Economics Education and the Great Recession
Neumann, Richard, Radical Teacher
One significant difference between the current Great Recession and the deep recession of the late 1970s and early 1980s is that no one is blaming public education for the crisis. No National Commission on Excellence in Education (authors of A Nation at Risk, 1983) has been appointed to make a case that public schools' ineffectiveness in preparing a competitive workforce brought about the economic meltdown. No claims have been made that higher average Scholastic Assessment Test (SAT),American College Test (ACT), or National Assessment of Educational Progress (NAEP) scores, or better ranking of American students on international math tests would have prevented the malaise that now besets our economy. But is public education really off the hook? Do most high school graduates have adequate knowledge and skills for political participation? Do most have a good understanding of the relationship between economics and politics; of the influence of corporations, political action committees, and lobbyists on policy development? Do most have the knowledge and disposition to deliberate critically about a political platform of deregulation and the potential consequences of dismantling regulations on financial institutions? Do they have the wisdom, capacity, and initiative to help our nation avert catastrophe? As I argue below, the answer to these questions is no: shortcomings of public education in preparing young people for democratic citizenship have played a central role in the current economic crisis. While these deficiencies are many, this discussion focuses on just one part of the terrain--economics education.
Most Americans have not had formal education in economics. A little more than a quarter (27.5%) of American adults over age 25 hold a bachelors degree. At the turn of the century, an estimated 40% of college students had taken a course in economics as part of their degree program. For most Americans, formal education in economics, if any, is obtained in high school: 84.5% of citizens over age 25 have a high school diploma; in recent years approximately 41-43% of high school seniors have taken an economics course. (1) In 2007, 40 states required economics standards to be implemented, but only 17 states required an economics course be taken for high school graduation. Testing of students' economics knowledge occurred in 23 states in 2007, two fewer than 2004. (2) For students who complete a high school economics course, the outcomes are not encouraging. An assessment of high school students' knowledge conducted in 2000, using the validity- and reliability-verified Test of Economic Literacy, found "there are significant deficiencies in the economic understanding of typical high-school students, whether or not they have taken an economics course." The study involved 7,243 students in 384 classes in 36 states. (3)
Another indicator of young peoples' economics knowledge is NAEP, an ambitious effort created by Congress in 1969 to measure student achievement that some refer to as the nation's report card. Results from the first NAEP survey of economics knowledge in grade 12 reveal that 58% of students scored below the "proficient" level. The 2006 NAEP economics assessment reportedly asked students to answer questions regarding "market, national, and international economies," but it does not indicate that students were asked questions concerning their understanding of the influence of lobbyists and of corporate contributions to political campaigns on the development of economic policy, or the potential impact of weak regulation of financial institutions on U.S. and international economies. The report does, however, provide an example of the level of economics understanding that students performing at the "basic" level, the level achieved by most test-takers, should be able to demonstrate: "the ability to recognize the inverse relationship between the market price of a product and the amount buyers are willing and able to purchase." As necessary as this ability may be, the level of understanding it reflects is hard to characterize as even "basic," given the economic issues citizens must grapple with in our society. (4)
The Economics Framework for the 2006 National Assessment of Educational Progress is based on the following definition of economic literacy: "the ability to identify, analyze, and evaluate the consequences of individual decisions and public policy." The framework states that economically literate 12th graders should be able to "identify and evaluate the benefits and costs of alternative public policies, assess who enjoys the benefits and who bears the costs, and explain why government policies exist." While this definition of economic literacy certainly addresses important knowledge and skills citizens need to effectively deliberate on economic policy, make voting decisions, and otherwise engage in the political process, none of the sample questions or question item maps provided in the NAEP economics assessment report address two central issues of our current economic crisis: government regulation of financial institutions, and taxpayer bailout of private corporations. In light of our present situation, it would seem important for the NAEP to assess whether students can identify periods of weak regulation of financial institutions during the past century that had severe consequences for the national economy, and describe how different groups of citizens were impacted; that students could explain and discuss inconsistencies in free-market principles manifest in taxpayer bailouts of Lockheed, the Chrysler Corporation, and the savings and loan industry, and apply their knowledge of these events to speculate on policy alternatives; and that students understand implications of government allowing a corporation to become "too big to fail." (5)
One factor contributing to poor student performance in economics is inadequate preparation of teachers. In 1997, only half of state teacher-certification agencies had an economics requirement for social studies teachers; the average was one course. A 1999 Gallup survey found more than half of social studies teachers had taken two or fewer college courses in economics. William B. Walstad, a leading researcher in economics education, argues that five or six courses in economics are needed to prepare social studies teachers to teach in the discipline. (6)
The content of classroom instruction in economics and other subjects is determined in large part by state standards and textbooks. High school economics curriculum standards in California are representative; they reflect many of the voluntary national content standards in economics established by the National Council on Economics Education (NCEE), and resemble economics standards in many other states. (7) California Principles of Economics Standard 12.3.2, taken in part from NCEE Standard 17, requires that students be able to "identify the factors that may cause the costs of government actions to outweigh the benefits." (8) Unlike NCEE Standard 17, California Standard 12.3 does not elaborate on what students should understand and how they should be able to use knowledge about government actions. NCEE Standard 17 clarifies: students should understand why costs of government action may outweigh benefit. "[T]his may occur ... because of actions by special interest groups that can impose costs on the general public...." Standard 17 also says students should know that "[i]ncentives exist for political leaders to implement policies that disperse costs widely over large groups of people and benefit relatively small, politically powerful groups of people." (9)
The only California standard that addresses the Great Depression requires that students be able to "compare the reasons for and the effects of trade restrictions during the Great Depression with present-day arguments among labor, business, and political leaders over the effects of free-trade on the economic and social interests of various groups of Americans." There is no standard that requires students to analyze government regulation of the banking industry, or lack thereof, as a factor contributing to the depression and compare present-day government regulation of financial companies with regulation during the period that preceded the Great Depression. (10)
Another California standard related to the sub-strand concerning "economic reasoning" requires that students "analyze the role of market economy in establishing and preserving political and personal liberty." (11) While bias reflected in the assumption that liberty is contingent on market economy is perhaps obvious and ought to be expected in a politicized curriculum, nowhere do the standards require students to examine anything other than free-market principles. Students are not encouraged to compare, for instance, socialist alternatives to market-based arrangements for providing crucial social services--health care for example. California's economics standards do not include NCEE Standard 3, which requires students to understand alternatives to market systems: "Students will understand that." Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services. Students will be able to use this knowledge to: Evaluate different methods of allocating goods and services by comparing the benefits and costs of each method." (12)
In the most recent comprehensive review of high school economics textbooks published since the 1980s, Don R. Leet and Jane S. Lopus concluded, "most texts subscribe to solid economic concepts and analysis." The investigators, however, found that the texts "ignored [NCEE] Standard 17 on government failure." As noted above, NCEE Standard 17 requires students to understand that "costs of government policies sometimes exceed benefits," and that these policies and their consequences may occur "because of actions by special interest groups that can impose costs on the general public," among other reasons. Elaborating on Standard 17, the NCEE recommends that students use knowledge obtained about specific government policies to contemplate the following question: "Do government officials try to promote the general welfare of the nation, or are they guided by their own self-interests?" Also in relation to the standard, the NCEE states: "Citizens should understand ... the incentives that can induce government leaders and employees to act in ways that do not promote the general national interest." (13) My own review of a leading California high school economics textbook found the same neglect of government failure noted by Leet and Lopus. For instance, in addressing the Great Depression, the text does not discuss inadequacies of government regulation of investment banks as a contributing factor in the crisis. Later, the Financial Services Modernization Act of 1999, which repealed the Glass-Steagall Act established in 1933 to prevent commercial banks from offering investment and insurance services, is described as "paving the way for banks to sell financial assets." Students are not asked to consider risks of dismantling protective regulation implemented during the Great Depression. Mergers that produced mega-banks currently under public support through the Troubled Asset Relief Program are discussed in the text in terms of access to ATMs and potential limitations on choices of where to bank. The Commodity Futures Modernization Act of 2000--which exempted financial derivatives such as the now infamous credit-default swaps from regulation, and facilitated the wild speculation in oil futures that gave us $4 per gallon gasoline-is not mentioned in the textbook. Perhaps the text's most egregious omission is failing to mention lobbyists and political campaign contributions as influences on banking policy.
The California economics textbook tells students that many critics say efforts to regulate industries have created inefficiencies, but it does not mention what advocates of government regulation have to say. Deregulation is clearly presented as healthy for the economy. The text states that one indicator of economic stability is the soundness of our financial institutions, which is assured by careful monitoring and "hundreds of regulations" that the government has power to enforce. Although the savings and loan crisis of the 1980s is described as an unfortunate consequence of deregulation, it is not made clear to students that the public treasury was used to bail out federally insured savings and loan companies, and that this tremendous sum of money could have been used otherwise for public benefit. Again, the influence of industry lobbyists is not addressed in regard to the legislators' decision to deregulate savings and loan banks in the 1970s and 1980s. The textbook never discusses government bailout of private companies in relation to principles of free-market economy or why political leaders administer socialistic palliatives for the failings of capitalism.
The world's free-market economy depicted in the California economics textbook is one governed by laws of supply and demand. While the text alludes to ways a cartel such as the Organization of Petroleum Exporting Countries (OPEC) may attempt to violate these laws through restriction of oil supply, it explains how the self-interest of individual cartel members ultimately corrects these infractions. The text does not mention hedge funds. As economist Paul Krugman tells us, hedge funds provoked currency crises in Britain in 1992 and in Malaysia in 1997 as well as the devaluation of the Hong Kong dollar and stock market in 1998. (14) Hedge funds and other speculators were largely responsible for $147 barrel oil in 2008, a price increase of more than 125% in less than year at a time when supply exceeded demand. (15)
In addition, the California economics text may also lead students to construct meanings about labor unions and taxes that correspond with conservative and neoliberal ideology, which seek to eliminate big government, and let market forces apply to all aspects of life In the chapter and section where labor unions are first introduced, the text provides one sentence on the achievements of unions--union workers tend to earn higher wages--followed by four paragraphs of negative consequences of unions for the economy. The need for and value of unions in protecting workers' safety and securing just wages and benefits, particularly in the last half-century, are dismissed as largely irrelevant given contemporary laws on workplace safety and competitive forces in the economy that keep workers' wages close to their level of productivity. The book notes that many economists argue that our competitive labor market helps prevent low wages and dangerous conditions because workers will leave jobs where these conditions exist and work elsewhere; a rebuttal to this argument is not provided. In discussing the decline of unions in recent decades, the text identifies union abuse of power and industries moving outside the country where labor is cheaper or moving to areas of the country less friendly to unions. Union busting efforts during the Reagan administration are not mentioned. The text notes that political donations by unions contributed to the significant influence these organizations once held; political donations by corporations are not mentioned anywhere in the book.
With regard to taxes, the California economics textbook says that "many people argue" the economy benefits most from lower tax rates; no opposing argument is provided. The book does not discuss implications of low taxes for the welfare of society. It mentions the challenge of future funding for Social Security, however, and students are posed the question: Who will pay for these costs? No policy options except the "popular proposal" to replace Social Security with private retirement savings are offered for students to deliberate. The text does not address the billions of dollars in tax revenue lost annually due to the offshore tax avoidance techniques used by U.S. corporations. Although the California economics text provides adequate explanation of economic terms and concepts, it fails to address significant forces influencing economic policy and the economy, misrepresents the stability of the economic system, inadequately addresses government failure, and promotes a certain set of values and beliefs about the role of government, labor unions, taxes, and the infallibility of free-market principles. To present as reality an idealization of market economy that operates reliably and efficiently under incorruptible laws of supply and demand compromises young peoples' ability to deliberate effectively on economic issues and participate politically as informed citizens.
If there is any truth to claims that citizens are the repositories of power in the United States, and that the vitality of our democratic society depends on an educated citizenry, then one cannot help concluding that our current economic crisis is in part a consequence of shortcomings in our educational system. The inadequacies of curriculum and requirements in economics education described here are perhaps an obvious target for improvement. Adoption of NCEE voluntary national content standards in economics by all states would be a good start to such an effort. Other promising reforms include graduation requirements for and assessment of economics education in high school; a requirement that social studies teachers or those who teach economics complete five or six college courses in economics; and revision of economics textbooks to address government failure accurately and provide a greater diversity of perspectives on economic policy. While these improvements might promote citizens' critical deliberation of and political engagement in issues of government regulation, the influence of corporations on economic policy, and methods of allocating goods and services in our society, they are not likely to provide the understanding we need for preventing recurrence of the kind of catastrophe that afflicts us today. If we expect our educational system to help us achieve a more stable economic condition and a more just, equitable, and satisfying society, a much more fundamental reform will be necessary. The pivotal piece of such a reform is subordination of the mantra of education for the workforce to a guiding vision of education for democratic citizenship.
What sorts of changes might we see in curriculum and instruction if educational policymakers and teachers were committed to the preparation of democratic citizens capable of participating effectively in the political process as the first and primary goal of public education? It seems likely that we would see much more attention to engaging students in critical, multidisciplinary examination of social, political, and economic issues. Social justice would probably be a central theme of the curriculum. Teachers would likely approach development of units and lessons with a mind for the possibilities their subject holds for advancing social, democratic purposes of education. There would likely be a greater emphasis on development of students' critical thinking skills, critical literacy skills, critical media skills, and sense of agency. It is very likely we would see greater concern for accuracy and diversity of perspectives in social studies texts. In short, schooling would probably be a lot different if educators refused to define their role as helping General Electric gain market-share over Hitachi and committed themselves to preparing democratic citizens. Of course, a collateral benefit of education for democratic citizenship would be knowledge and skills that might actually transform places where people work.
(1) Sarah R. Crissey, "Educational Attainment in the United States: 2007," Current Population Reports (Washington, D.C.: United States Department of Commerce, Economics and Statistics Administration, United States Census Bureau, January 2009); William B. Walstad, "Economics Education in U.S. High Schools," Journal of Economic Perspectives, vol. 15, 2001, pp.195-210.
(2) National Council on Economic Education, Economic, Personal Finance & Entrepreneur Education in Our Nation's Schools in 2007: Report Card--Survey of the States (New York: Author, 2007).
(3) William B. Walstad and Ken Rebeck, "Assessing the Economic Understanding of U.S. High School Students," The American Economic Review, May 2001, p. 454.
(4) Nancy Mead and Brent Sandene, The Nation's Report Card." Economics 2006 (Washington D.C.: National Center for Educational Statistics, Institute of Education Sciences, U.S. Department of Education, 2007), pp. 1, 9.
(5) Stephen Buckles and Claire Melican, Economics Framework for the 2006 National Assessment of Educational Progress (Washington, D.C.: National Assessment Governing Board, U.S. Department of Education, 2006), pp. v, 15.
(6) William B. Walstad, op cit.
(7) California State Board of Education, History--Social Science Content Standards for California Public Schools: Kindergarten Through Grade Twelve (Sacramento, Calif.: California Department of Education, 1998), pp. 59-61.
(8) California State Board of Education, op cit., p. 60.
(9) National Council on Economic Education, Voluntary National Content Standards in Economics (Washington, D.C.: Author, 1997), pp. 33-34.
(10) California State Board of Education, op cit., p. 61.
(11) California State Board of Education, op cit, p. 59.
(12) National Council on Economic Education, op cit., p. 5.
(13) Don R. Leet and Jane S. Lopus, "A Review of High School Economics Textbooks," 13 February 2003, pp. 6, 12, 13, http://ssrn.com/abstract=381760; National Council on Economic Education, op cit., pp. 33, 34.
(14) Paul Krugman, The Return of Depression Economics and the Crisis of 2008 (New York: W. W. Norton, 2009).
(15) 60 Minutes, The Price of Oil. CBS Broadcasting Inc., 11 January 2008.…
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Publication information: Article title: Economics Education and the Great Recession. Contributors: Neumann, Richard - Author. Magazine title: Radical Teacher. Issue: 87 Publication date: Spring 2010. Page number: 36+. © 2009 Center for Critical Education, Inc. COPYRIGHT 2010 Gale Group.
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