Does it matter that people are stupid about Economics?

Question

This forum serves as a constant reminder of the incredible ignorance and stupidity so many people display about economic issues. Is that a tangible problem? Would it make any improvement in the economy itself if the people within it had an informed, rational mastery of mainstream free market economics? Or, at the micro level do individuals still behave rationally despite all the idiotic things they believe and say?

Example: so many people have a fear and loathing of "worthless" fiat paper money. Yet I'm guessing these same people are happy to get their hands on this worthless paper money and even work 8 or 10 hours a day to acquire as much of it as they can.

Answer 1

Actually, your question goes to the heart of one the great discussions of the last 200-300 years. Namely... does rational self-interest ultimately trump all other human follies?

Adam Smith thought so. And, if you look at any large American city (NYC, for example) it certainly looks like chaos. But... go into a butcher shop and there will be meat for sale. The utilities and transportation networks function properly (most of the time), and law and order is generally observed.

I take this as evidence that, as long as people look out for their own best interests... things will get done. Remember, we live in an imperfect world, but the one thing we can count on is the fact that people prefer wealth to poverty. Our economic system "capitalizes" on that fact, and it doesn't really matter if people understand the nature of wealth as long as they continue to provide needed goods and services in search of wealth.

Answer 2

The reason free market economies work better than planned ones is the "knowledge of time and place" is more important for economic decisions that expert opinion, no matter how much economics the experts know. What people need to know they learn. People who worry about fiat money have just been reading the political econo-trash that permeates the web. I don't think it actually effect their life decisions.

Answer 3

This economy is based on the fact that people don't know how it works, they get money, they spend it, the money itself comes literaly from nowhere and is assigned value based on how much is in circulation (1 dollar is 1.00 unit/$ because we manage inflation and keep it that way.)

if people were informed, our economy would work short term, then fall apart, everyone would know how to invest (when to sell (crash)), and what not to buy (a key component of our economy is 'want' spending, or spending on things you have no need for)

Answer 4

like you said
EMOTIONAL HAVE ALOT TO DO WITH BEING STUPID

for example I wanted to buy a trailer There were two of them
so I listed the pro and con like the tire are they new or not, how big they are and other information

then compare them up
and let the FACT tell me not emoitonal

sometime people do the same thing for job
they sign up at a job to become slave with out comparing other jobs.

so THINK

Answer 5

In matters of the economy, it is useful to rely on economic data and reasonable conclusions drawn from that data to inform public policy. Specific economists can be faulty. General consensus based around data tends to be accurate.

Answer 6

You can split the group into two.

One group is made up of people who have never had any sort of education of graduate micro/macro economics. This appears to be the group you're referring to. (Edit - you don't need graduate education to spot these posters)

The latter is made up of new theorists in top research universities nationwide; 99% of these theories are garbage but one occasionally turns out to be Solow's growth model.
This latter group should continue, assuming policy makers actually observe economic theory (the World Bank surely has not).