Economic Beliefs and Economic Attitudes: Results from Principles of Economics

Dan Settlage, Latisha Settlage, & Jim WollscheidUniversity of Arkansas – Fort SmithOctober 27, 2011

Presentation Outline

•Motivation of Research•Summary of Methods Used

▫Knowledge Survey▫Attitude Survey

•Discussion of Results▫Descriptive Statistics▫Evidence of Change

•Directions for Future Exploration

Motivation of Research• Economics students often begin principles courses

with preconceived notions (often false) that shape their worldview and influence their learning environment.

• Selected Literature▫ Table 1 – Chapter 2; “Principles of Economics”

N. Gregory Mankiw▫ “The Myth of the Rational Voter”

Bryan Caplan▫ “Survey of Americans and Economists on the Economy”

The Washington Post/Harvard University▫ “Initial Misconceptions in a Macro Principles Class”

William Goffe

Motivation (cont.)

•We seek to answer the following questions:▫How knowledgeable are principles students

about general economic conditions? Inflation, unemployment, economic growth

▫Is knowledge correlated with attitudes regarding basic economic principles?

▫Do we make a difference in the classroom?

Summary of Methods Used

•Two surveys were administered to principles of economics students (start of spring 2011)▫Knowledge Survey▫Attitude Survey

•Surveys completed by both macro and micro students.▫278 observations (56% macro)

Summary of Methods Used

•Knowledge Survey▫Descriptive statistics compiled and

compared to correct answers.•Attitude Survey

▫Histograms of responses.▫Relationship between attitudes at the

beginning and end of the semester examined.

Knowledge Survey – Historical Perspective•Considering period from 1950 to today,

students were asked to provide average annual percentages, max rate and min rate for:▫Unemployment▫Inflation

•Also asked to identify:▫Number of recessions since 1950

Average length in months Longest and shortest

▫Growth in real income

Knowledge Survey – Current Perspective•Also asked to provide current percentages

for:▫Unemployment▫Inflation▫Workers employed at minimum wage jobs▫Proportion of federal income tax paid by top 20

percent of income earners▫Proportion of federal income tax paid by

bottom 20 percent of income earners▫Prices controlled by government▫National debt relative to national income

Economic Attitudes Survey

•Students asked to rank their agreement or disagreement with various economic statements.

•Likert scale:▫5 – strongly agree▫4 – agree▫3 – neither agree or disagree▫2 – disagree ▫1 – strongly disagree

Economic Attitudes Survey• Example statements:

▫Trade/immigration is beneficial to U.S. economy.▫Govt should restrict companies from outsourcing

work.▫Taxes are too high for the poor/rich.▫ Income has increased faster than the cost of living.▫The national debt is too big.▫ Inflation/unemployment is a big problem in the U.S.▫Minimum wage is too low.▫Social security will be there for me when I retire.▫Government should control more prices.

Results – Unemployment RatePre-SurveyMedians

Post-Survey

Medians

Actual Data

Average annual %(1950-today)

10 8 5.7

Highest annual %

16 12 9.7 (1982)

Lowest annual %

5 4 2.9 (1953)

Current 11 9 9.4 (Dec ‘10)

Future 10 8 N.A.

Results – Inflation Rate

Pre-Survey Medians

Post-Survey

Medians

Actual Data

Average annual %(1950-today)

16 10 3.7

Highest annual %

25 15 13.5 (1980)

Lowest annual %

5 5 -0.3 (2009)

Current 10 5 1.1 (Nov ‘10)

Future 10 5 N.A.

Results – Misc. Econ. Knowledge

Pre-Survey

Medians

Post-Survey

Medians

Actual Data

Percentage growth in real income

20 21 226

Percent of workers earning min wage

40 30 1.3

% of fed inc tax paid by top 20% 33 40 69.3

% of fed inc tax paid by lowest 20%

20 15 0.8

Results – Misc. Econ. Knowledge

Pre-Survey

Medians

Post-Survey

Medians

Actual Data

Percent of prices controlled by govt

50 20 N/A

U.S. percent of world manufact.

22 30 20.2

China percent of world manufact.

45 30 13.9

Debt as % of national income 68 66 62

Pre-Survey Average (Blue) 4.50Post-Survey Average (Red) 4.68Difference (Post-Pre) 0.18

1 2 3 4 50%

10%

20%

30%

40%

50%

60%

70%

80%

Trade Is beneficial to U.S.

0%

200%

400%

600%

800%

1000%

1200%Immigration is beneficial to U.S.

Pre-Survey Average (Blue) 3.27Post-Survey Average (Red) 3.37Difference (Post-Pre) 0.09

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

40%

Immigration is beneficial to U.S.

Pre-Survey Average (Blue) 3.01Post-Survey Average (Red) 3.52Difference (Post-Pre) -0.51

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

40%

The U.S. should restrict employers from outsourcing work to other coun-tires

Pre-Survey Average (Blue) 2.58Post-Survey Average (Red) 2.50Difference (Post-Pre) -0.08

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

40%

Taxes are too high for the poor

Pre-Survey Average (Blue) 3.45Post-Survey Average (Red) 3.24Difference (Post-Pre) -0.21

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

Taxes are too high for the rich

Pre-Survey Average (Blue) 2.58Post-Survey Average (Red) 2.80Difference (Post-Pre) 0.22

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

Income has increased faster than the cost of living

Pre-Test Average (Blue)4.60Post-Test Average (Red) 4.40Difference (Post-Pre) -0.20

1 2 3 4 50%

10%

20%

30%

40%

50%

60%

70%

80%

The national debt is too big

Pre-Test Average (Blue)3.65Post-Test Average (Red) 3.32Difference (Post-Pre) -0.32

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Inflation is a big problem in the U.S.

Pre-Test Average (Blue)4.29Post-Test Average (Red) 3.98Difference (Post-Pre) -0.31

1 2 3 4 50%

10%

20%

30%

40%

50%

60%

Unemployment is a big problem in the U.S.

Pre-Test Average (Blue)3.45Post-Test Average (Red) 3.23Difference (Post-Pre) -0.22

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

40%

Minimum wage is too low

Pre-Test Average (Blue)2,43Post-Test Average (Red) 2.10Difference (Post-Pre) -0.33

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Social Security will be there for me when I retire

Pre-Test Average (Blue)2.64Post-Test Average (Red) 2.46Difference (Post-Pre) -0.18

1 2 3 4 50%

5%

10%

15%

20%

25%

30%

35%

The government should control more prices

Directions for Future Exploration•Administer a demographic and

personality survey.▫Link perception and knowledge to

demographic variables as well as locus of control measures

•Capture student knowledge and perception beyond principles sequence (i.e., as an incoming freshman and senior).

Thank you for your attention and participation!

Questions??

Dan Settlage, Latisha Settlage, Jim WollscheidUniversity of Arkansas – Fort Smith