“Unicorns don’t exist.” All economic logic follows from this observation. Simple, right? Unfortunately, the poor state of economic understanding among many Americans indicates to me not only that the idea is subtly complex, but also that people do have an affinity for mythical, horned creatures.
To wit, my students believe that a third of the workforce earns the minimum wage (reality: less than 2.5 percent). Forty percent believe living standards were at least as good in 1900 as they are today. (We’re at least 14 times better off.) Our median student believes manufacturing peaked in America in 1955. (It peaked just prior to the current recession, and the U.S. is still the world’s largest manufacturer.)
Without an understanding of economics, individuals may support policies that produce outcomes that hurt their own interests or those of others, while eroding liberty and peaceful association. It’s a bit of a mystery why the level of misunderstanding is so high, and even more of a mystery why economic illiteracy doesn’t suppress the desire for individuals and policymakers alike to attempt to influence economics.
It can’t be that people aren’t interested in economics. “Freakonomics” was a best-selling book. News reports never fail to mention economics, and the subject is one of the most popular majors in college. Yet illiteracy seems to be no better today than in the past.
The common excuses given for economic illiteracy — economics is “confusing” or “boring” — are somewhat fair, but they don’t explain why a lack of understanding exists. My view is that we don’t expose young people early enough to sound economic ideas, and that when we finally do, it’s probably too late to do any good.
Our education system runs on the idea that there is a hierarchy of learning that applies to every subject. This view condemns economics to start in 12th grade or beyond — well after strong cognitive biases form and other classes have addressed economic issues without students having the tools to think clearly about them.
All too often, the few instances of successful (or at least not harmful) interventions are put front and center in students’ early education. For example, a majority of students are aware of the successful public health initiatives of governments in cities; however, virtually none of my students had heard that rent controls destroy cities, that the Endangered Species Act in some spectacular cases has increased the threats to species, or that horrifically poor Fed policy in 1937 almost surely caused the “Depression within a Depression.”
If seventh-graders are capable of appreciating the causes of the American Revolution and how cellular mitosis works, then they are more than capable of grasping that voluntary exchange is mutually beneficial, that if you tax something you get less of it, and that anytime we make a decision we have a trade-off to deal with. Economics is not about sophisticated math or fancy theories, and thus does not have to come after our students are familiarized with advanced algebra, science and the like.
I am far more optimistic today than I was as a college student in the 1990s. I see an increased level of excitement and engagement by young people to obtain this crucial set of critical thinking skills.
But I also attribute my optimism to the desire of the younger cohorts of Generation Y to be an active part of their education, and to do more than sit down and absorb what is being told to them — they want to know why the unicorn doesn’t exist. It is this mentality that lends hope to the future of economic literacy.
Michael Rizzo, a senior fellow at the Alexander Hamilton Institute, is an assistant professor of economics at the University of Rochester.
About the Author
