1. Economic Beliefs and Economic Attitudes: Results from Principles of Economics Dan Settlage, Latisha Settlage, & Jim Wollscheid University of Arkansas – Fort Smith October 27, 2011

2. Presentation Outline Motivation of Research Summary of Methods Used ▫Knowledge Survey ▫Attitude Survey Discussion of Results ▫Descriptive Statistics ▫Evidence of Change Directions for Future Exploration

3. Motivation of Research Economics students often begin principles courses with preconceived notions (often false) that shape their worldview and influence their learning environment. Selected Literature ▫Table 1 – Chapter 2; “Principles of Economics”  N. Gregory Mankiw ▫“The Myth of the Rational Voter”  Bryan Caplan ▫“Survey of Americans and Economists on the Economy”  The Washington Post/Harvard University ▫“Initial Misconceptions in a Macro Principles Class”  William Goffe

4. Motivation (cont.) We seek to answer the following questions: ▫How knowledgeable are principles students about general economic conditions?  Inflation, unemployment, economic growth ▫Is knowledge correlated with attitudes regarding basic economic principles? ▫Do we make a difference in the classroom?

5. Summary of Methods Used Two surveys were administered to principles of economics students (start of spring 2011) ▫Knowledge Survey ▫Attitude Survey Surveys completed by both macro and micro students. ▫278 observations (56% macro)

6. Summary of Methods Used Knowledge Survey ▫Descriptive statistics compiled and compared to correct answers. Attitude Survey ▫Histograms of responses. ▫Relationship between attitudes at the beginning and end of the semester examined.

7. Knowledge Survey – Historical Perspective Considering period from 1950 to today, students were asked to provide average annual percentages, max rate and min rate for: ▫Unemployment ▫Inflation Also asked to identify: ▫Number of recessions since 1950  Average length in months  Longest and shortest ▫Growth in real income

8. Knowledge Survey – Current Perspective Also asked to provide current percentages for: ▫Unemployment ▫Inflation ▫Workers employed at minimum wage jobs ▫Proportion of federal income tax paid by top 20 percent of income earners ▫Proportion of federal income tax paid by bottom 20 percent of income earners ▫Prices controlled by government ▫National debt relative to national income

9. Economic Attitudes Survey Students asked to rank their agreement or disagreement with various economic statements. Likert scale: ▫5 – strongly agree ▫4 – agree ▫3 – neither agree or disagree ▫2 – disagree ▫1 – strongly disagree

10. Economic Attitudes Survey Example statements: ▫Trade/immigration is beneficial to U.S. economy. ▫Govt should restrict companies from outsourcing work. ▫Taxes are too high for the poor/rich. ▫Income has increased faster than the cost of living. ▫The national debt is too big. ▫Inflation/unemployment is a big problem in the U.S. ▫Minimum wage is too low. ▫Social security will be there for me when I retire. ▫Government should control more prices.

11. Results – Unemployment Rate Pre-Survey Medians Post-Survey Medians Actual Data Average annual % (1950-today) 1085.7 Highest annual % 16129.7 (1982) Lowest annual % 542.9 (1953) Current1199.4 (Dec ‘10) Future108N.A.

12. Results – Inflation Rate Pre-Survey Medians Post-Survey Medians Actual Data Average annual % (1950-today) 16103.7 Highest annual % 251513.5 (1980) Lowest annual % 55-0.3 (2009) Current1051.1 (Nov ‘10) Future105N.A.

13. Results – Misc. Econ. Knowledge Pre-Survey Medians Post-Survey Medians Actual Data Percentage growth in real income2021226 Percent of workers earning min wage40301.3 % of fed inc tax paid by top 20%334069.3 % of fed inc tax paid by lowest 20%20150.8

14. Results – Misc. Econ. Knowledge Pre-Survey Medians Post-Survey Medians Actual Data Percent of prices controlled by govt5020N/A U.S. percent of world manufact.223020.2 China percent of world manufact.453013.9 Debt as % of national income686662

15. Pre-Survey Average (Blue) 4.50 Post-Survey Average (Red) 4.68 Difference (Post-Pre)0.18

16. Pre-Survey Average (Blue) 3.27 Post-Survey Average (Red) 3.37 Difference (Post-Pre)0.09

17. Pre-Survey Average (Blue) 3.01 Post-Survey Average (Red) 3.52 Difference (Post-Pre)-0.51

18. Pre-Survey Average (Blue) 2.58 Post-Survey Average (Red) 2.50 Difference (Post-Pre)-0.08

19. Pre-Survey Average (Blue) 3.45 Post-Survey Average (Red) 3.24 Difference (Post-Pre)-0.21

20. Pre-Survey Average (Blue) 2.58 Post-Survey Average (Red) 2.80 Difference (Post-Pre)0.22

21. Pre-Test Average (Blue)4.60 Post-Test Average (Red) 4.40 Difference (Post-Pre)-0.20

22. Pre-Test Average (Blue)3.65 Post-Test Average (Red) 3.32 Difference (Post-Pre)-0.32

23. Pre-Test Average (Blue)4.29 Post-Test Average (Red) 3.98 Difference (Post-Pre)-0.31

24. Pre-Test Average (Blue)3.45 Post-Test Average (Red) 3.23 Difference (Post-Pre)-0.22

25. Pre-Test Average (Blue)2,43 Post-Test Average (Red) 2.10 Difference (Post-Pre)-0.33

26. Pre-Test Average (Blue)2.64 Post-Test Average (Red) 2.46 Difference (Post-Pre)-0.18

27. Directions for Future Exploration Administer a demographic and personality survey. ▫Link perception and knowledge to demographic variables as well as locus of control measures Capture student knowledge and perception beyond principles sequence (i.e., as an incoming freshman and senior).

28. Thank you for your attention and participation! Questions?? Dan Settlage, Latisha Settlage, Jim Wollscheid University of Arkansas – Fort Smith