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Economic Experts Vs. Average Americans

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Economic Experts Vs. Average Americans January 2013 Very preliminary Economic Experts vs. Average Americans PAOLA SAPIENZA and LUIGI ZINGALES∗ ABSTRACT Do economic experts’ opinions differ from those of ordinary citizens on the most relevant economic policy questions? We compare the answers of the Chicago Economic Expert Panel with those of a representative sample of US population on 19 policy relevant questions. We find on average a large (37 percentage points) difference between the two. This gap is only partially explained by differences in ideological or personal characteristics of the two samples. Interestingly, the difference is the largest on the questions where economists agree the most and where there is the largest amount of literature. Informing people of the expert opinions does not seem to have much of an impact. Ordinary people seem to be skeptical of some of the implicit assumptions embedded into the economists’ answer, and probably for good reasons. ∗ Sapienza is with Northwestern University, NBER, and CEPR; Zingales is with the University of Chicago, NBER, and CEPR. Zingales is a director of the Initiative on Global Markets that administers the Economic Expert Panel and one of the one of the participants in the panel. We thank Alessandra Fenizia for excellent research assistantship. In 2012 the National Public Radio program Planet Money created a fake presidential platform based on the issues a small sample of economists, with different political views, agreed upon. In focus groups this platform found no support among the public at large. Is this just a feature of the particular selection made by NPR or is it a generalizable feature? If so, is this because ordinary people have not being trained in economics or because economists lack common sense or miss important political considerations? In this article we try to address these questions. To do so we compare the answers to a common set of policy questions provided by the Economic Expert Panel at the University of Chicago Booth School of Business (EEP) with those provided by the Chicago Booth/Kellogg School Financial Trust Index (FTI) which quarterly interviews a representative sample of the U.S. population. We find that economists’ opinions differ greatly from those of other ordinary Americans. On average, the percentage of agreement with a statement differs 37 percentage points between the two groups. One reason for this gap is the different composition of the two samples. The EEP sample has higher trust in both the government and the market than the FTI sample. It is also more “liberal” in their attitudes towards incentives and government intervention. The subsample of the FTI that looks more similar to the EEP sample is made of Democrats who have high-trust in market. While the sample composition explains some of the difference between the two samples, it does not explain it all. Beyond the average opinion gap, we find a large variation across questions. There is a 70 percentage point difference in the answers across the two panels to the statement to “A tax on gasoline would be a less expensive way to reduce CO2 emissions than mandatory standards for cars”, while only a five percentage point difference in the answer to the statement “If the government money currently being spent on education was used for school vouchers most students would be better off.” Intriguingly, we find that the topic on which economists agree the most are also the topics in which their opinions are more distant from the opinion of the US population. These are also the topic where there is more economic literature available. One obvious possibility is that there are some topics where economists know more as a result of their training. To test this hypothesis we study whether the difference between economists and ordinary Americans shrinks if we consider more educated ordinary Americans. We do find some evidence that Americans with a graduate degree answer more similarly to expert economists that Americans who did not go to school past college. The effect, however, is small. The average absolute difference between economists and ordinary people drops from 37 percentage points (when laypeople have at most a high school degree) to 32 when the FTI sample is restricted to people with a graduate degree. For a subset of questions asked to the FTI sample, we also know whether the average American respondent has taken a class in economics. Restricting the sample to those respondents does not change the average difference in answers. 2 To study whether the problem arises from a gap of knowledge, we test the effect of informing the people interviewed in the FTI sample of the prevailing expert opinion on a small subset of questions. Providing the expert information changes the answers of average Americans very little. In fact in one case, it even makes them move in the opposite direction. Finally, we singled out the two questions with the largest difference in responses to probe deeper into the causes of this difference. Laypeople seem to understand the assumptions embedded in the questions. For example in the fuel emission standards, 70% understands that those standards will increase car prices, but they still prefer them to a tax on gasoline. They also seem to understand that to work to their advantage a tax on gasoline requires a rebate. When this is offered explicitly 17% more prefer the tax. Of those who do not, 51% state that they do not trust the government to rebate them the money. If the lack of trust in the willingness or ability of the government to rebate the extra revenue is a big factor in choosing mandatory standards instead of a carbon tax, when we regress the probability of supporting the carbon tax on the trust in government we should find a positive and statistically significant coefficient. This is indeed the case for the FTI sample but not for the EEP sample, suggesting that the economists treat the statements as an exam question, where you do not challenge the underlying assumptions, while average Americans do. Who does provide the better policy insights? 1. The Datasets Since late 2010 the Initiative on Global Markets (IGM) at the University of Chicago Booth School of Business asks a panel of 41 expert economists—“senior faculty at the most elite research universities in the United States,” two policy-related questions each week. We will refer to it as the Economic Expert Panel (EEP). As the Web site describes, the goal of the EEP is to “explore the extent to which economists agree or disagree on major public policy issues.” The panelists are chosen “to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars.” Since not all panelists answer all the questions, the observations depend upon the question. The list of all the questions and answers can be found at http://www.igmchicago.org/igm-economic-experts-panel. To compare the opinions of the experts with those of average Americans we rely upon the Chicago Booth Kellogg School Financial Trust Index survey (FTI panel). Each wave of the survey, conducted by Social Science Research Solutions, collects information on a representative sample of roughly 1,000 American households. The main purpose of these surveys is to study how the level of trust that people have in the financial system changes over time. We added some questions for the purpose of 3 comparisons in the waves 13 to 17 from December 2011 to December 2012.1 Details about the survey and its design are provided in Guiso, Sapienza and Zingales (forthcoming). Up to the beginning of December 2012 the IGM had asked 78 questions. For cost considerations we limited the number of questions asked to the ordinary American panel to 19. We eliminated the questions that were too technical. We also slightly modified the phrasing of the questions to eliminate jargon or make them more comprehensible to an average citizen. In some cases the editing was minimal. For example, when the EEP was asked: “If public school students had the option of taking the government money (local, state, federal) currently being spent on their own education and turning that money into vouchers that they could use towards covering the costs of any private school or public school of their choice (e.g. charter schools), most would be better off,” we asked the FTI sample: “If the government money currently being spent on education was used for school vouchers most students would be better off.” In others, it had to be more substantial. For example, when the EEP was asked: “The 19 financial firms that just completed the Federal Reserve stress tests (i.e. the CCAR) are big primarily because of economies of scale and scope, rather than because of implicit government support,” we asked the FTI sample: “Do you think big financial firms are big because…? 1) their large size allows them to be more efficient and obtain greater profits; 2) there are political benefits of being large.” We were helped in this editing by the Social Science Research Solutions personnel, who has vast experience in asking questions over the phone so that they can be understood by the interviewed person. 2. The Questions 2.1 Policy questions We selected 19 questions that were previously asked to the EEP panel. The questions are drawn from a variety of topics ranging from macroeconomic, labor, education, financial economics, and public economics. The detailed list, with the exact wording used in the two samples, is in Table A of the Appendix. The questions can be grouped along various dimensions. Gordon and Dahl (2013) classify all the questions asked to the EEP panel on the basis of the volume of economic literature present on the topic.
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