Liberal Democrats just don’t understand economies or dynamic scoring

Almost by definition liberal Democrats know little about how economies work, and nothing about dynamic scoring which is the predictable result of a tax increase upon human behavior.

They cling to their child-like notion that the only time taxation changes behavior is when THEY say it will as in piling tax upon tax on the cost cigarettes to curtail teenage smoking. In New York State they are learning a harsh lesson about excessive taxation on tobacco products and dynamic scoring.

New York liberals are getting their noses rubbed in reality by the unexpected backlash to the huge tax increase on a pack of cigarettes they installed last July. In an unprecedented move New York’s outgoing Governor David Paterson signed a law adding $4.35 a pack to the cost of smoking cigarettes in the Empire State.

Since July when the new tax went into effect, sales of cigarettes have fallen some 27% a new report reveals. Fully 11 million fewer packs of cigarettes have been sold in New York State during this period.

This is more than 3 times the expected decline and is seriously cutting into the State’s tax revenue base. Now that it is too late and the damage has been done, it has finally dawned on Albany’s liberals that people have NOT stopped smoking, but rather just stopped buying cigarettes in New York. Both the neighboring states of Vermont and Pennsylvania have experiences increased sales and the obvious reason is that New York smokers are stocking up on their cheaper cigarettes.

As projected currently, this blunder will result is a net loss of $136 million by the end of this fiscal year, March 31, 2011.

Intelligence
Volume 38, Issue 6, November-December 2010, Pages 636-647 doi:10.1016/j.intell.2010.09.005 | How to Cite or Link Using DOI
Copyright © 2010 Elsevier Inc. All rights reserved. Cited By in Scopus (0)
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Intelligence makes people think like economists: Evidence from the General Social Survey

Bryan Caplana, , and Stephen C. Millerb,

a Department of Economics, Center for Study of Public Choice, and Mercatus Center, George Mason University, VA, United States

b Department of Accounting, Finance, and Economics, Western Carolina University, NC, United States
Received 2 March 2009; revised 21 September 2010; accepted 22 September 2010. Available online 13 October 2010.
Abstract

Education is by far the strongest predictor of whether a non-economist will share the economic beliefs of the average economist. (Caplan, 2001) Is the effect of education as large as it seems? Or is education largely a proxy for cognitive ability? Using data from the General Social Survey (GSS), we show that the estimated effect of education sharply falls after controlling for intelligence. In fact, education is driven down to second place, and intelligence replaces it at the top of the list of variables that make people “think like economists.” Thus, to a fair degree education is proxy for intelligence, though there are some areas—international economics in particular—where education still dominates. An important implication is that the political externalities of education may not be as large as they initially appear.

Keywords: Economic beliefs; Ability bias; Civic returns

Quick version of the paper:
Adding a measure of intelligence to the list of independent variables and re-estimating confirms that ability bias is present and substantial. Adding intelligence as an independent variable does not simply shrink our estimates of the effect of education. It is more important than education in both statistical and economic terms. In fact, intelligence turns out to be the single strongest predictor of economic beliefs.
Subtle version of the paper:
First, even though intelligence is the most important overall predictor of economic beliefs, it is not the most important predictor of beliefs in any of the four categories. Party, ideology, and male gender are stronger predictors for the anti-market questions. Education and “other race” are stronger predictors for the anti-foreign questions. Black is a stronger predictor of the make-work questions. Income growth is a stronger predictor for the pessimistic questions. Intelligence is the most important overall predictor of economic beliefs because it has a strong effect in all four categories, not because it has an overwhelming effect in any particular category.

Second, intelligence is more important than education for every category except anti-foreign bias. For anti-market and make-work bias, intelligence is much more important than education; for pessimistic bias, intelligence has a moderate edge. Education is, however, the most important predictor of anti-foreign bias. This is consistent with the literature finding that education “tends to socialize students to have more tolerant, pro-outsider views of the world” (Hainmueller & Hiscox, 2006, p. 473). In contrast, the typical educational experience gives students mixed signals about anti-market, make-work, and pessimistic biases. Classes in economics and high-IQ peers restrain these biases, but classes in other social sciences and humanities, as well as student activism, arguably encourage them.

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