Commentary: Economics Made Too Simple

Economics has long been known as the dismal science, but I've often thought it more properly might be called the squabbling science. As they struggle to make sense of the world we live in, economists battle over the meaning of the latest statistics, wrangle over whose theory makes the most sense, and sift through warring analyses. Economists tackle thorny issues, such as how nations grow. And they tackle unusual ones, such as the economics of big-game poaching.* Still, even though their reach often exceeds their grasp, economists manage to explain, or at least to illuminate, a great deal about complicated events and circumstances.

It's not easy for the average person to view the world through an economic prism. Now along come the National Council on Economic Education's 20 economics content standards for students from kindergarten through 12th grade. The nonprofit partnership, made up of education, business, and labor representatives, is dedicated to improving economic understanding. The guidelines are the latest in a series of its offerings in math, science, and other subjects designed for voluntary adoption by states and local schools.

UNREALISTIC. Shunning jargon, the NCEE focuses largely on basic economic principles--that the law of supply and demand determines prices, that prices are signals, that economic activity is predicated on choices among scarce inputs. The standards suggest exercises for 4th, 8th, and 12th graders to teach these principles.

Students should learn about economics, authors of the standards contend, to become better citizens, workers, and consumers. That's reasonable enough. But the standards presume near-universal agreement within the profession on what is important and avoid controversial topics. So pupils get both too much and too little information. It's unrealistic and probably undesirable to inculcate 4th or even 8th graders with ideas about monetary incentives and self-interest while ignoring altruism and making little mention of nonmonetary incentives. And it's unfair to 12th graders to study government's economic role with scant discussion of taxes and income redistribution.

Unveiled in New Orleans on Jan. 4 at the American Economic Assn. meetings--the annual venue for professional squabbling if ever there was one--the standards focus on basic, even self-evident, axioms. Some exercises are worthwhile, others laughable: Eighth graders are supposed to demonstrate that they understand money's "store of value" by explaining why a farmer would be better off selling his tomatoes for money than saving tomatoes to exchange for his daughter's tuition when she reaches age 18. Had this been my introduction to economics, I would have quickly lost interest.

The first few pages of my well-worn copy of Paul A. Samuelson's classic text, Economics, do a far better job of conveying the richness of the discipline and the debates that infuse it. In the introduction is a discussion of the fallacy of composition, in which what is true of a part is alleged to also be necessarily true of the whole. You won't find that in the new standards. And Samuelson tells the reader up front that in economics "things are often not what at first they seem"--an observation the NCEE neglects.

Yes, Samuelson's text is a college text. I was introduced to it in high school, though, and it's not a stretch to adapt introductory college texts to high school use. Which raises the question: Just how much economics does a kid need to learn? More, perhaps, than when I was growing up in the 1960s. Today, many kids have more spending power, while others may be living in single-parent households where income is constrained. Understanding the interplay of money, interest rates, and debt, as well as how incomes are earned, could be useful.

But I worry about 9-year-olds parroting economic concepts and applying bargaining principles to daily life. And I doubt the standards will help older students assess the many policy responses that one issue, say, welfare reform, may generate. It's not easy to write education standards--and the NCEE has made a valiant effort. But a complex subject has been rendered overly simple. Far better to wait until students can gain a fuller understanding of economic principles. This is a case of half a loaf not being better than none.

*Elephants. NATIONAL BUREAU OF ECONOMIC RESEARCH Working Paper 5674, July 1996, by Michael R. Kremer and Charles Morcom

Before it's here, it's on the Bloomberg Terminal.