Our Economics Knowledge Deficit

(Editor's note: The following commentary appears as the "Free-Market Fundamentals" in the Summer 2010 issue of Impact.)

Economics dominates public life and important policy discussions these days, but most people who rely on what they've learned of it in the schools are entering the intellectual battle unarmed.

Economics courses in high school are few and far between and often deal with little more than "consumer" issues: how to balance a checkbook, how to find the best deals in the market, or how to borrow money at the lowest interest rate. Those are all useful things to know, but the mental tools and essential principles needed to analyze and evaluate the paramount issues of the day are too often missing.

Stay Engaged

Receive our weekly emails!

Even a cursory examination of textbooks used in high school economics courses reveals a dismal level of understanding or outright bias by the text authors themselves. Students are sometimes reading that citizens are under-taxed, that government spending creates new wealth and that politicians are better long-term planners than private entrepreneurs. It is not uncommon for texts to portray free-market competition and private property in a suspicious light while presenting government intervention with little or no critical scrutiny.

Economics is immensely important. Without it we miss an understanding of much of what makes us the unique, thinking creatures we are. Economics is the study of human action in a world of limited resources and unlimited wants — a lively topic that cannot be reduced to lifeless graphs and mind-numbing equations that occupy the pretentious planner's time.

Economics teaches us that everything of value has a cost. It informs us that higher standards of living can only come about through greater production. It tells us that nations become wealthy not by printing money or spending it, but through capital accumulation and the creation of goods and services. It tells us that supply and demand are harmonized by the signals we call prices and that political attempts to manipulate them produce harmful consequences.

Economics explains that good intentions are worse than worthless when they flout inexorable laws of human action. It reminds us to think of the long-term effects of what we do, not just the short-term or the flash-in-the-pan effects.

When people have little or no economic understanding, they embrace impractical "pie-in-the-sky" solutions to problems. They may think that whatever the government gives must really be "free," and that all it has to do to foster prosperity is to command it.

Citizens are being asked every day to form judgments and cast votes for programs and proposals that are largely economic in nature. We should think about how we can provide the missing tools we need to make those and other such decisions, so that we don't dig ourselves deeper in the muck of poor thinking and bad public policy. I'm thankful that the Mackinac Center helps fill the void created by the dearth of sound economics in primary and secondary education.


Lawrence W. Reed is president of the Foundation for Economic Education and president emeritus of the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.