By Julia Heath
Given today’s economic uncertainties, you might take comfort in knowing that the next
generation has the basic ability to address these problems. Or do they? The first
national assessment of economic literacy was recently conducted by the National Assessment
of Education Progress, the organization that has reported on the state of knowledge
in geography, history and math.
Approximately 11,500 students were tested, representing 590 public and private high
schools. The results were mixed. On the one hand, 79 percent of the students scored
at or above a basic-achievement level, meaning they could identify key economic concepts
On the other hand, while students appear to know basic concepts such as supply and
demand, much of that knowledge can be obtained through casual observation of the world
around them. However, when it comes to more complex relationships — the role of the
Federal Reserve Bank in our economy, international trade issues, how changes in unemployment
rates affect the overall economy — our nation’s high school students fared much worse.
Only 3 percent performed at an advanced level, a level of proficiency I call being
able to “do” economics.
Why is having an advanced understanding of economics important? Most people understand
that they have to make choices in life. But those who can do economics understand
that choices involve opportunity costs — what you give up when you make your choice.
The ability to articulate options, evaluate them and understand (and accept) the cost
of decisions is fundamental to doing economics.
Most people understand that a change in interest rates will affect their ability to
purchase a home. Doing economics means they also understand that changes in interest
rates do not occur in a vacuum. The best decisions are made by those who realize how
the pieces of the economy fit together to determine them. Our current recessionary
slide is testament to the consequences of making personal decisions without this knowledge.
Politicians talk about social policy issues: medical coverage, Social Security, education.
Many people respond to these issues based on what resonates on an emotional level.
As seductive as emotional responses might be, they are no substitute for the ability
to examine issues within an evaluative framework — doing economics. What is the opportunity
cost of various proposals? What are their broader implications for economic growth,
for quality of life? Are their effects felt disproportionately across the socioeconomic
The challenges we face as individuals and as a nation require more than a cursory
knowledge of economic
terms. They require a deeper understanding of the role of various economic agents
in our economy, how they fit together and how a disturbance in one reverberates throughout
the economy. They require an ability to make choices — to understand that benefits
and costs are inextricably linked — and to accept the consequences of those choices.
They require an increasing number of citizens who can do economics.
To prepare students to meet these challenges, to prepare them to do economics, we
need to expose them to economics early (starting in kindergarten) and often, not only
as a set of terms, but as a way of thinking.
Economics also needs to be integrated into other disciplines.
Doing economics means that the economic way of thinking becomes part of everyday life,
and economic issues are evaluated within a larger context — historical, geographical,
political. We should teach it to children in the same way, teasing out the economic
lessons in children’s literature, using economics as applications in math, and presenting
economics as the “why” of much of history. It is imperative that the next generation
be taught what it means to be competitive in a global economy; to make thoughtful
personal choices and informed national decisions; to evaluate the context and complexities
of our economy — to not just know economics, but to do it.
Dr. Julia Heath is the director of the Center for Economic Education at the U of M.
She received her doctorate in economics at the University of South Carolina in 1986,
specializing in labor economics and quantitative methods. Heath received a Visiting
Research Fellowship to Princeton University to conduct research in economics education
and has published extensively in the area. She has also been the principal investigator
for many research grants, including one from the Rockefeller Foundation.
Dr. Julia Heath
Heath teaches undergraduate and graduate classes, primarily micro theory, principles
and the economics of sports and labor. She has won several teaching awards, including
the economics discipline’s highest award, the Elzinga Award, and received the Educator
of the Year Award from the National Association for Financial Literacy, both in 2008.