Professor Offers Thoughts on Economic Literacy

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 and relationships.

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 spectrum?

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

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.