How many high school students do you suppose can answer the following questions?
What function does an entrepreneur perform in the economy?
What is the average rate of profit earned by businesses in the U.S. in a typical year?
Why did the former Soviet Union collapse?
Every year, nearly three million high school seniors graduate. They are expected to make adult decisions about their careers and such weighty matters as housing, marriage and starting families, and participating in political debates and elections.
Tragically, most of these young adults lack an understanding of even the most elementary facts needed to perform the roles they are expected to play. Few have taken a course in economics or finance. According to a national survey conducted by the Federal Reserve, the typical high school senior is able to correctly answer only half of 31 questions about personal finance and economics. One third don’t know the difference between a private pension program and Social Security.
Just 1 in 4 students is “proficient” in civics
Most high school seniors don’t know where the public sector ends and the private sector begins, or why the difference matters. Just 25 percent rank “proficient” in their understanding of civics, according to the National Education Goals Panel. The general public may not be any better informed. A comparison of survey results from New York City and Moscow, according to Myron Lieberman, found “public understanding of and attitudes toward market systems were generally the same in both countries.”
While much attention is properly focused on reading, writing, and mathematics, economics and civics ought to rank almost as high. The United States has a capitalist economy and a democratic government. It need educated producers and consumers who can make informed choices in the marketplace and educated voters to hold elected officials accountable.
To think clearly about their career possibilities, young people should know that entrepreneurs help others meet consumer demands by being alert to opportunities for new products and more efficient production processes.
Knowing that average after-tax profits in the U.S. range from 6 to 10 percent a year is equally important. People who believe profits are much higher than this may think starting a business is an easy road to fame and fortune, and make foolish career decisions as a result. Or they may resent business owners for their “obscene” profits. Both attitudes are wrong and counterproductive.
Why is it important to know why the former Soviet Union collapsed? Because it ended a generations-long debate about whether centrally planned economies could produce prosperity and freedom just as well as societies with capitalist economies. Those who believe private property, markets, and the Rule of Law are the best way to organize economic affairs were finally vindicated, though a healthy debate about the proper role of government continues.
Start teaching children about economic choices
Children as young as 5 or 6 years old may benefit from being introduced to the basic economic concepts of scarcity, choices, and the unforeseen consequences of choices they or others make. These are real-life skills they will need later to be successful in any walk of life. The Web site of the Foundation for Teaching Education (www.fte.org) contains some wonderful lesson plans for introducing young children to the real sources of wealth and the differences between a free market and a controlled economy.
The National Council on Economic Education’s Web site (www.economicsamerica.org) has links to many other sources of information and lesson plans. NCEE’s mission is to help students think and choose responsibly as consumers, savers, investors, citizens, members of the workforce, and effective participants in a global economy.
Excellent introductions to economics are available for students and their parents, including The Adventures of Jonathan Gullible: A Free Market Odyssey by Ken Schoolland, Princess Navina Visits Voluntaria by James L. Payne, and Thomas Sowell’s Basic Economics: A Citizen’s Guide to the Economy. Two older books suitable for high school and college students, both models of clear writing and common sense, are available in many editions: Economics in One Lesson by Henry Hazlitt, and Capitalism and Freedom by Milton Friedman.
Joseph Bast and Herbert Walberg are president and chairman, respectively, of The Heartland Institute, and coauthors of Education and Capitalism, to be published later this year.