Paul J. Ferraro and Laura O. Taylor ask, “Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance from the Dismal Science”
One expects people with graduate training in economics to have a deeper understanding of economic processes and reasoning than people without such training. However, as others have noted over the past 25 years, modern graduate education may emphasize mathematics and technique to the detriment of economic reasoning. One of the most important contributions economics has to offer as a discipline is the understanding of opportunity cost and how to apply this concept to all forms of decision making. We examine how PhD economists answer an introductory economics textbook question that requires identifying the relevant opportunity cost of an action. The results are not consistent with our expectation that graduate training leads to a deeper understanding of the concept. We explore the implications of our results for the relevance of economists in policy, research, and teaching.
Importantly, given four options, only 21.6% of respondents chose the correct one. They performed worse than chance. Some feeble statistical analysis is performed by the authors.
This challenges none of my views about economists: none of them can do maths; none of them can do statistics; what they do has very little rational basis; they are terrible at designing questions for undergrads that don’t require you to make assumptions, often drawing heavily on cultural knowledge.
Found via MetaFilter, which compares the problem to the Monty Hall problem in probability. Nowhere near, in my opinion.