Student Attitudes toward Regulation, Politics, and Free Enterprise
Davis, Elynor, Parker, Darrell F., Journal of Legal, Ethical and Regulatory Issues
What determines the attitudes that students have toward governmental agencies, regulatory bodies, and political systems? This paper begins with a review of the historical foundations of today's economic beliefs concerning the role of government. Survey data is then used to explore individual economic beliefs and student attitudes toward government. A factor analysis of these survey instruments reveal underlying attitudes toward government and economic institutions. A regression analysis explores the linkages between these belief systems.
The economic literature has a rich history of discussions as to when, why, and how government should intervene. Early economic thinkers such as Mill and Sidgwick posed questions that are still viable for today's college students. Since those beginnings, further research has studied the impact of economic education on beliefs and attitudes. Stigler (1959) defines economic conservatism related to the study of economics as student beliefs and attitudes on the functioning of private ownership and competitive markets to allocate resources in an efficient manner and limit private power. Boulding (1969) recognizes the interdependence of economic and political attitudes and the social process. He advocates considering this as an important topic for economic education research. This paper extends that literature by linking free enterprise attitudes to political attitudes. A factor analysis of survey responses is used to identify alternate attitudes toward the free enterprise system. One set of factors reflects beliefs about the market allocation of resources and the efficiency of the free enterprise system. Another set of factors captures beliefs about private ownership and private power in a capitalist system. A separate factor analysis identifies components of political attitudes. Regression analysis is then employed to investigate the correlation between attitudes as reflected in the free enterprise factors, political factors, and gender.
Both John Stuart Mill and Henry Sidgwick endeavored to construct a comprehensive theory regarding the intervention of government in instances of recognized market failure: When government should intervene, why should government intervene, and how these interventions should be implemented. (Schwartz 1966, Grampp 1965, and O'Donnell 1976.) A solid answer to this issue is not assured even today. The appropriate scope of government intervention is an ongoing topic of political debate. The alternate philosophies of government intervention have their foundations in the historical arguments concerning government and the economy.
Jeremy Bentham, one of the founders of utilitarianism, believed morals and legislation could be described scientifically (Bentham, 1789). Bentham's main concern was consequences of private acts, not motivations prompting this behavior. The government's role was to reconcile society's goals with individual self-interest. Bentham was very pragmatic in his approach: nothing was, in principle, outside the purview of a legislative solution. He feared government's powers of coercion but admitted to its necessity to prevent greater evils (Stephen 1950).
Sidgwick's brand of utilitarianism was based on precepts intuitively known, what he regarded as "common sense." Under his hand, Bentham's "greatest good" implied one's concern for others as well as himself: an ethical standard. Like Bentham, he focused on consequences of laws to promote this harmony: government action should make individual's actions more conducive to the happiness of others, particularly in cases of imperfectly defined property rights (O'Donnell, 1976).
Mill retained the utilitarian method and approach but included certain non-utilitarian ideas. He was primarily concerned with the happiness of the individual (Mill, JS, 1863). He distinguished between immutable laws, which were not the subject of human choice, and those that were. He rejected Sidgwick's intuitional approach. He broke with Bentham because he emphasized that the cultivation of the inner man was the ultimate fact, not pleasure and pain. This is a critical difference in Mill and Bentham and led Mill into concern about the moral (religious, some would say) sphere (Anschutz, 1953).
Both Mill and Sidgwick rejected government interference with individual actions involving only the person himself (O'Donnell, 1976). However, Sidgwick would prescribe a governmental solution for any wrong. For Mill, failure to perform obligations did not automatically involve compensation if to do so would mean the sacrifice of some greater good. He would endure certain "insecurities" for the sake of not further abridging individual freedom.
The major difference between these two was not in their premise but in their goals. Sidgwick emphasized curing defects. Mill wanted to find the limits to the state's, society's, and individual's rights while simultaneously prescribing cures for market defects, an emphasis that Sidgwick's system lacked (J.S. Mill 1848).
Mill had a philosophy about society, government, morals, and individual differences (Samuels, 1966). Freedom of the individual to act and the absence of the coercion of the individual were preeminent in his scheme of things. Individual initiative was the chief means of the advancement of civilization. Diversity of life styles was healthy for society and allowed the individual full play of his faculties. Human beings could learn from their mistakes; which were self-educating and character building (Mill 1873b). Social etiquette or law should not prescribe all things; it would be stultifying (Stephen 1950). For the government to intervene in cases where individuals were capable of doing for themselves was paternalistic at best and was counter to Mill's supreme guiding principle, which was the right of the individual to direct his own life (Alchian and Allen, 1969).
Mill designed solutions for specific problems, which largely depended on private negotiation rather than government action. Sidgwick wanted government to insure certain obligations directly, not secondarily, as Mill preferred (O'Donnell, 1976).
Mill's solutions include a laundry list of certain situations. Contracts must be enforced; and this includes cases of externalities where individuals can negotiate a mutually acceptable solution. Problems that arise from imperfect information provide an opening for the government to act as an agency of information (Alchian and Allen, 1969). Mill would also enforce a group contract, thus addressing the "free-rider" problem (O'Donnell 1976). He recognized a legitimate role for government when there were social benefits, such as scientific and educational research, which private actions could not provide (Mill 1848). Mill consistently held to the superiority of the market, as opposed to conscious planning, as a problem solver (Malcup 1976). In addition, he mistrusted centralized decision-making, advocating local decision-making (Schwartz, 1966). He was concerned about the impaired incentive of hired management or government bureaucrats (Mill 1873a). However, he would permit the establishment of governmental hospitals, banks, or the post office without any curtailment of private institutions of like kind (Davis 1978).
In designing an appropriate role for government, Mill disagreed with those whose argument was based on "to intervene or not to intervene." Instead, he argued that guidelines must be stated for defining limits (Mill 1848). This was not a question for which there was a "universal solution." Certain functions of government are undisputed, such as controlling the money supply, setting standards, etc. Other functions were questionable; and he retained a tentative attitude about them and urged caution and constant reevaluation. Human discretion provides the means to the future but is also dangerous in its opportunity for abuse (Ekelund and Price, forthcoming; Mill, 1848).
A survey instrument was developed to capture perspectives on the free enterprise system, attitudes about control, and personality measures. Thirty questions on free enterprise were taken from Jackstadt, Brennan and Thompson (1985). These questions capture views on the market allocation of resources, efficiency of the free enterprise system, the role of private ownership, and the ability of competition to limit abuses of private power. The survey was administered to introductory economics classes yielding one hundred and seven usable responses. Demographic information on age, gender, and undergraduate major was also collected and is reported in Table 1. From the survey responses, three sets of factor analysis are conducted. First, two sets of factor analysis are applied to the thirty questions on economic attitudes and free enterprise. The first set of factors is determined for the seventeen questions dealing with market allocation of resources and economic efficiency. The second set of factor analysis is estimated for the remaining thirteen questions on private ownership and power. A Varimax rotation with Kaiser normalization is applied. The five extracted principal components from the first estimation are presented in Table 2. The four principle components from the second estimation are presented in Table 3. The interpretations of this analysis are discussed in the following section. The same procedure is then used to analyze the political items on the instrument. These three components follow in Table 4.
Finally a regression analysis is performed to examine the correlations from the component factors that represent these students' free enterprise attitudes on the components of the political factors extracted. A stepwise regression analysis is used since no a priori expectations are expressed as to which free enterprise factors would be the most significant categorization. The stepwise regression process adds variables into the model sequentially, including only those variables above a stated significance level. The regression results are presented in Table 5.
ATTITUDES TOWARD FREE ENTERPRISE
Student beliefs on the market allocation of resources provided by the free enterprise system and on its ability to operate efficiently are captured through seventeen of the survey questions. This is the same analytical methodology employed in Parker and Spears (2002). A factor analysis was conducted and five principal components were extracted. A Varimax rotation with Kaiser normalization was performed with the factor scores saved as variables. The rotation converged in eight iterations with the rotated component matrix reported in Table 2.
The categorization suggested in Table 2 identifies five underlying types. Component one captures those attitudes focused on economic freedom. These individuals believe in a free economy and government should keep hands off. This factor is characterized by strong negative loadings associated with statements of government control or regulation.
The component three also supports free enterprise and loads heavily on the Allocative efficiency of the price system. Respondents believe prices should be set by supply and demand. They also endorse the value of enlightened self-interest on the part of market participants.
The remaining three components take a dimmer view of the free enterprise system. Component two captures the view that close government regulation is for the good of all people. Government control of business profits, interest rates, and gasoline prices are all favored. Component four is loaded heavily on government keeping its hands off private business. Furthermore, this grouping also favors reducing price supports for farmers. However, they also reject the belief that private enterprise is responsible for high living standards. Component five represents the view that government involves a great deal of waste but sees the free enterprise system as responsible for the evils of society. These individuals are critical of both systems.
The remaining thirteen free enterprise questions reflect student views on private ownership and competition's ability to limit abuses of private power. A similar factor analysis was performed, and four principal components were extracted. The rotation converged in eight iterations with the rotated component matrix reported in Table 3.
The components related in Table 3 are divided in their reflection of the free enterprise system. Component one strongly supports private ownership. Competition among businesses is the best form of consumer protection. Government ownership is seen as a negative factor leading to bureaucracy and inefficiency.
Component two has a somewhat mixed messages about economic attitudes. It recognizes private ownership as necessary but also advocates socialization of industries. Consumer protection concerns are very strong for these respondents.
Component three sees the free enterprise system as exploitive of workers. Private enterprise is associated with monopoly and exploitation. Component four advocates a socialist ownership of basic industries and resources. Included are government ownership of railroads and oil and natural resources and the socialization of steel, coal, oil, and transportation.
Attitudes about how students deal with or control events are captured through the short ten-question political attitude survey. The questions are drawn from the libertarian political survey (Marshall, 2002). A factor analysis was conducted and three principal components were extracted. Again a Varimax rotation with Kaiser normalization was performed with the factor scores saved as variables. The rotation converged in five iterations with the rotated component matrix reported in Table 4.
The survey is designed to reflect two dimensions of libertarian political thought. No items are reverse scored, and the questions are framed to reflect the political leanings of libertarians. The first five questions reflect opposition to government control over social issues, and the last five questions reflect opposition to government control over economic matters.
The factor analysis does not line up exactly with the questions, as the libertarians would presume. Six items loaded on the first component as an economic freedom factor. For this sample freedom to cross borders is seen as more of an economic than social item. Three of the social factors aligned on Component two. This grouping is sensitive to government regulations involving drugs, sex, and the media. A third factor was extracted that loaded heavily on just two items. Component three represents views favoring voluntary military service and free trade. This commitment to free trade characterizes this group as recognizing a world economy.
The previous discussion applied factor analysis to identify a categorization of components for free enterprise attitudes as well as libertarian political attitudes. The factor scores for each factor analysis were saved as variables. This permits the use of regression analysis to analyze the correlation between the categorizations found from the factor analysis of political attitudes with those found for free enterprise attributes. Political attitudes are treated as dependent variables. Three separate regressions are run to reflect the determinants from free enterprise factors on the libertarian attitudes.
The regression results are presented in Table 5. Each of the three political factors had significant relationship with some of the free enterprise attitudinal factors. Furthermore seven of the nine free enterprise factors extracted were significant in the formation of some political attitudes.
The dependent variable in column 1 represents the component extracted from the political questions on economic freedom. The components interpreted as supporting economic efficiency and viewing government as wasteful both were strongly positive and significantly related to valuing economic freedom on the libertarian scale. As one would expect, those who advocated policies that amounted to socialization of commodity markets were negatively predisposed toward economic freedom. The remaining two significant variables provide a somewhat contrary linkage between economic and political attitudes. Those who responded positively toward privatization on the economic survey were not as likely to support the economic freedom questions on the political instrument. Similarly, those who treated free enterprise as "evil" still expressed support for greater economic freedom. These correlations are consistent with the interpretation that those respondents are expressing a fearful approach to economic power whether private or governmental. Thus, they both desire economic freedom and fear the free system. The R square of .531 indicates that overall 53% of the variation in this political component is explained by the economic attitudes.
The second regression analyzing the component of political items associated with social freedom provides a clearer picture. Proponents of social freedom are positively and significantly correlated with four economic attitude components. The respondents who value social freedom see the free enterprise system as efficient and government as wasteful. There is also a positive correlation with social freedom from those who are critical of both systems. In terms of economic ownership and power, proponents of privatization strongly hold social freedom views. Combined with the results from the economic freedom items, this places an interesting perspective on the view of privatization. Among these respondents, the argument for privatization resonates more as a social freedom issue than a pure economic freedom issue. Thus, privatization is seen as more important for issues of personal choice and freedom rather than as a pure economic efficiency argument. The explanatory power of this regression is still strong with an R squared of .445.
The final regression considers the formation of political opinions we describe as a worldview. The key political items for these individual's were free trade and a voluntary military service. The two factors that are strongly significant are economic efficiency and privatization. Consistent with the interpretation of the prior two regressions, economic efficiency is significantly correlated with the gains from trade. Privatization is correlated with the personal freedoms of volunteer military and no international barriers. This regression explained the lowest portion of the variation with only an R squared of .189.
The attitudes of today's college students reflect a tradition of economic thought and debate that extends to the early economic philosophers such as Mill and Sidgwick. Conflict still exists over applications of the appropriate issues for government intervention into individual's daily lives. These opinions link the students' political leanings to their views on free enterprise topics. Our findings demonstrate the importance of economic educators' recognizing the interdependence of political and economic thought. The economic opinions of entering students are highly correlated with the political leanings that they bring to the classroom. In particular, recognizing economic efficiency and government waste leads to expressions of economic freedom on the libertarian scale. Similarly, support for privatization and free market efficiencies are correlated with support for social freedoms.
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Elynor Davis, Georgia Southern University
Darrell F. Parker, Georgia Southern University
Table 1: Demographic Data Age N <=19 27 20 45 21 23 >=22 11 Not Reported 1 Gender Male 68 Female 38 Not Reported 1 Major Accounting, Finance, and Economics 12 Management 12 Marketing and Logistics 19 Pre-business and General Business 33 Other including Undecided 31 Table 2: Factor Analysis of Market Allocation of Resources and Efficiency Free Enterprise Attitudes Component Questions Market Allocation of Resources and Efficiency. 1 2 3 The amount of profit made -.770 3.476E-02 -2.793E-2.605 by a business ought to be regulated. Prices should be set by .177 .183 .605 supply and demand, in markets free from government control. The best means of setting .339 3.61 9E-02 .671 prices is to let buyers and sellers seek their own interests in a market free from government interference and control. Most government programs .350 6.495E-02 .332 involve a great deal of waste. The government should set a .142 .657 .277 ceiling on interest rates. The government should play a -.547 .357 -.214 larger role in U.S. economic affairs. Private enterprise is .345 .253 .279 responsible for the high living standards of most Americans. The government should not .706 .360 .162 attempt to limit profits. Government should control .187 .704 -4.119E-02 the price of gasoline. Free enterprise has been -.461 -7.139E-04 -.251 responsible for most of the evils in our society. A free enterprise economic .705 9.462E-02 -8.273E-02 system is generally more productive than a centrally planned economic system. Federal price supports for -.345- .274 -2.464-02 farmers should be eliminated. This country needs less -9685E-02 -.143 .721 government regulation of business. Our most important industries 1.034E-03 .739 -4.917E-02 ought to be closely regulated by government, for the good of all people, rather than by private business seeking profits. Government should keep its .336 -1.363E-02 .151 hands off private business operations. When a business gets big, it -.678 .196 -.216 should be controlled by government. A "free" economy is better .662 .142 .335 than a planned economy. Free Enterprise Attitudes Component Questions Market Allocation of Resources and Efficiency. 4 5 The amount of profit made .342 -.137 by a business ought to be regulated. Prices should be set by -.161 -.106 supply and demand, in markets free from government control. The best means of setting -3.487E-02 7.826E-02 prices is to let buyers and sellers seek their own interests in a market free from government interference and control. Most government programs -.172 .668 involve a great deal of waste. The government should set a -.145 -.189 ceiling on interest rates. The government should play a .238 6.276E-02 larger role in U.S. economic affairs. Private enterprise is -.517 .128 responsible for the high living standards of most Americans. The government should not 7.442E-02 -6.382E-02 attempt to limit profits. Government should control -.151 -.071 the price of gasoline. Free enterprise has been 2.349E-02 .664 responsible for most of the evils in our society. A free enterprise economic .159 -6.522E-02 system is generally more productive than a centrally planned economic system. Federal price supports for .447 .463 farmers should be eliminated. This country needs less .186 5.383E-02 government regulation of business. Our most important industries -4.783E-02 .150 ought to be closely regulated by government, for the good of all people, rather than by private business seeking profits. Government should keep its .772 -1.091E-02 hands off private business operations. When a business gets big, it -2.500E-02 .046 should be controlled by government. A "free" economy is better 5.121E-02 -.141 than a planned economy. Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization Rotation converged in 8 iterations. Table 3: Factor Analysis of Private Ownership and Private Power Free Enterprise Attitudes Questions: Private Component Ownership and Private Power 1 2 Private ownership of property is necessary .455 .531 for economic progress. Competition among businesses is the best .700 .367 form of consumer protection. The government should own the 7.465E-02 -.239 railroads established in the United States Competition keeps corporations from making .429 .606 too much profit. People would not do their best, if .721 .268 government owned all industry. Private enterprise usually leads to monopoly 8.426E-02 -.142 and exploitation of the consumer. More socialization of basic U.S. industries .227 .622 such as steel, coal, oil and transportation is necessary for the economic well being of the nation. The government should own and operate all -.734 9.872E-02 public utilities. Free enterprise exploits workers by failing 4.611E-02 .126 to give them full value for their productive labor. The consumer is at the mercy of the producer -.378 .439 and needs government protection. Government ownership and management of .502 .163 business leads to bureaucracy and inefficiency. Since consumers can refuse to buy products -.158 -.773 that are poor quality or are harmful, there is no need to have laws to protect the consumer. I favor public ownership of -9.282E-02 .283 oil and other natural resources. Free Enterprise Attitudes Questions: Private Component Ownership and Private Power 3 4 Private ownership of property is necessary -.434 -.147 for economic progress. Competition among businesses is the best 1.388E-02 -7.818E-03 form of consumer protection. The government should own the .213 .786 railroads established in the United States Competition keeps corporations from making 5.35E-02 .128 too much profit. People would not do their best, if -7.124E-02 .132 government owned all industry. Private enterprise usually leads to monopoly .768 6.275E-02 and exploitation of the consumer. More socialization of basic U.S. industries .241 .404 such as steel, coal, oil and transportation is necessary for the economic well being of the nation. The government should own and operate all -.206 .259 public utilities. Free enterprise exploits workers by failing .668 2.923E-02 to give them full value for their productive labor. The consumer is at the mercy of the producer .512 -2.789E.02 and needs government protection. Government ownership and management of -.277 .121 business leads to bureaucracy and inefficiency. Since consumers can refuse to buy products 6.179E-02 7.092E-02 that are poor quality or are harmful, there is no need to have laws to protect the consumer. I favor public ownership of -.117 .741 oil and other natural resources. Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization Rotation converged in 8 iterations. Table 4: Factor Analysis Libertarian Questions Component Libertarian Questions 1 2 3 Military service should -.271 .140 .786 be voluntary. Government should not -.295 .738 .110 control radio, TV, the press, or the Internet. Repeal regulations on sex -.3.577E-02 .697 .143 for consenting adults. Drug laws do more harm than .364 .644 -.188 good. Repeal them. People should be free to .727 1.133E-02 6.849E-02 come and go across borders; to live and work where they choose. Businesses and farms should .523 .312 -8.828E-02 operate without subsidies. People are better off with .419 .002 .672 free trade than with tariffs. Minimum wage laws cause .783 -.165 -.255 unemployment. Repeal them. End taxes. Pay for services .786 -8.566E-02 9.684E-02 with user fees. All foreign aid should .402 .367 .142 be privately funded. Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization Rotation converged in 5 iterations. Table 5: Regression Analysis of Libertarian Factors on Market Allocation of Resources and Efficiency, Private Ownership and Private Power (Standard Errors) Market Allocation of Resources and Libertarian Libertarian Libertarian Efficiency, Private Fac 1: Fac 2: Fac 3: Ownership and Economic Social World Private Power Freedom Freedom Economy Constant 0.11 -4.83E-03 -6.34E-02 (.090) (.103) (.116) Market 1: .306 * Efficiency (.112) Market 3: .198 ** .270 ** Economic Efficiency (.092) (.118) Market 4: .298 * .402 * Government Wasteful (.090) (.102) Market 5: .331 * Free Ent. Evil and (.106) Government Wasteful Ownership/Power 1: -.355 * .256 ** .232 ** Privatization (.089) (.114) (.114) Ownership/Power 2: .409 * Socialized Commodities (.088) Ownership/Power 3: .257 * Free Ent. Evil (.089) [R.sup.2] .531 .445 .189 * Significant at .99 level ** Significant at .95 level…
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Publication information: Article title: Student Attitudes toward Regulation, Politics, and Free Enterprise. Contributors: Davis, Elynor - Author, Parker, Darrell F. - Author. Journal title: Journal of Legal, Ethical and Regulatory Issues. Volume: 7. Issue: 1-2 Publication date: January-July 2004. Page number: 155+. © The DreamCatchers Group, LLC 2008. COPYRIGHT 2004 Gale Group.
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