It's the Economy....I'm Shocked, Shocked

It really should not come as a surprise, but a front page story in today's issue of The Wall Street Journal states "Economy Moves to Fore as Issue for 2008 Voters" Even before reading the article (it’s quite good) I find myself reduced to quoting Captain Renault in the movie Casablanca.

Actually, given the confluence of sub-prime, oil prices, and twin concerns about economic overheating and slowdown, one would actually be surprised if it wasn't the topic. And given the focus on things economic, teachers all across the nation will be using the economy and the elections to spice up their lessons in economics, political science, American history and current events, among other thing. This gives all of us an opportunity to discuss a very fundamental aspect of economic literacy and thinking.

Economics is parsed a number of ways, but one way is to distinguish between positive and normative economics. Positive economics is based on fact. It describes economic conditions as they are. Normative economics describes things as one thinks they should be. Politicians (of all stripes) generally are huge fans of normative economics, using normative economics to describe their future policies and the wonderful benefits that will derive from those policies.

Politicians generally shy away from positive economics; although they do like to use data to disguise normative statements in a way as to appear positive. By throwing in an occasional statistic, a politician can seem to base their proscription in economic reality. But the reality too often is that while they may start from a positive statement, they seem to rarely provide a full explanation of how and why their policies are expected to work, and the extent to which they will actually change behavior; and by extension, the expected impact on the economy.

There are reasons for this. First and foremost, they frequently don't know. Second, we the electorate frequently don't care about the positive because the normative sounds good. The normative also frequently doesn't address issues of cost - either monetary or opportunity cost. And we know that we like to hear what the benefits will be, but we don't want to hear about costs -- unless it's to be told that someone else will pay the costs.

But this is a good opportunity to use current events to reinforce economic learning. Have your students dissect the sound bites (or the entire presentations if you can) that come out of press conferences, stump appearances, and debates. Have them analyze what the candidates say and sort them in to positive and normative statements. I suspect you and your students will find few, if any positive statements. And what they do find will be dwarfed by the normative statements.

As a follow up, ask your students "why do the candidates do this?" And ask them if they think the statements actually enhance their opinions of the candidates' ability to solve economic problems, or whether the candidates are just acting in their own self-interest.

Finally, you may also want to consider reading Russ Roberts' essay, "Pigs Don't Fly: The Economic Way of Thinking about Politics". I would recommend you read it first, and then you can decide whether you need to distill it, or whether you can give it to your students straight. Either way, it could generate some good discussion.

I look forward to your comments.