I don’t know about you, but it seems to me like economics has been in the news and social media a fair bit lately. Now, this could simply be my bias showing, seeing as I’m immersed in this world on a daily basis. But at the very least, I think it’s fair to say people are thinking about the economy a lot.
Inflation is, of course, one of the main things on peoples’ minds. Gas and real estate prices in particular have gone through the roof in recent months, so it’s no wonder people are beginning to pay attention.
Unfortunately, lots of econ news also means lots of bad econ takes. I’m sure you’ve heard some. They come from everywhere; public figures on Twitter and pundits on TV. Indeed, bad economic analysis seems to be the only thing in this economy that isn’t in short supply.
Consider, for example, Vice President Kamala Harris’s comments back in December about how the Build Back Better Act would “ease long-term inflationary pressures.”
Republicans in Congress claim to want to lower costs and address inflation.
But not one supports the Build Back Better Act, which will lower costs on everything from health care to child care—which 17 Nobel Prize-winning economists say will ease long-term inflationary pressures.
— Kamala Harris (@KamalaHarris) December 18, 2021
Talk about mental gymnastics! She can cite Nobel-prize winners all she wants, but the reality won’t change: long-term inflation is ultimately caused by the Fed’s money printing (BRRRRRRR), which is used to finance government expenditures—the very things she’s promoting as the cure.
But maybe, say some state governments, we can mitigate the problem by handing out more stimulus checks? Sure, and you can relieve hangover symptoms by drinking more alcohol, but I wouldn’t advise it. Think about what will happen when people start spending that money. I’ll give you a hint: it doesn’t end well.
The analysis surrounding gas prices hasn’t been much better. Take this tweet from podcaster Chris Hahn. “There is no supply shortage impacting the price of gas,” he writes. “Rising prices are due to market speculation and price gouging. It’s amazing how many so called ‘Capitalists’ are part of the 68% of Americans blaming President Biden for the price of a commodity.”
There is no supply shortage impacting the price of gas.
Rising prices are due to market speculation and price gouging.
It’s amazing how many so called “Capitalists” are part of the 68% of Americans blaming President Biden for the price of a commodity.
— Chris Hahn (@ChristopherHahn) March 26, 2022
People love to blame private “speculators” and businesses for high prices, but this kind of thinking completely ignores economic realities. To his first point, of course there is speculation; and of course companies are raising their prices (call it gouging if you want), but that’s exactly what indicates a lower supply relative to demand. If there was truly “no supply shortage,” private companies wouldn’t be able to get away with such high prices.
Regarding his second point, of course Biden isn’t entirely responsible for high gas prices, but considering his strict and often senseless regulation of the fossil fuel industry, you can’t honestly say he had nothing to do with it.
Speaking of blaming private companies, Elizabeth Warren is now going after Blackstone—one of America’s biggest corporate landlords—because the company recently made a large profit.
Corporate landlord @Blackstone reported its highest net income on record last year— $5.9 billion—after hiding behind inflation to raise rent on hardworking families.
We need to loosen private equity’s grip on the housing market.https://t.co/EpTqI5pIRA
— Elizabeth Warren (@SenWarren) March 25, 2022
“We need to loosen private equity’s grip on the housing market,” she writes, as if companies like Blackstone are the reason housing costs so much. But again, this is foolishness. Blackstone doesn’t set rents, the market does. The only reason the Blackstones of the world can get away with charging higher rents is because supply and demand have shifted. And, as I recently pointed out in an article on FEE.org, these supply and demand problems are largely driven by government interference in the market, not the actions of private companies.
“Ok, so some people on Twitter don’t understand economics. What’s your point?”
My point is that these aren’t just some people. This isn’t your local comments-section troll. We’re talking about a public figure, a senator, and the vice president. Millions of people subscribe to their ideas. And we’ve barely scratched the surface of the big names and well-funded movements that regularly repeat these kinds of economic fallacies.
It’s clear that economic illiteracy is pervasive, and dangerously so. Some subjects we can get away with not understanding. If you forget what your teacher said about parallelograms, no biggie. But when people don’t understand economics, the consequences are severe.
Every bad econ take underscores the need for economic education. And if you trust the government to provide such an education, well, you might think differently after learning some economics.
The good news is, we are not helpless. With a bit of effort, we can counter these bad ideas with logic and reasoning. A sharp mind and a persuasive argument can go a long way toward correcting these fallacies and teaching better ideas to the next generation.
But it’s not enough to simply know the arguments and refutations. If we want real change, we need to use them.