Things Are Better Than You Imagine | Jason Kuznicki | Cato Institute: Commentary

Things Are Better Than You Imagine | Jason Kuznicki | Cato Institute: Commentary: "When asked what how much an average U.S. corporation's profits were as a percentage of sales, the students gave wild overestimates — the median student guessed corporate profits were 30% of sales; the upper quartile said more than 60%. The reality? More like 4%.

Goffe's students also thought inflation for the previous year (2008) had been about 11%. The Consumer Price Index, our best measure of inflation, rose by a mere .09% during that time, a small enough change that we could plausibly dismiss it as a measuring error.

Ordinary Americans make more money, too – the median student said that 35% of all workers earned the minimum wage. The real number is more like 1.7%.

And things are improving more than they imagine. When asked how much inflation-adjusted income had risen since 1950, the median student said 25%. Really, it's more like 248%.

Finally, our economy is freer than most of them imagine – when asked, the median student believed that the government sets 40% of market prices. Numbers for this one are harder to come by, but I asked some economist friends of mine, and it's certainly nowhere near that high. Governments do set prices on state-school tuitions, on Medicaid and Medicare-financed health spending, on cigarettes, and on a few others — but in all, prices are pretty free nowadays. Formerly, the federal and local governments had regulated airfare, trucking prices, and the prices of major consumer products like gasoline and apartment rents (there are still a few rent-controlled apartments, but good luck finding them!)."