Complete Whimsy, Game Theory, Live and Learn

Liberals Are Smarter Than Conservatives, But Liberals Are Stupid at Economics and Libertarians Are Smarter Than Both of Them

Some time back, the always controversial Satoshi Kanazawa made the claim that liberals were smarter than conservatives stating:

Liberals usually support such social welfare programs and higher taxes to finance them, and conservatives usually oppose them. Defined as such, liberalism is evolutionarily novel.  Humans (like other species) are evolutionarily designed to be altruistic toward their genetic kin, their friends and allies, and members of their deme (a group of intermarrying individuals) or ethnic group.  They are not designed to be altruistic toward an indefinite number of complete strangers whom they are not likely ever to meet or interact with.  This is largely because our ancestors lived in a small band of 50-150 genetically related individuals, and large cities and nations with thousands and millions of people are themselves evolutionarily novel.

Studies then show that those who call themselves “very liberal” have an IQ of 106.4 and very conservative have an IQ of only 94.8. Obviously, liberals repeated the study ad-nauseum (I wonder if Steven Jay Gould rolled over in his grave).

Others have even gone so for as to pathologize conservatism. A study for the University of California Berkeley (gee, I wonder where this is going) stated that “conservatism is pathological or that conservative beliefs are necessarily false, irrational, or unprincipled.”

Now everything about both these IQ tests and the Berkeley “study” are questionable. Does a college student voting for tax increases upon other people to finance his or her own education count as “altruistic?” What about a public employee supporting public unions which will increase his own wages? What about some activist group asking for money to finance their own operation (and salaries)? Indeed, what does the government have to do with personal altruism. After all, studies have repeatedly shown that conservatives donate more money to charity, give more time to charity and donate more blood than their liberal counterparts. Apparently, they even hug their kids more. Sorry to say, but voting for tax increases does not in itself make you a good person.

And since, as Noel Sheppard points out, the definitions used for liberal and conservative really come down to unselfish vs selfish, if that assumption is wrong (which it appears to be), the whole study is bunk. And even if it it isn’t, correlation doesn’t equal causation (liberal universities indoctrinating the typically smarter individuals who go to college may have something to do with this).

All that being said, I wouldn’t be surprised if your average latte-drinking-pot-smoking-yuppie-urbanite liberal is a bit smarter than your average gun-toting-tobacco-chewing-flag-waving-backwater conservative. But there does appear to be one area that liberals are just utterly stupid in: economics.

As Daniel Klein notes:

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.

Rather than focusing on whether respondents answered a question correctly, we instead looked at whether they answered incorrectly. A response was counted as incorrect only if it was flatly unenlightened.

1. Restrictions on housing development make housing less affordable.
Unenlightened: Disagree

2. Mandatory licensing of professional services increases the prices of those services.
Unenlightened: Disagree

3. Overall, the standard of living is higher today than it was 30 years ago.
Unenlightened: Disagree

4. Rent control leads to housing shortages.
Unenlightened: Disagree

5. A company with the largest market share is a monopoly.
Unenlightened: Agree

6. Third-world workers working for American companies overseas are being exploited.
Unenlightened: Agree

7. Free trade leads to unemployment.
Unenlightened: Agree

8. Minimum wage laws raise unemployment.
Unenlightened: Disagree

How did everybody do?

Very conservative: 1.30

Libertarian: 1.38

Conservative: 1.67

Moderate: 3.67

Liberal: 4.69

Progressive/very liberal: 5.26

(Based on number incorrect, from 1-8)

This is truly sad. Just guessing would get you a 4, which means both liberals and progressives are worse at economics than your average monkey. Good thing such questions aren’t on the Stanford-Binet ehh Satoshi? I mean honestly, what would a restriction on housing do other than raise the prices?

I’m surprised and a bit saddened that the ultra conservatives beat out libertarians. I thought they were more interested in proving that rabbit fossils could be found in the Cambrian age than in learning basic economics.

Oh well, after all, the blog Half Sigma, has looked at the Wordsum test to see which scores correlated with which political beliefs. Libertarians dominate.

He looks at government spending, welfare, regulation, price controls, housing and the environment. With each one, other than the environment (smart people apparently like mother nature and don’t trust property rights with her) the better the score on Wordsum, the more libertarian the position. For example, on price controls, people who scored between an 8-10 (10 is the best, 6 is average), 18.6%  were strongly against while only 3.2% were strongly in favor. 54.8% were against price controls while only 22.6% were for them.

Another spurious correlation? Perhaps. Or perhaps it’s just that smart people like freedom the most.

Photo Credit: Tbeckett and Complex Search

______________________________________________________________________________________________________

For more Swift Economics, subscribe now to our RSS Feed
Follow Swift Economics on Twitter

Standard
Live and Learn

Gary Johnson Doesn’t Let a Non-Invitation to a Debate Stop Him

Despite not receiving an invitation for the recent CNN-sponsored debate in New Hampshire, Gary Johnson has answered the questions anyway via YouTube. Thank goodness for the interwebs.

______________________________________________________________________________________________________

Text REDCROSS to 90999 to donate $10 to the Japan relief effort, or submit your donations online here.
______________________________________________________________________________________________________

For more Swift Economics, subscribe now to our RSS Feed
Follow Swift Economics on Twitter

Standard
Uncategorized

Almost Half of U.S. Households Will Pay No Federal Income Tax in ’09

Tax Avoidance: The Price is Right

According to estimates by the nonpartisan Tax Policy Center, 47% of U.S. households are projected to owe zero federal income tax in 2009. (1) Is this good, bad, or inconsequential?

Vice President Joe Biden would tell you this is very bad, because it is “patriotic” to pay taxes. President Barack Obama has called for a more progressive tax code, suggesting those making above either $200,000, or $250,000 per year, pay more.

Taxation is a touchy subject to be sure. Reasonable people understand that government revenue is necessary to deliver public goods, such as roads, utilities and national defense. Realists understand that if the point of funding national defense is to secure our sovereign nation, we are failing. The U.S. is not secure at the borders or ports, and we’ve left ourselves a steep national defense tab to deliver an unsecured nation.

There is no question that the more an individual is taxed, the less economic freedom they have. But it isn’t unreasonable to say that a moral country provides some safety nets for the less fortunate. Nobody wants the government to pull the plug on grandma, or watch her die slowly at home as she does not have the means to take care of herself through the age of 90.

The question of how much government revenue should be collected from the public, through taxes or fees, is one of extreme subjectivity. If a person believes tax money is being squandered by the government, or consistently spent in areas not representative of their own values or beliefs, what would be their incentive to keep forking money over to the politicians? Why would they not take every legal avenue the government provides to limit their tax burden? 9% of households making between $75,000 and $100,000 have done just that; these homes will have zero or negative federal income tax liability in 2009.

Note that while having zero federal income tax liability, workers still pay state taxes and payroll taxes, which contribute to Social Security and Medicare. A bevy of other taxes come up on everyone’s plate depending on their state of residence, from sales taxes to property taxes to gasoline taxes.

Philosophies have limits in practice. A completely free society, a hardcore libertarian approach, would leave everyone’s freedom in tact, but leave some less fortunate folks in quite a bind. Yes, communities would ban together to provide assistance to those in need, but many would fall through the cracks, or require a level of care unable to be provided at a church soup line.

A society with a heavy government hand has one major problem: it requires said government to allocate resources and run enterprises efficiently, neither of which has been demonstrated on a consistent basis in the United States. The problem, beyond incompetency and the reality that central planners cannot possibly take in all information from the economy to make good decisions, is that government cannot fail. It pulls from a slush fund known as tax revenue, government bonds and a printing press. When free enterprise is ran poorly, it goes bankrupt, and the organization’s debt is liquidated and assets freed to go into other productive areas of the economy. When government programs are ran poorly, they go bankrupt, but never go away. The Social Security and Medicare programs noted above, is nothing more than a Ponzi scheme, and the vast majority of Americans will not see a dime of it, after paying into the system for a working life.

As much as I want to see the elderly taken care of, I know that twenty cents out of every dollar paid to Medicare goes to fraud. (2) I also know that I want to take care of myself when I reach my golden years. Every dollar the government takes from me, is another dollar I can’t save and invest to pay for myself. And life expectancies only continue to grow; how tough will it be to pay for cost of living in inflation nation if I live to be 100 years old?

Households limiting their tax burden is bad if you’re into serious income redistribution, beyond what is already a progressive system, with the government actively seizing control of some of the means of production. Limiting tax burdens is good if you’re into economic freedom and self-reliance. And lastly, limiting tax burdens is inconsequential if you’re a hardcore freedom addict. The most moral thing you can do for a pure libertarian is allow everyone to be free.

The debt is ballooning and it is clear that more tax revenue will have to be generated. To manage the debt over the next two decades, a broader tax base will be formed. As long as the government keeps spending, they must tax. It will be a combination of inflation, an invisible tax, and formal taxes, to cover the tab. And realistically, it will only cover a portion, particularly as health care reform increases entitlements, carbon taxes are enacted, national defense budgets spike, bailouts of private industry bubble up and payments to special interests continue.

Be alert of the tax base debate now, before it really starts to rage. The finger will be pointed at households who do not pay federal income tax; this includes most households with income of $30,000 and less, as well as half of households making between $30,000 and $40,000; it’s not just some of the “rich” households pulling in $75,000 or more with their fancy tax accountant, rental properties and 401(k)’s. (2) Shout from the tree tops and ask the government to stop spending, vote for someone who promises not to run deficits (don’t they all say that, though?), or watch people across all income levels be taxed more. It may not happen this year, or next, or even in the Obama administration. But eventually, politicians will have to manage the debt with something other than new debt and printed money.
___________________________________________________________

(1) 47% will pay no federal income tax – CNNmoney.com, retrieved October 4, 2009, http://money.cnn.com/2009/09/30/pf/taxes/who_pays_taxes/index.htm?postversion=2009100314

(2) Making the World Safe for Medicaid Fraud – WSJ.com, retrieved October 4, 2009, http://online.wsj.com/article/SB10001424052748704471504574449192073386128.html

Standard
Deficits, Dollar, Federal Reserve, Game Theory, Live and Learn, Trust

Lies, Damned Lies and Statistics: All Fiat Currencies Fail

hyperinflation

__________________________________________________________________________________________________

For more Swift Economics, subscribe now to our RSS Feed
Follow Swift Economics on Twitter
LIKE Swift Economics on Facebook
__________________________________________________________________________________________________

Next in Lies, Damned Lies and Statistics Series: Part 4: Iraq War Casualties
Previous in Lies, Damned Lies and Statistics Series: Part 2: Income Stagnation
___________________________________________________________________________________________________

Anyone who’s read my posts can tell I have pretty strong libertarian leanings. So in this post, I’m going to try to remain fair and take on a common libertarian statistic. In the documentary film, Fiat Empire, libertarian congressman Ron Paul restates an oft-cited fact by libertarians, “If you study monetary history, throughout thousands of years, paper money has been tried many, many times and it never succeeds. It always ends badly.” (1)

A fiat currency is simply a currency that isn’t backed by any underlying asset. Fiat currencies derive their value solely from the ratio of money to goods in the economy. If that ratio gets out of whack (say the government prints too much money), the currency will become worth less than the paper it’s printed on. Ron Paul and many libertarians, especially those who ascribe to Austrian economics, believe in the gold standard (where each unit of currency is backed by gold, a proposal I have a lot of sympathy for). And since every fiat currency that has ever existed has failed, all the more reason we should go back to the gold standard. Now, the statement that every fiat currency has failed is completely true. It’s also completely meaningless.

First we have to boil down what these libertarians are actually talking about here. A failed fiat currency is one that hyper-inflates. There are certainly numerous examples of this throughout history. The most famous example is Weimar Germany in between the two World Wars. In 1914, 4.2 marks were worth 1 dollar. In 1923, 4.2 trillion marks equaled one dollar! In case you were wondering, this is bad for an economy. Other examples include the Romans, who experienced severe runaway inflation near the end of their empire, France in the late 18th century, Hungary after World War II, many Asian countries during the Asian Financial Crisis of 1997 and Zimbabwe today. (2)

The moral of the story is all fiat currencies hyper-inflate, while those backed by gold don’t (they can however suffer from high inflation in the short term). (3)  As I said, these libertarians are correct. As the Daily Reckoning puts it: “EVERY fiat currency, since the Romans first began the practice in the first century, has ended in devaluation and eventual collapse.” (4) There are two caveats to their argument, though: 1) if the fiat currency was ended for another reason, say the country was conquered and the currency replaced, then those examples are obviously ignored and 2) if the currency is still around today*, it also doesn’t count, because the currency will presumably fail in the future. The problem with this assessment is simple: What else can happen to a currency?

The answer to that question is nothing. The only possible exception would be the hypothetical hyper-deflation. This isn’t even worth talking about though, since it has never happened in the history of the world and would have to get so out of hand that one unit of currency was worth everything on the planet (otherwise you could just print more or cut the currency up into smaller pieces, like when a stock splits). Other than such an absurd scenario, there are only three options for a fiat currency: hyperinflation, ended by another means or it still exists. So while this statistic/fact is completely true, it’s also akin to saying the sky is blue (and about as useful for determining monetary policy).

There are plenty of reasons to support the gold standard. Gold standards reduce inflation and prevent governments from taxing the population in a hidden way. This thereby makes it more difficult for governments to wage wars or reward their friends in the private sector. The “fact” that every fiat currency has failed (excluding the two obvious caveats) does nothing to help the argument, though. It sounds like it conveys something, but in actuality, it conveys absolutely nothing.

___________________________________________________________________________________________________

For more Swift Economics, subscribe now to our RSS Feed
Follow Swift Economics on Twitter
LIKE Swift Economics on Facebook
___________________________________________________________________________________________________

Lies, Damned Lies and Statistics Series

Part 1: A Primer
Part 2: Income Stagnaton
Part 3: All Fiat Currencies Fail
Part 4: Iraq War Casualties
Part 5: Female-Male College Gap
Part 6: Male-Female Wage Gap
Part 7: Roger Maris’ Asterisk
Part 8: Women Do All the Work but Men Keep All the Money
Part 9: The BMI
Part 10: A College Degree is Worth One Million Dollars

___________________________________________________________________________________________________

*Every currency in the world today is a fiat currency.

(1) Ron Paul, Fiat Empire, Matrixx Entertainment, 2006, http://vids.myspace.com/index.cfm?fuseaction=vids.individual&videoid=41426337
(2)  “Toilet Paper Money,” Whiskey and Gunpowder, 4/17/2007,  http://whiskeyandgunpowder.com/toilet-paper-money/#hidehttp://seekingalpha.com/article/127585-the-gold-standard-and-inflation
(3) Stephen Yu, “The Gold Standard and Inflation,” 3/24/2009, http://seekingalpha.com/article/127585-the-gold-standard-and-inflation
(4) Nick Jones, “Fiat Currency – Using the Past to See the Future,” The Daily Reckoning, http://dailyreckoning.com/fiat-currency/

Standard