Why Economic Education Is Dangerous for Politicians (summary)

Why Economic Education Is Dangerous for Politicians (summary)

14/05/2014 | Mark C. Schug and Dwight R. Lee

“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” Thomas Sowell (1993, p. 131)

We wonder why schools do not teach more economics at the K- 12 level. Curriculum matters. A pre-college curriculum, rich with economic principles that are taught early and often, might influence how responsive voters are to the traditional appeals made by politicians wishing to gain support for this or that new government program. A review of the economic education literature (Miller and Van Fossen, 2008) reveals that research dating back several years shows that children as well as adolescents can learn basic economics. Research indicates that even elementary-age children can learn economics through direct and purposeful instruction.

Let’s begin with three basic economic ideas that we suggest are “unhealthy” to politicians and yet are fundamental to economic education: scarcity, opportunity cost, and incentives matter.

• Scarcity: The productive resources of any society are limited but we want more—more education, more frequent Caribbean vacations, a more financially secure retirement, a nice vacation home, a cleaner environment, more time to spend with family and friends—than our limited resources permit.

Opportunity cost: Every time we make a choice, we incur a cost. Something must be sacrificed. This is true regardless of whether we are rich or poor.

• Incentives matter: Incentives are any sort of reward or penalty and may be monetary or non-monetary. Markets work because they create incentives that provide information and motivations for both buyers and sellers to adjust their behavior in ways that coordinate their decisions when circumstances change. Nonmonetary rewards—satisfaction gained from teaching children, helping a loved one, or watching a glorious sunset on a northern Wisconsin lake—can also be powerful rewards.

Scarcity, opportunity cost, and incentives seem little more than common-sense ideas. But they are powerful ones. Once understood and applied, they change the way people look at things. They make people critical thinkers. Those who have learned to think like economists are immediately skeptical of claims that the quantity and quality of goods and services can be increased without increasing costs. They know that trade-offs are involved in everything we do, that tough decisions cannot be wished away, and that every decision to do something comes with a sacrifice of a valuable alternative—a cost. And the economically literate understand that markets make it possible for people to do a better job solving most of their own problems through specialization and cooperation with others without detailed regulations and mandates being imposed by political authorities. It would be surprising indeed if politicians were anxious to have large numbers of voters thinking like economists.

But a nation of citizens that are largely economically illiterate reduces the costs politicians from both parties face when claiming that they can provide benefits at either no cost or at far less cost than is actually possible. Of course, politicians can disguise and delay the cost of government programs with subsidies and deficits, but that invariably increases the cost we end up paying. Simple economics would inform citizens that the most effective way to control costsis by revealing them through market prices so that we know the value of what we are giving up when we make decisions, rather than concealing them with political deception.

Politicians commonly employ consultants who use focus groups to measure the emotional response to various ways of presenting arguments for policies. Invariably the strongest and most favorable responses are to statements that emphasize benefits and ignore costs.

Perhaps the desire of elected officials to make claims that ignore economic logic can be better understood by examining the context in which they work. Elected officials are keenly aware that they face competition, often intense competition. They compete to gain the nomination of their party. They compete to get campaign volunteers. They compete to find professional staffers and to gain support from colleagues. They compete to get votes for election and reelection. Most importantly, they compete for contributions to make these other things possible.

To compete successfully, elected officials seek the help of groups that share some of the same interests as they do. Center left politicians might seek the support of organized labor or environmental groups. Center right politicians might seek out the support of large corporations or business organizations. The problem is that these interest groups invariably have a healthy regard for private interests that, despite the rhetoric of public interest, can be advanced only through subsidies and restrictions on competition that impose higher taxes and prices on the general public. As Adam Smith (1776, p. 145) warned in the Wealth of Nations, «People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.»

But increasing economic literacy would clearly reduce the influence of interest groups and limit the ability of politicians to gain political advantage by transferring benefits to a few at the expense of the many.

Things could be different. If voters were better educated regarding basic economic principles, they would be more keenly aware of the context in which elected officials operate. They would quickly recognize the concentrated interests of interest groups and the perverse influence of these groups over political decisions, and would be far less naïve in believing that every market failure, real or imaginary, can be corrected by increasing the power of government. They would not have to study every issue in great depth to know when politicians and their special-interest clients are trying to deceive them. The more voters who have such an economic education, the more difficult it will be for elected officials to benefit from enacting bad economic policies.

This article comes from «The Journal of Private Enterprise 28(1), 2012, 47–60«. It is available on the following link. The content from this web page is under a Creative Commons Non-Commercial Attribution License 3.0.

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