Wednesday, October 13

Summary of common economic misconceptions among economics students. Examples:
When asked about profits as a percentage of sales the median student guessed 30% (actual rate, closer to 4%).
When asked about the inflation rate over the last year (survey was in 2009) the median student guessed 11%. Actual rate: much closer to 0%. Note, how important such misconceptions could be to policy.
When asked by how much has income per person in the United States changed since 1950 (after adjusting for inflation) the median student said an increase of 25%. Actual rate an increase of about 248%, thus the median student was off by a factor of 10.
Link to study and some comments here. Is there a study of politicians knowledge? as a group they didn't do so well on this test.

1 comment:

  1. Anonymous11:10 AM

    Problem with the inflation estimate. Official method of determining the rate has changed so radically in the past 15 years, that it is IMPOSSIBLE to correlate the government rate today, with the government rate of pre-Clinton. 11% is likely the students experience with prices, while the government continues to understate inflation drastically for their own benefit