What Do "We" Think About The Economy

What do “we” think about the economy?

Dr. Steven MyersAssociate Professor of Economics

The University of AkronPrepared for presentation on October 27, 2009 to the Annunciation Greek Orthodox Men’s Club, Akron, OH

Took College Economics Have not taken College Economics

Checks news daily or several times a day

82% 59%

Gov’t provided health insurance Good for the economy

42% 57%

Free Trade is good for economy

70% 55%

Capitalism has failed 12% yes / 51% no 25% yes / 37% no

Cash for clunkers a good use of funds?

36% 40%

Financial Bailout of Wall Street calmed markets

43% 25%

Stimulus helped the economy

41% 35%

Classroom survey research project in my Computer Skills in Economic Analysis course, Oct 2009, 489 respondents.

25. Do you think the current price of gasoline is too high, too low, or about right?

26. Which do you think is more responsible for the recent increase in gasoline prices: the normal law of supply and demand, oil companies are trying to increase profits, both, or neither.

Economists Too high Too Low About Right

Noopinion

General Public

75% 4% 21% 1%

Economists 7% 42% 46% 5%

Supply and demand

Oil companies profits

Both Neither Noopinion

General Public

22% 73% 2% 2% 1%

Economists 85% 8% 3% 3% 1%

Survey of Americans and Economists, Kaiser Family Foundation, 1996

What do others think about economists?

• Give me only one armed economists!– Harry Truman

• If you lay all of the economists in the world end to end you won’t reach a conclusion.

How economists think

• Incentives matter• Actions occur at the margin• Economists watch what people “do” and not

what people “say.”• Tradeoffs always exist• Opportunity costs• Unintended consequences

“That which is seen, and that which is not seen” - 1850

Between a good and a bad economist …—the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee.

“the whole of economics can be reduced to a single sentence.”

First 1946, then revised 1978

The sentence:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.First 1946, then revised 1978

But …

“… bad economists present their errors to the public better than the good economists present their truths.”

First 1946, then revised 1978

Broken Window Fallacy

Broken Window FallacyCan not create jobs or wealth –by destruction–Or force–Or Coercion (by Government)

If we could, let’s break them all.

Health Insurance Reform

In the first 10 years:

• It will be deficit neutral– Christine Romer, Chair

CEA

• It will have a 10 year surplus of -$81 Billion.– CBO

Health Insurance Reform

In the first 10 years:

• It will be deficit neutral– Christine Romer, Chair

CEA

• It will have a 10 year surplus of -$81 Billion.– CBO

Levin Foundation

• First 10 years– Deficit 89 Billion

• Second 1o years– Deficit of $1,007 Billion

The Peterson Foundation Report.pdf

Individual v. CollectiveFreedom v. Coercion

Private Markets v. Government Provision

Is the economy “broken?”

Has Capitalism Failed?Agree or Strongly Agree

Disagree or Strongly Disagree

Strong Agreement – Strong disagreement

Took a economics course in college

11%

Did not take a college course in economics

25%

Left Leaning 23% 34% 0

Middle of the road 21% 46% -12

Right Leaning 12% 64% -23

Classroom survey research project in my Computer Skills in Economic Analysis course, Oct 2009, 489 respondents.

The Forgotten Man

“A”Progressives

“B”Politicians

“C”Everyone Else

“X”The Unfortunate

1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938

-5000

-4000

-3000

-2000

-1000

0

1000

2000

Deficit 1920 to 1938 -- The New Deal

1901

1903

1905

1907

1909

1911

1913

1915

1917

1919

1921

1923

1925

1927

1929

1931

1933

1935

1937

1939

1941

1943

1945

1947

1949

1951

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

-1600000

-1400000

-1200000

-1000000

-800000

-600000

-400000

-200000

0

200000

400000

-1417121

Federal Budge Deficit 1900-2009

We paid off WWII$1.4 Trillion isn’t so big.

http://politicalmath.wordpress.com/2009/08/25/willful-omissions-from-paul-krugman/

http://www.lewin.com/content/publications/The%20Peterson%20Foundation%20Report.pdf

http://online.wsj.com/article/SB10001424052748703746604574461610985243066.html

http://perotcharts.com/2009/08/comparison-of-share-of-income-to-income-taxes-paid-in-2007/

http://perotcharts.com/2009/07/income-taxes-paid-by-individuals-in-2007/

http://michaelscomments.files.wordpress.com/2009/09/augustunempdata.jpg

Dr. Steven Myers

myers@uakron.eduhttp://gozips.uakron.edu/~myers