Matt Zeitlin: Impetuous Young Whippersnapper

see a whole lot of value in catering to what “people” think. Yeah, I sound an aristocratic dickwad, but I basically agree with Bryan Caplan (and Matt Yglesias) that on fiscal and economic issues especially, many people just have the basic concepts and facts wrong.

I could point to polls showing that many think that foreign aid and welfare are large part of our budget, or that most jobs lost in the manufacturing sector are lost due to foreign trade. More generally, there is very little reason to think that just because we all participate in the economy (this is Chris Bowers’ argument), that we all thus know a lot about it. Yglesias:

 Similarly, most people in their personal lives aren’t aware of making any dramatic decisions based on small changes in interest rates. Therefore, they may conclude that small across-the-board changes in interest rates couldn’t possibly have dramatic impact on their lives. And yet, anyone who thinks that is wrong. But to see that that’s wrong, you need to acquire some expertise in the subject.

 In the context of the bailout, I think that a lot of people aren’t supporting it because they don’t know the connection between credit markets drying up and their own personal finances. But ask any economist (or really anyone who thinks about this stuff), and they’ll tell you that, yes, the TED spread and the availability  of credit has a whole lot of importance for just about everyone. Another reason there’s been this populist upsurge against the bailout is that it “costs” 700 Billion dollars. This just isn’t true. Sure, the initial outlay will be 700 billion, and some media organizations would have you think that this was equivalent to appropriating 700 billion to spend somewhere, but it isn’t. Although it’s unlikely that the government would make a profit selling these distressed bank assets later, the total hit to the budget will be much, much less than 700 billion.

 So, when the opposition to this bill is largely based on 1. a misunderstanding of how the economy works and 2. incorrect information about its cost, it’s really hard to say that we’ve had some great, small-d democratic victory in the past two days.