U.S. can’t afford to continue graduating economic illiterates

Steve Murphy loved his Miami-based work as an economic development consultant specializing in Latin America, but he found he could not explain it to young people. Many of the ones he met said they wanted to start their own businesses, but “when I ask where they plan to get their startup capital, they just shrug their shoulders. Motivation and knowledge are not connected at that age.”

So Murphy, a former Seattleite and steeped in the ethic of service, tried something unusual; he created a high school course that appeals directly to the student’s self-interest in making lots of money. “They’re all interested in that,” he reports. And he volunteered to teach the course, called “Material Wealth and the Stock Market,” at inner-city Miami’s Jackson High School. The course became so popular and successful that it got coverage in the Miami Herald and The Wall Street Journal.

Murphy’s lesson plan reaches from “the wisdom of Solomon” in the Bible to the guild of Dan Akyrod and Eddie Murphy in the film “Trading Places.” But central to its appeal is the practical experience Steve Murphy gives the students in investing in the stock market. He starts with play money, but at the end of the class the students who performed best win cash prizes in the form of stock, donated by a brokerage house.

Murphy now is expanding his consulting business into his old hometown of Seattle, and also is looking for a way to volunteer a practical economics course here like the one he started in Miami (attention, school Superintendent John Stanford).

When he returns he will find another model of educating kids in economics is being tried here for the second year by the National Foundation of rTeaching Entrepreneurship (NFTE, pronounced “Nifty”). With support from Microsoft, among others, NFTE will run a two-week crash course next month in starting ga business and, like Murphy’s regular school year course, it is making its strongest appeal to kids from minority backgrounds. Students tour companies, hear motivational and instructional talks and learn how to develop a business plan. The best students win cash prizes. An independent evaluation by Dr. Andrew Hahn of Brandeis shows that the program leads to sharp increases in knowledge of the economic system and how to participate in it.

Both these excellent approaches are making a difference, but to a relatively small number of students. The need is to replicate them on a far larger scale. Minority students certainly warrant major attention, for the gap between entrepreneurial ambition and actual outcomes is most striking in the inner city. But, the truth is that America, the world’s greatest capitalist power, does a poor job of instructing any large share of its youth in practical economics. And in the population as a whole the results are manifest.

A survey of the National Council on Economic Education showed that “the general public was able to answer correctly only 39 percent of the questions on economic concepts, relations and ideas that are frequently used in discussions of economic matters.” For example, “Only 36 percent knew the basis purpose of profits in an economy.” (And where do they get their economics information? For 79 percent, “television.”) The ignorance of high school graduates is even more discouraging. Two thirds of senior could not tell the meaning of the word “profit” and nearly half were baffled by such concepts as “inflation” and “governmental budget deficit.”

Such reports frustrate educators, presumable, but they also weigh upon serious politicians. One reason political campaigns dwell on on scandals and candidates’ slips of the tongue is that the public has a hard time following economic issues. The proposed flat tax, trade policy or the minimum wage may bear more on the average citizens well-being than the latest candidate poll, but if voters don’t understand the subject, they can’t even participate in the debate.

Also frustrated by widespread ignorance of economics are the nation’s employers.

We constantly are told that the jobs being created today are for workers with higher skills, and some of those skills include a knowledge of economics and even many of those, the surveys show, manage to maintain an appealing ignorance of the subject. In college, the avoidance of economics courses continues, which is why so many college students’ ideas about the economy seem so bizarre.

Surely, motivation is part of the problem. Economics, the “dismal science,” sounds boring to a young person interested in rap music and exploring their own “feelings.” There is too much discipline to it.

That’s where people like Steve Murphy, and the NFTE (and, of course, older organizations, like Junior Achievement), come in; exciting the students’ native desire for personal success and community respect. However worthy and popular, however, such experiments mainly serve to point the way ahead. The people who write curricula for our schools have infinitely more power to close the gap between what the public knows of economics and what it needs to know. In a world where even informed consumer behavior, let alone earning a living, takes some economics background, how can we go on graduating economic illiterates?