Laying the Groundwork for Thinking about Liberty

As we know, there are known knowns. There are things we know we know. We also know there are known unknowns. That is to say, we know there are some things we do not know. But there are also unknown unknowns: the ones we don't know we don't know. —Feb. 12, 2002, Department of Defense news briefing

Laying the Groundwork for Thinking about Liberty ~ or ~ One misguided zealot can wreak more havoc than a roomful of idiots.

Things that are true. Knowledge MisconceptionThe Unknown Things students believe are true. 33% of UK adults believe that Mount Everest is in Europe. – National Geographic, % of American adults either do not believe in evolution or have no opinion. – Gallup, February 2009

Knowledge MisconceptionThe Unknown What We Think We Do

Misconception Knowledge The Unknown What We Really Do

Misconceptions Are the Enemy (a real conversation) As wages rise, more people enter the labor market. Cool.

As wages rise, firms cut back on hiring. Got it. Misconceptions Are the Enemy

Therefore, price floors create surpluses. No problem. Misconceptions Are the Enemy

So, a minimum wage causes unemployment. But we need a minimum wage because companies would pay zero if we let them. Misconceptions Are the Enemy

Misconceptions Are the Enemy

Knowledge Misconception What We Need To Do The Unknown

How Do We Dispel Misconceptions? 1.Data 2.Demonstrations

Shameless plug

Data source: Statistical Abstract of the United States, and Bureau of Labor Statistics

Data source: Statistical Abstract of the United States, and Bureau of Labor Statistics

Data source: Statistical Abstract of the United States, and Bureau of Labor Statistics

How Do We Dispel Misconceptions? 1.Data 2.Demonstrations

WorkersFirms Find a firm willing to hire you at whatever price you can negotiate. Goal: Get the highest wage you can. Hire workers at whatever price you can negotiate. Goal: Maximize profit.

Firms Each firm gets a chart like this. The chart is the firm’s factory. Each unit the firm produces is automatically sold for $4.

Suppose you can negotiate a price of $10 per worker. All the workers will be hired  0% unemployment.

Only half of the workers will be hired  50% unemployment. Now, impose a minimum wage of $15 per worker.

This demonstration can be done in 20 minutes and students immediately “get” two important lessons: 1.Minimum wage causes unemployment. 2.Left alone, firms will not pay zero.

Demonstration and data remove misconceptions, opening the mind to more knowledge.

Economic misconceptions are usually the result of pride and prejudice. Inoculate Against Misconceptions

Prejudice Humans who work in the private sector are greedy. Humans who work in the public sector are altruistic.

Truth The same humans with the same strengths, failings, and desires occupy both sectors.

Schizophrenic Voters The same people you claim are selfish in the marketplace you also claim are selfless in the voting booth.

Addict Voters People want to be forced to do the right thing! Save us!

Pride Economic truths are opinion.

Truth The whole point of economic theory is to describe the real world. Disconnects arise not from a failure of economics but from a lack of understanding of what economics is telling us.

Pride Unwillingness to admit limitations.

Truth It is impossible for an economy to provide everything that everyone wants. Corollary:A majority vote does not bestow magical powers to circumvent limitations.

What is the point?

What We Need To Do Dispel misconceptions with data and demonstration. Inoculate by warning against pride and prejudice.