In studying for the CFA, the Economics section has eight readings (about a week's worth) on Microeconomics, and eight readings on Macroeonomics. It seems to me that while economic illiteracy abounds, especially among the political and journalistic classes, it manifests itself somewhat differently between the two subjects. Most of the juice is around macro stuff, because that's where policy decisions lay. But most of the action is in micro, because that's where businesses actually have to operate.
Illiteracy about macroeconomics leads people to assume that price rises mean inflation. Inflation is a monetary phenomenon. Illiteracy about microeconomics leads people to ignore how poorly gate space is allocated at DIA. Gates are not offered by competitive bid, leading to all sorts of market distortions. Historically, I would guess that micro-illiteracy is dangerous all the time, while macro-illiteracy is mostly dangerous on four- and two-year cycles.
But when politicians talk about 'windfall' taxes on oil companies, then complain about lack of slack in refinery capacity, or when they shut down drilling on the Roan Plateau, then complain about natural gas prices, it's dangerous micro-illiteracy. Or demagoguery taking advantage of it, which amounts to the same thing.
Cross-Posted over at CFA Blog.
