: Disagree”

    Certainly that question is a philosophical one, not an economic one. Even if we agree that, for example, sweatshops economically benefit third world workers by giving them jobs they otherwise wouldn’t have had, we might still conclude that the workers are being exploited. For example, I might feed a homeless man under the condition that I’m allowed to punch him in the stomach. Now, I’ve saved him from starving, so he’s overall benefited, but there’s still something vaguely exploitative about that deal.



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