Promoting Economic Communication

by Don Boudreaux on January 11, 2007

in Economics

The economic way of thinking — to use the title of my favorite textbook — is essential for grasping the complex reality that we call economy and society.  Also essential is clear and compelling communication of economic insights to a broad audience.

Alas, too few good economists have excelled at talking crisply and vividly to non-economists.  The great communicators — Milton Friedman, Walter Williams, Thomas Sowell, Steven Landsburg, Russell Roberts, and (of course) Frederic Bastiat — are the exceptions.

We here at GMU Economics are doing our share to help remedy the problem: Russ Roberts teaches a graduate seminar each year for students who wish to enhance their skills at translating their economic knowledge into compelling prose.

Another effort underway along these general lines is being sponsored by the Market-Based Management Institute (along with the Association for Private Enterprise Education)Here’s the link to their Economic Communication Contest.

I urge students to enter, and professors to alert promising students to this opportunity.

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{ 29 comments }

Scott Peterson January 11, 2007 at 11:36 am

I agree 100% with your thoughts regarding economic communication. Obviously, a blog can be an useful tool in this regard. Presumably, you encourage your students to blog as a means of honing their communication skills.

Unfortunately, I think that a majority of people in any country could be considered to be illiterate regarding economics.

matt January 11, 2007 at 12:25 pm

The MBMI needs to better communicate its contest parameters.

Dom January 11, 2007 at 12:48 pm

THOSE SNAP POP-UPS ARE DRIVING ME NUTS. THEY KEEP POPPING UP WHEN I'M SCROLLING ALONG.

Student January 11, 2007 at 2:01 pm

Allow me to rephrase for Dr. Boudreaux…

"Alas, too few good economists THAT I AGREE WITH POLITICALLY have excelled at talking crisply and vividly to non-economists."

Since that's apparently what he meant to say.

Randy January 11, 2007 at 4:05 pm

Student has a point. There are many "economists" making a living by reinforcing popular prejudice – and doing quite well. Of course, how difficult can it be to find the right words to reinforce popular prejudice?

True_Liberal January 11, 2007 at 6:59 pm

In my mind (I'll be 65 next month) Econ and critical thinking are closely related. Without the latter, one won't have the tools to understand or employ the former.

Unfortunately the basic supply-demand curves are a abstraction that even some college students cannot seem to get their heads around.

Ray G January 11, 2007 at 7:15 pm

"Alas, too few good economists . . . . THAT I AGREE WITH POLITICALLY . . . have excelled at talking crisply and vividly to non-economists."

Pandering to the lowest common denominator with easy to shovel populist drivel doesn't quite meet the definition of "crisply and vividly" describing good, sound economics.

undergroundman January 12, 2007 at 4:40 am

"Pandering to the lowest common denominator with easy to shovel populist drivel doesn't quite meet the definition of "crisply and vividly" describing good, sound economics."

Calling some of the best economists and Nobel Prize winners of history populist idiots does not exactly help your case for the University of Chicago perspective, buddy.

I like Milton Friedman, but I think a lot of his analysis get fucked up by conservatives who really don't know what they're talking about, but pretend they do. And you have to keep in mind that there are always trade-offs. Friedman believed in legalizing all drugs, completely. There is not a clear benefit to such an action (I believe there is a clear benefit to legalizing marijuana). The price elasticity of hard drugs is likely very high, and their addictive potential is enormous. If everyone was like me (highly resistant to drug addiction), then I could see legalizing all drugs — but they're not. Legalize —> price goes way down, quantity demanded goes way up. Supply goes up, sure, but the fact is that drugs would be dirt cheap if legalized, no matter how much is demanded. The benefit may lie in the fact that many of these numerous people would die and less reduce the societal burden — but then again, what if they don't and we have to support their damaged bodies? (I think the brain-damage aspect of most drugs is highly exaggerated, however.)

In Free To Choose, Friedman also comes down on labeling and safety regulations, as "the free market" will always do it. Blatantly false. Consumers suffer from imperfect information — we don't know whether something has hazardous chemicals in it. Some allergy sufferers are a small part of the population and industry will not take the time to post allergens unless it's imposed on them. I, along with 1-3% of the population, have celiac sprue — I'm allergic to gluten. There are no regulations on labeling gluten. Sure, a small market of goods labels, but most of them don't test. All I want is a decent labeling system in which it's labeled if there are gluten ingredients in the food. It wouldn't be that hard — but I can't force industry to do, no matter how many times I send letters, call, email, ect.

In Capitalism and Freedom, Friedman comes out in favor of a negative income tax credit. Yep, that's right. An efficient method for redistributing wealth to the poor, incrementally decreasing as income goes up to allow for an incentive to work. Friedman wasn't at all the crazy "let people starve if they can't find work" guy that people think of him as. (I don't agree with giving too much cash to the poor, though, because too often they will spend it on stupid shit.)

RayMofda January 12, 2007 at 8:24 am

What's the difference between 'compelling prose' and 'spin'?

Lee January 12, 2007 at 8:56 am

"Friedman believed in legalizing all drugs, completely. There is not a clear benefit to such an action"

Benefit to who? The mistake is in assuming that there can be anything for "the good of society." To begin arguing from this premise is to begin from a gross philosophical error, because any choice can only be "for the good" of anything relative to values, motivations and incentives. The problem is that each of us is different in these respects, such claims of acting for the "good of society" are simply a smokescreen to hide authoritarian ideals.

The fact is that many drug users are comfortable with their habit, and very few plan on keeping it indefinitely. They no doubt believe that their habit is for *the good fo themselves*, for their social life, relaxation, happiness etc. The fact that some drug users becomes seriously addicted and occasionally dangerous should not concern us, partly because these people were usually headed down a criminal path *before* using drugs, but mostly because nobody would consider it sensible to force everyone to diet just because some people are obese.

I think Friedman well recognised this, and knew that life is not just about maximising efficient energy use, but about satisfying individual human desires, in a way which preserves liberty. The reason why the free market also brings prosperity, is because human happiness tends to be a pretty close approximation of efficient energy usage, a legacy of natural selection's ever ongoing struggle with entropy.

Lee January 12, 2007 at 9:01 am

What's the difference between 'compelling prose' and 'spin'?

Spin is a deliberate attempt to obscure or twist the truth. While compelling prose may or may not be an attempt to honestly convey the truth.

In other words, spin might be compelling prose, but not all compelling prose is spin.

Matt C. January 12, 2007 at 9:13 am

undergroundman-you have made you point and did it by cursing (I don't agree with you). Poor taste, if I may say so.

Your last statement does point to the elitism of the left's dogma and the idea that people can't make a decision for themselves. People buy "stupid" stuff when they are given money because they didn't earn it. They didn't reallocate their time for that money, it becomes a cycle of dependance on the government. There was a very influential women in the business of providing charity during the 19th century, I can't remember her name, but she even came to find that by simply giving money away it was not helping the poor.

Regarding consumers imperfect information and legalize drug use. People have free will and they must make a decision. I can still purchase drugs even today, but why haven't I? It's not because of the price. I made the CHOICE! Because I believe it was not in my best interests. There are also other markets where the consumer has imperfect information, but what has come about? There are magazines and ratings companies that expound on the ability of the items. Robert Higgs has argued, even in prescription drugs that private companies would have the incentive to pay for outside companies to rate their products. He even points out that insurance companies review the test and make a decision whether to offer the drug to its clients whether it has been approved by the FDA.

I work in the financial services industry and we have Moody's, S&P and Fitch. Did you know that financial services companies PAY to be rated? Why? Because consumers demand it. Notice even stocks have ratings systems. The government already says that the stock is a legal offer, they don't offer quality ratings, but just because it's "legal" doesn't mean that its a good investment. So you have Morningstar and the Motley Fool that provide CONSUMERS review of the stock.

I think you underestimate the ability of consumers to make the best decisions for themselves.

Randy January 12, 2007 at 10:25 am

Undergroundman,

I, (and I believe many others), favor a negative income tax as well (EITC). The minimum wage makes little sense at all with that option available. If the society believes that anyone who works should make a certain amount of money, then let the entire society chip in to pay for it. Taxing the employment transaction may help a few (in the short term, anyway), but comes at the expense of those most in need of employment opportunities.

Doug January 12, 2007 at 10:30 am

Undergroundman,

You might want to check out these sources re: drug prohibition:

An economic treatment of drug prohibition:
http://www.amazon.com/s/ref=nb_ss_gw/103-8838162-5606219?url=search-alias%3Daps&field-keywords=drug+war+crimes&Go.x=0&Go.y=0&Go=Go

A general argument against drug prohibition:
http://www.amazon.com/Legalize-This-Decriminalizing-Practical-Ethics/dp/1859843204/sr=8-1/qid=1168615483/ref=sr_1_1/102-4626914-9076160?ie=UTF8&s=books

Friedman talking at length about drug legalization:
http://www.youtube.com/watch?v=Se_TJzB9-z0

And finally, for a funnier look at drug prohibition:
http://video.google.com/videoplay?docid=-3653114296815352489&q=penn+teller

Randy January 12, 2007 at 10:44 am

P.S. The minimum wage is a regressive tax in the guise of a progressive tax. From the politician's perspective its win-win.

Michael Sullivan January 12, 2007 at 11:32 am

"I work in the financial services industry and we have Moody's, S&P and Fitch. Did you know that financial services companies PAY to be rated? Why? Because consumers demand it."

Not because a *few* consumers demand it, but because a large share of the market demands it.

There is signficant market inertia in cases like underground man describes where an issue is critical to 1% of the population and irrelevant to the rest. I would argue that the market *does* serve those people to an extent in that non-mass market producers will often cater to them, but at a higher price.

It's not clear to me that the market is always making the efficient decision in these cases, though. It's not even clear that the market is *always* making a more efficient decision than a semi-intelligent regulation would mandate, due to inertia.

Where the market prettty much always makes a better decision than any regulator is when an issue affects a majority or large minority of consumers and does not involve signficant externalities. That's a pretty big subset of transactions and it includes a lot of things the majority chooses to let government mess with in spite of the near certainty of causing dead-weight loss, but it isn't everything.

BTW, where was undergroundman making his point by cursing? Using the reference to "stupid shit"? I guess it's not very formal, but I don't consider that cursing. There was no profanity directed at any particular person. I don't consider the use of taboo words to undermine communication in the way that personal invective does (even if it contains no profanity), which is the accusation I infer when you use "cursing".

BTW, I don't think it's accurate that there have been many good economists who are also good communicators on the egalitarian liberal side. Who would you choose? Galbraith is a pretty mediocre economist. Keynes would be the counterpart to Friedman, except he doesn't seem much more of an egalitarian than MF. I think he would have become much more skeptical of government in time had he lived longer.

Who else is the class of Sowell and Williams? Thurow and Krugman are both egalitarians and pretty reasonable economists, but I cerrtainly don't find them any more clear or convincing than those two.

I can think of a number of popular and semi-popular bloggers, including our two hosts, who do a very good job, but about as many (maybe more) on the classical side of the spectrum as the egalitarian.

If anything I tend to think there are more clear and simple explicators of economic concepts among the libertarian crowd than among egalitarian liberals.

Matt C. January 12, 2007 at 12:56 pm

Michael-
I am sure that at one time there was not a ratings system in the financial markets, but there was clearly a need and the market took care of that. Another good example is the Insurance Institute of Highway Safety that was formed by insurance industry to test the vehicles. These test have become highly appreciated among the market, even for consumers. Another example is the horsepower debate for vehicles. At one point in time each company had a different way of testing horse power in their engines. So, a group of individuals got together and started testing the engines and standardized those test of the industry. You cannot be certified without the following the testing requirements, that certainly does not mean that all engines are certified, but you know it is accurate if it is certified.

Also, it is true that a market may not be efficient in all manner of picking the "correct" choice. But markets are self correcting. It may be more efficient for a tyrant to make the trains run on time, but that doesn't mean that it should be done.

If you allow the market to play out inovation will follow by increasing efficiency, even in the non-mass markets. If an entrepreneur can make something more efficient it makes it cheaper and thus increases the demand. Televisions at one point were a non-mass market at one point in time. You must let entrepreneurs work within the market. Even semi-intelligent decision makers are not more efficient in getting the information within a market place and finding the solution.

Matt C. January 12, 2007 at 2:11 pm

Sheldon Richman has a great article today about how important consumers and the entrepreneur are in offering products.

http://www.fee.org/in_brief/default.asp?id=1038

Randy January 12, 2007 at 3:54 pm

Thanks for the link Matt. Good article. I keep coming back to the idea that we live in a luxury economy, that we don't really need most of the stuff we buy. The central planning types have necessities in mind when they talk about redistributing resources "fairly". But the idea of redistributing luxuries "fairly" is a non-starter, because if we try to redistibute them at all, they simply vanish.

Michael Sullivan January 12, 2007 at 4:13 pm

Matt: you aren't telling me anything I don't already know.

Markets work, they do their job and they do it well.

But real markets are not perfect, and many cases of information oligopoly exist. A general principle of truth in advertising and labeling backed by a legal ability to shut down or sue fraudulent sellers is well worth supporting. Some amount of requirement in labeling, especially for health or food goods, I'm willing to support as well. Note that I think the current FDA is much *too* draconian in its requirements (and it's ability to ban sales rather than merely require warnings is completely over the line, IMO), but unless it can be conclusively demonstrated that any regulation of this nature ultimately morphs into something like the FDA or worse, I'm certain that I prefer some regulation to none. I'm not even certain that I'd prefer zero regulation to the current regime, and the current regime is really awful from a market liberal perspective.

I'd be happier if labeling requirements and certifications were all handled privately, but I don't count on the vacuum to be filled very fast if we simply ceased government work on such issues. We'd have a period where it was very difficult to know what you are buying.

To me, the fact that food labels must contain a list of ingredients and nutritional information and allergy alerts by government decree, is at *worst* a small gnat in my drink, compared to the herd of camels forced down our throats by drug prohibition, welfare for the middle and upper class, trade barriers and preemptive wars.

Noah Yetter January 12, 2007 at 4:32 pm

undergroundman,
If hard drugs are as bad as you say, and price elasticities of demand for them as you assert them to be, then ending prohibition would not be likely to substantially increase their use.

First, the cost of (ab)using a hard drug (if we assume them to be Bad For You) is not found chiefly in its money price, but in its consequences for your life in general. The money price could be $0 and the cost would still be very high.

Second, if the responsiveness of consumers to price is small, then just as a substantial increase in price does not dissuade users from cutting back and quitting, it should not encourage non-users to take up the habit.

The alternative hypothesis would be that what we now call hard drugs are not really all that bad, particularly in an environment where they are legal, in which case the problem itself evaporates.

The great contribution of Friedman and others like him is to make these ideas comprehensible to those willing to listen. The reason this is challenging is because much, if not most, economic understanding is counter-intuitive, which is also why it's very easy to communicate bad economics.

undergroundman January 12, 2007 at 6:51 pm

"Benefit to who? The mistake is in assuming that there can be anything for "the good of society."

Economists (yes, even Friedman) implicitly argue for utilitarian net benefits. That's what I mean when I say there's a "benefit." Am I making an implicit value judgment, saying that certain things are more beneficial than others? Of course. But I'm valuing the conventional things: wealth, health, productivity, happiness, ect. When people abuse drugs, they inevitably affect those around them. Now, I'm not a big fan of paternalism, but the effect on others from abusing drugs can be pretty extreme. Still, I am in favor of legalizing all drugs.

"The fact is that many drug users are comfortable with their habit, and very few plan on keeping it indefinitely."

That's "the fact", eh? Interesting. The other fact is that regardless of whether they plan on it, it's likely that they will. ;)

"I think Friedman well recognised this, and knew that life is not just about maximising efficient energy use, but about satisfying individual human desires, in a way which preserves liberty."

My desire is to kill idiots. Does that mean I should be able to do this? My point is that when your desires begin to affect my well-being, we enter into a grey area. Crackhead and meth addicts on the streets may well be a bad thing for my safety. (I'm not sure I believe that — and they're on the streets anyway, but it's an argument. Ultimately it's empirical, and it's left to be proven whether crack and meth increase violence.)

"The reason why the free market also brings prosperity, is because human happiness tends to be a pretty close approximation of efficient energy usage, a legacy of natural selection's ever ongoing struggle with entropy."

HAHAHAHAHAHAHAH. Yeah, fuckin' bitches, drinkin' beer, watching TV, and killing people on Counterstrike are pretty efficient directions of energy, yup. I'm so glad you see the light.

"undergroundman-you have made you point and did it by cursing (I don't agree with you). Poor taste, if I may say so."

MWHAHAHAHA! Christ. Go back to church. Neither I nor Friedman like staid traditionalists. Fuck, shit, damn — they're words.

"Your last statement does point to the elitism of the left's dogma and the idea that people can't make a decision for themselves. People buy "stupid" stuff when they are given money because they didn't earn it."

No. There are plenty of poor people who work for their wages and spend it on stupid stuff. It's just irrational planning and decision making. (One strike for the rational choice theory.)

"I can still purchase drugs even today, but why haven't I? It's not because of the price."

So you may say, but when your friends start showing up with coke at the parties because it's pure and cheap, you'll likely change your mind. Trust me. Coke+alcohol is fun fun fun. (Or so I hear.)

"Where the market prettty much always makes a better decision than any regulator is when an issue affects a majority or large minority of consumers and does not involve signficant externalities. That's a pretty big subset of transactions and it includes a lot of things the majority chooses to let government mess with in spite of the near certainty of causing dead-weight loss, but it isn't everything."

Yes, although we must also add natural monopolies to that list! (And we can add several areas where one supplier would be most efficient — including, perhaps, healthcare.) And perhaps others that don't come straight to mind. Congratulations. You're one of the only ones who undestands economics.

"undergroundman,
If hard drugs are as bad as you say, and price elasticities of demand for them as you assert them to be, then ending prohibition would not be likely to substantially increase their use."

Go study economics and learn what price elasticity of demand means, then speak.

"I'm certain that I prefer some regulation to none. I'm not even certain that I'd prefer zero regulation to the current regime, and the current regime is really awful from a market liberal perspective."

A wise statement. Is the current regime of safety regulation, outside of the FDA, all that bad? Are you opposed to the regulations against lead in toys, perhaps?

undergroundman January 12, 2007 at 7:18 pm

"BTW, I don't think it's accurate that there have been many good economists who are also good communicators on the egalitarian liberal side. Who would you choose? Galbraith is a pretty mediocre economist. Keynes would be the counterpart to Friedman, except he doesn't seem much more of an egalitarian than MF. I think he would have become much more skeptical of government in time had he lived longer."

How about Stiglitz, Akerlof, Sachs, DeLong, and I'm sure many others? I don't really know Who's Who in economics today — all I know is that there are plenty of leftist economists out there, and for good reasons: 1)markets are very imperfect. 2) What seems best to people is not necessarily what's best for the society or the world. 3) the concentration of wealth and power at the top is worrying, both morally and politically.

As I read in Capitalism and Freedom today: "Our minds tell us, and history confirms, that the great threat to freedom is the concentration of power."

Randy January 12, 2007 at 7:47 pm

Undergroundman: "…the great threat to freedom is the concentration of power."

Absolutely agreed. I've been saying that we need to start taxing the government for this very reason.

Matt C. January 12, 2007 at 8:32 pm

Aw yes…because I believe you have poor taste that automatically makes me a Bible thumper.

You must not have put Friedman's quote into context or I was reading a completely different book than Capitalism and Freedom. Concentration of power can only be done with the force of the government. I there have been other posts to this blog showing that wealth inequality is a red herring and that is much more fluid that most of the economist for which you mentioned give credit.

Michael E Sullivan January 13, 2007 at 11:42 am

"How about Stiglitz, Akerlof, Sachs, DeLong, and I'm sure many others? "

Good examples, but do they overwhelm the many of similar stature on the right?

And, as far as I can tell, none of these guys are exactly sworn enemies of a market liberal perspective.

I think the real problem is not so much the lack of good economists that are good communicators (on either "side"), but the huge preponderance of economically ignorant political hacks who receive blessing from the MSM to hold out as experts, and proceed cloud the debates with partisan cherry-picking and foolishness.

Alex Forshaw January 13, 2007 at 1:36 pm

Anyone who gets into a political argument knows the futility of trying to convince somebody that their entire worldview is wrong.

Rather than try to convince people that they have had a screwed-up interpretation of economics their entire lives, just move your capital to where it's best treated. Unless, I guess, people pay you more to educate the uneducated than you can make by investing that money yourself–that is, if education is your comparative advantage ;-)

Howie Copywriter January 14, 2007 at 9:28 pm

Bush is going crazy. He is shooting down any way out of the mess. Meanwhile, the US and the dollar are ready to collapse. The fight is to persuade the US Congress to adopt a real capital budget, and get out of the Thirty Years War in Iraq, Iran, etc.

The idea of an expanded war is the option of "stabilization" of the financial bubble. Look at the US bombing of Somalia, this is part of it. Force panic stricken people to do anything for a so-called "war economy".

Meanwhile, the widespread fraud of not reporting the true state of the Housing Market, is seen in the NY Times, Jan. 7th. Also see Moody's economy.com . The US Comerce Dept figures reported for new home sales both 1. significantly overstate the level of new home sales, and 2. understate the number of new homes listed for sale- inventory of homes for sale- due to Commerce's not taking account of people cancelling their contracts to buy new homes.

See http://www.realcrash.com

Reuben Peck December 17, 2007 at 6:57 am

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Pay It Forward
http://www.churchfields.swindon.sch.uk

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