And the survey says ... economic illiteracy
New York — The nation's high school students get failing marks in economics, says a report issued by the Joint Council on Economic Education. And economic literacy has a wide effect on how well people are prepared to survive in society as consumers, as workers, and as citizens, says William Walstad, an author of the study.
Former Federal Reserve chairman Paul Volcker says, ``The more basic knowledge [the public] has, the better for policymakers, and the better for the economy.''
In a world of budget and trade deficits and global markets, economic literacy is important, Mr. Volcker said when the report was announced yesterday.
At a time when fundamentals such as reading, math, and science need to be emphasized, Volcker says economic education can be taught in a way to enhance those basics.
Basic economic information is important particularly when high school dropout rates continue to range high in urban areas, says Michael Macdowell, president of the Joint Council.
Studies show that many kids who drop out ``do not think highly of themselves'' and that makes it hard for them to participate in the economic mainstream, he says. A program the council sponsors that targets potential dropouts as early as third and fourth grade works to help such students ``feel a part of the economic system.''
Typical high school students surveyed in the council's study answer only 40 percent of the questions in a multiple-choice test on basic economic issues.
Understanding of national and international economy was particularly low, says Dr. Walstad.
Just 34 percent of seniors were correct on national economic questions and 36 percent on international questions. For example, only 25 percent could define inflation.
On fundamental and microeconomic points (such as consumer issues), results were slightly better, with between 43 and 44 percent correct responses. Only 27 percent could figure out the economic cost in a question about going to college. Fewer than 30 percent recognized that a lack of labor market skills was a major cause of low income, Walstad says; most thought poverty resulted when people did not want to work.
Solutions recommended by the council include teaching economics during all 12 years of grade and high school; requiring that high school students take a course in economics before graduation; and preparing teachers to teach economics, whether as a separate course or integrated into a curriculum.
Volcker points out that sophisticated economics, over which there are many arguments, should not be the issue in teaching high school students.
However, core issues that economists agree on - such as how wealth is created, what makes markets work, what are supply and demand - are not controversial, and are essential.
Supporting the report and the call for better economic education were representatives from business, labor, and education.
Pointing to the fact that many students don't understand how the lack of marketable skills leads to low incomes, Rudolph Oswald of the AFL-CIO talked about the importance of the public debate on developing a skilled labor force.
Such policy questions not only affect the corporate director, he says, but the worker.