Economists - Capitalists or Socialists?

In many cases the people that lead our Nation are not business minded. Most have never managed a convenience store let alone a major corporation. When it comes to managing the country’s wealth and financial future our leaders often turn to the “experts”, to economists.

The problem with this however might be that Economists are Socialists. According to one of their own, Peter G. Klein of the Ludwig von Mises Institute reports, based on a series of studies and surveys, academia is predominately liberal. As he refers to in his article; you may have heard the jokes about liberalism on college campuses:

“…the only place in the world where Marxists are still thriving is the Harvard political science department.”

According to a study conducted for the Carnegie Institute in 1989, it was found that only 27% of all faculty reported they are politically conservative. Breaking down the numbers, a full 70% of professors in the liberal arts reported themselves as liberal or moderately liberal.

In 2004 Christopher Cardiff and Daniel Klein examined the political affiliations of professors in 11 California universities. They found an average Liberal:Conservative ratio of 5:1, ranging from 9:1 at Berkeley to 1:1 at Pepperdine. The humanities average 10:1. This data shows definitively that American academia is quite liberal.

Also captured from Peter G. Klein’s musings is the fact that most economists believe in the concept of redistribution of wealth:

Another survey, reported in the Southern Economic Journal, reveals that “71 percent of American economists believe the distribution of income in the US should be more equal, and 81 percent feel that the redistribution of income is a legitimate role for government.”

What I find most interesting about all these studies and statistics the irony found in an article by the Wall Street Journal earlier this month. In the article Secrets of the Economist’s Trade: First, Purchase a Piggy Bank; they share a completely different vision of the economist.

It appears when discussing the challenges of  our National economy; redistribution is a good idea, until it comes to their own money. Economist , it appears, are trained to be quite frugal, some might even attain the level of extreme frugalist.

Several examples provided include acts such as driving 30 minutes out of the way to purchase groceries with a $5 savings, or purchasing a car in black instead of gray because it was $100 cheaper.

In additional studies by The University of Washington The University of Wisconsin they found that economics major were less likely than students in other fields to donate money and more likely to take advantage of opportunities for a free ride such as paying less than their fair share of a dinner bill among a group of friends.

What really bothers me is that some of these economists are the ones that are advising our President and Congress on how to manage our countries financial future and our tax dollars. They want to keep their own but have no problem taking ours.

It kind of reminds me of my ex-wife. “What’s mine is mine and what’s ours is mine!” (She literally said that and more disconcerting, proved it!)

What’s your take, are you comfortable with the direction our government is taking with our money? There is no doubt there is a lot of wasteful spending, how about some ideas on how to get it under control?

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photo by clementpetit2

11 comments to Economists – Capitalists or Socialists?

  • I think there needs to be some plan to help everyday Americans deal with their debt. Instead, the stimulus packages all seem to include some hairbrained scheme to get people to either spend or borrow more. In my mind these are not sustainable approaches and are mostly designed to benefit big business without dealing with an economy that just doesn’t work. I am flummoxed by the idea that consumer spending is viewed by economists as a “product” Rather than looking for ways to loosen up credit (more debt spending) we should be looking for a new approach to job creation and wealth building as a people. Whew…okay, stepping off soapbox now.

  • The LeanLifeCoach

    Tracy – Well said… The one very wide gap in our societies approach is comprehensive personal finance education. I had none. My son learned how to write a check in 8th grade. I didn’t think checks are still used!

    It’s a shame that after over a year of the common man calling for job creation the administration has just recently held a round table meeting to “discuss” it. Healthcare is a concern but it shouldn’t be the highest priority when 15% of the population is unemployed or underemployed.

  • David @ MBA briefs

    I didn’t realize economist were so left-leaning with socialist tendencies. My favorite magazine is The Economist and one of the reasons I enjoy reading their articles is you get a non-American objective view point on a variety of topics. I haven’t noticed any of their articles being overly liberal or I would cancel my subscription.

    As far as frugality is concerned there’s being frugal and then there’s being just plain cheap. I can’t stand people who will haggle over every little thing; they need to understand businesses make it a standard practice to show a profit, and if they have no revenue then they can’t pay the bills.

    I’m frugal, and have been accused of being cheap, but even I wouldn’t drive 30 minutes out of my way to save $5 in groceries (although I might buy the black car instead).

    You’re on a roll, keep up the good work.
    .-= David @ MBA briefs´s last blog ..How to analyze stocks like a pro – part 5 =-.

  • When taking my economics minor in college I had professors who were great at crunching through theories and talking about their grad school days, but of all 4 that I took classes with, none had any actual business experience. I think that there are a plethora of ways to cut back on spending, but I think the focus should be more on getting the most bang for our buck.

    The programs I’d like to be funded more than anything are youth financial education, healthy eating in school cafeterias (why the hell are there soda machines there?), and preventative health care. Start with kids in school, teach them how to manage money and eat right and by doing so we would wipe out any future social security needs and would reduce the health care costs in America greatly. If we tackle obesity and financial irresponsibility, we’ll solve a lot of the other symptoms that we’re wasting money on fighting as well.

    Thanks for the advice on my blog and the encouragement! You’re not doing so bad yourself and will be 100k alexa in no time.
    .-= Ryan @ Planting Dollars´s last blog ..Organizing Planting Dollars =-.

  • The LeanLifeCoach

    @David – My ex use to drive to the other side of D.C. because her make-up “was on sale.” It drove me crazy. These days I may be in the midst of a transition from frugal to cheap. Instead of a 4 page comment, look out for post in the near future. You can’t miss it!

    @Ryan – Amen on the PF Education. Wish I had that! I like the way you think, it’s very “Lean”. Eliminating the root cause of the problem is always the most effective approach. The only problem is that if our society could be self-responsible, healthy and financially fit Washington wouldn’t have much else to do.

    We could probably question the quality but a surprising number of states actually do provide PF education. Personal Finance In Education.

  • I didn’t have the typical MBA curriculum, I only took the required core classes and chose electives in project management and IT because of the kind of work I do. I only had to take one undergraduate and one graduate economics course and both professors were die hard capitalists and I can’t remember them making one left-leaning comment. Same thing with my other professors and instructors, especially with the online classes that were taught by working professionals.

    I would never have sat through some professor’s socialist commentary. About half of my courses I did online so I wouldn’t have to make the drive to DC to attend class so there wasn’t much time for idle chit chat, everything discussed was course related.
    .-= David @ MBA briefs´s last blog ..How to analyze stocks like a pro – part 5 =-.

  • Nicole

    Econ 101 just gives the basic framework and doesn’t talk about market failure (except maybe monopoly and monopsony and a little lipservice to public goods) because it is too complicated to cram into heads along with everything else in just one semester. Generally we’re talking about monopoly, public goods, negative and positive externalities, moral hazard, and adverse selection. In terms of paternalism we’re focusing that a dollar means more to a poor person than it does to a wealthy person and sometimes people don’t make the “correct” choices because of time inconsistent preferences or (gasp) lack of rationality.

    Public Finance much more thoroughly explores the role for government. There’s role for government in cases of market failure or when we believe that the government should play a paternalistic role. The former is pretty well agreed upon by even the most conservative economists, the latter is something philosophers should argue out (basically it boils down to: how do we weight different people’s utility functions). Economists are interested in maximizing total welfare… sometimes that means just maximizing individual welfares and letting the free market do its work, sometimes that means government interventions to correct for market failure. It’s totally consistent.

    A big problem is that we give people a little economics which leaves them thinking markets always work perfectly. That just isn’t true. It’s not socialist or conservative. It’s just economic theory. There’s a wide range of how much government intervention people think is necessary, but economic theory does provide for a role for government intervention.

  • The LeanLifeCoach

    Nicole: Can we guess that you teach economics? You raise some interesting points.

    “Economists are interested in maximizing total welfare…”but do they look at issues in a microscope?

    No doubt, if the government didn’t step in to address the market failures the economy would have suffered a catastrophic collapse, but I can’t help but wonder if in the long run society would have been better off? As a result of the intervention the long-term costs may well end up becoming the proverbial straw.

    “we give people a little economics which leaves them thinking markets always work perfectly. That just isn’t true.” Anyone that thinks the free market is perfect is delusional, it’s not but it’s still better than any alternative.

    What I found interesting with this post was that economists (as a group) seem to have one opinion when it’s the peoples money but another when it is their own. If they see the benefits in personal conservatism why are they so liberal with the public economy?

  • oh i love to do wealth building but it requires some good skills about business and time management~’:

  • [...] post  “Economists – Capitalists or Socialists?” - After reading this post, Greg made me say “oh really” out loud, in the past I always [...]

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