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How Political Bias Alters Economic Understanding

Daniel B. Klein and Zeljka Buturovic did a study about a year ago that you may have heard about which purported to show that self-identified liberals and progressives had lower levels of understanding about economics…Now they’ve run a new study with different questions and the results appear to indicate that the gap is, indeed, all about which questions you ask…

cognitive dissonance

Basically when you ask questions where the left-wing answer is also the one supported by economics, suddenly left-wing people have a better understanding of economics. But when you ask the other set of questions, it comes out the other way.

-Matt Yglesias, Confirmation Bias And Economic Knowledge

As I have pointed out on several occasions, humans are built to be hypocritical. We seek ideological consistency. But the world is complex and our mental models are built to reduce that complexity, making those mental frameworks inadequate at registering contradictions in the real world. If any facts go against us, we just dismiss them through selective editing or simply by making stuff up to support our original thinking.

When it comes to politics, when it comes to economics, the facts don’t really matter. Human reasoning is not designed to pursue truth but to argue a point. It’s mainly about philosophical predisposition. If the cognitive dissonance is large enough, most people do eventually come around. This is what we saw in Germany in the aftermath of revelations of genocide by the Nazis.

Otherwise, the only way one gets around this is by hedging and not committing to a view before taking in the information. That’s really hard to do because it can make you look like someone with "high ambivalence" – a flake. How many people are going to want to do that? If you think you’re one of those people who can resist confirmation bias, think again. Remember that 80% of people think they’re above average drivers too. It’s called illusory superiority.

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.

2 Comments

  1. Rick Clark says:

    I totally agree with you Edward. I try to do everything to fight these tendencies in myself.

  2. fresnodan says:

    I have a very small penis which I have been told that I don’t use very well. 
    But I would be interested in knowing what the “correct” answers to the questions are…
    It strikes me that the criteria used for evaluating the answers is the debatable point, as well as the criteria for inclusion in the dataset, and timeframes as well.  For example, in number 15, did unemployment go down after war was declared by the US?  Was that a criteria?  Were Germans better off after the annexation of the Sudentenland, but much worse off 4 years later?

  3. Anonymous says:

    I have a very small penis which I have been told that I don’t use very well. 
    But I would be interested in knowing what the “correct” answers to the questions are…
    It strikes me that the criteria used for evaluating the answers is the debatable point, as well as the criteria for inclusion in the dataset, and timeframes as well.  For example, in number 15, did unemployment go down after war was declared by the US?  Was that a criteria?  Were Germans better off after the annexation of the Sudentenland, but much worse off 4 years later?