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Laying the Groundwork for Thinking about Liberty. As we know, there are known knowns . There are things we know we know. We also know there are known unknowns. That is to say, we know there are some things we do not know. But there are also unknown unknowns:

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Presentation Transcript
slide2

As we know, there are known knowns. There are things we know we know.

We also know there are known unknowns. That is to say, we know there are some things we do not know.

But there are also unknown unknowns:

the ones we don't know we don't know.

—Feb. 12, 2002, Department of Defense news briefing

slide3

Laying the Groundwork for Thinking about Liberty

~ or ~

One misguided zealot can wreak more havoc than a roomful of idiots.

slide4

Things that are true.

Things students believe are true.

Misconception

The Unknown

Knowledge

33% of UK adults believe that Mount Everest is in Europe.

– National Geographic, 2007

61% of American adults either do not believe in evolution or have no opinion.

– Gallup, February 2009

slide5

What We Think We Do

Misconception

The Unknown

Knowledge

slide6

What We Really Do

Misconception

The Unknown

Knowledge

slide7

Misconceptions Are the Enemy

(a real conversation)

As wages rise, more people enter the labor market.

Cool.

slide8

Misconceptions Are the Enemy

As wages rise, firms cut back on hiring.

Got it.

slide9

Misconceptions Are the Enemy

Therefore, price floors create surpluses.

No problem.

slide10

Misconceptions Are the Enemy

So, a minimum wage causes unemployment.

But we need a minimum wage because companies would pay zero if we let them.

slide12

What We Need To Do

Misconception

The Unknown

Knowledge

slide14

www.antonydavies.org

Shameless plug

slide19

Workers

Firms

Find a firm willing to hire you at whatever price you can negotiate.

Goal: Get the highest wage you can.

Hire workers at whatever price you can negotiate.

Goal: Maximize profit.

slide20

Firms

Each firm gets a chart like this. The chart is the firm’s factory.

Each unit the firm produces is automatically sold for $4.

slide21

Suppose you can negotiate a price of $10 per worker.

All the workers will be hired  0% unemployment.

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Now, impose a minimum wage of $15 per worker.

Only half of the workers will be hired  50% unemployment.

slide23

This demonstration can be done in 20 minutes and students immediately “get” two important lessons:

    • Minimum wage causes unemployment.
    • Left alone, firms will not pay zero.
slide25

Inoculate Against Misconceptions

Economic misconceptions are usually the result of pride and prejudice.

slide26

Prejudice

  • Humans who work in the private sector are greedy.
  • Humans who work in the public sector are altruistic.
slide27

Truth

  • The same humans with the same strengths, failings, and desires occupy both sectors.
slide28

Schizophrenic Voters

  • The same people you claim are selfish in the marketplace you also claim are selfless in the voting booth.
slide29

Addict Voters

  • People want to be forced to do the right thing!

Save us!

slide30

Pride

  • Economic truths are opinion.
slide31

Truth

  • The whole point of economic theory is to describe the real world.
  • Disconnects arise not from a failure of economics but from a lack of understanding of what economics is telling us.
slide32

Pride

  • Unwillingness to admit limitations.
slide33

Truth

  • It is impossible for an economy to provide everything that everyone wants.
  • Corollary: A majority vote does not bestow magical powers to circumvent limitations.
slide35

What We Need To Do

Dispel misconceptions with data and demonstration.

Inoculate by warning against pride and prejudice.