Teach financial literacy earlier

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Corpus Christi Caller Times
By: Michael Rizzo
April 29, 2011

If your seventh grader came home from school and told you that the American Revolution was fought in 1872 against Uganda, you'd be outraged by his historical illiteracy.

If your fifth grader came home and asked "When is the pizzas going came?" you'd be outraged by his actual illiteracy (assuming you could even surmise his question as to the arrival time of that evening's dinner).

If your third grader came home and informed you that "2 + 2 = 7," you'd wonder if his mathematical illiteracy was caused by a bump on his head on the bus ride home.

Yet we don't harbor similar concerns when our children grow up to be economically and financially illiterate without knowing the first thing about micro or macroeconomics, let alone supply and demand or the dangers of unintended consequences of regulatory meddling. As Financial Literacy Month draws to a close, perhaps it's time we reconsider the way we introduce our nation's youth to basic economic concepts. As a professor, I see the effects of economic illiteracy all the time. My students believe that a third of the workforce earns the minimum wage (reality: less than 2.5 percent, half of whom are below age 25). Forty percent believe living standards were at least as good in 1900 as they are today (we're at least 14 times better off). Our median student believes manufacturing peaked in America in 1955 (it actually peaked just before the current recession, and the U.S. is neck and neck with China and its 1.3 billion people for the title of the world's largest manufacturer).

It can't be that people aren't interested in economics. "Freakonomics" was a best-selling book. "A Beautiful Mind" was an award winning film. News reports never fail to mention economics and the subject is one of the most popular majors in college. Yet illiteracy seems to be no better today than in the past.

The common excuses given for economic illiteracy - economics is "confusing" or "boring" or "complicated" - are somewhat fair, but they don't explain why a lack of understanding exists. My view is that we don't expose young people early enough to sound economic ideas, and that when we finally do, it's probably too late to do any good.

Our education system runs on the idea that there is a natural hierarchy of learning that applies to every subject. This view condemns economics to start in 12th grade or beyond - well after strong cognitive biases form and other classes have addressed economic issues without students having the tools to think clearly about them. If seventh graders are capable of appreciating the causes of the American Revolution, how cellular mitosis works, and the nuances of sex education, then they are more than capable of grasping that voluntary exchange is mutually beneficial, that if you tax something you get less of it, and that anytime we make a decision we have a trade-off to deal with. Economics is not about sophisticated math or fancy theories, and thus does not have to come after our students are familiarized with advanced algebra, science, and the like.

I am far more optimistic today than I was as a college student in the 1990s - there is an increased level of excitement and engagement by young people to obtain this crucial set of critical thinking skills. I also attribute my optimism to the desire of the younger cohorts of Generation Y to be an active part of their education, and to do more than sit down and absorb what is being told to them. Now is not the time for complacency: We need to introduce economics to our children sooner, and more thoroughly, than we ever have.

Michael Rizzo is a Senior Fellow at the Alexander Hamilton Institute and an Assistant Professor of Economics at the University of Rochester.

If 7th graders are capable of appreciating the causes of the American Revolution, how cellular mitosis works, and the nuances of sex education, then they are more than capable of grasping that voluntary exchange is mutually beneficial, that if you tax something you get less of it, and that anytime we make a decision we have a trade-off to deal with."

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This page contains a single entry by CFED published on April 29, 2011 7:26 PM.

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