NAMA : MARIANA FITRIA
KELAS : 1EA09 ( 2EA13)
NPM :14211298
TUGAS SOFTSKILL BAHASA INGGRIS 2
THE ECONOMIC LITERACY PROJECT
Why it's Important to Understand Economics
Some may think
that economics is too difficult a subject to be taught to children and youth,
and that such instruction should wait until college. Nothing could be more
incorrect.
The case for economic literacy is a strong one. George
Stigler, a Nobel Laureate in economics, probably stated it best almost three
decades ago when he wrote: "The public has chosen to speak and vote on
economic problems, so the only open question is how intelligently it speaks and
votes." In Stigler's view, economic literacy is special because it
contributes to two classes of knowledge. First, it serves as a "means of
communication among people, incorporating a basic vocabulary or logic that is
so frequently encountered that the knowledge should be possessed by
everyone." Second, it is a "type of knowledge frequently needed and
yet not susceptible to economical purchase from experts."
Economic literacy certainly contributes to the first class
of knowledge. People like to think and talk about the economic issues that
affect them as consumers, workers, producers, investors, citizens and in other
roles they assume over a lifetime. Economic literacy also gives people the tools
for understanding their economic world and how to interpret events that will
either directly or indirectly affect them. Nations benefit from having an
economically literate population because it improves the public's ability to
comprehend and evaluate critical issues. This understanding is especially
important in democracies that rely on the active support and involvement of its
citizens.
Economic literacy contributes to a second class of
knowledge. For some economic decisions, such as buying a home or investing in
the stock market, it is possible to hire professional or technical help when
making a choice, but in most cases it is neither economical nor practical for
an individual to hire a skilled professional every time an economic decision
needs to be made. Even when such advice is given, the final choice must be made
by the individual, not the adviser. What this means is that each person must
ultimately serve as his or her own economist in making many economic choices,
whether those choices involve buying a product, getting a loan, voting on
candidates and economic issues, or something else. Economic literacy improves
the competence of each individual for making personal and social decisions
about the multitude of economic issues that will be encountered over a
lifetime.
Economic Education
Whether there is a case for economic literacy, however, is
not the most important question that needs to be answered. George Stigler and
many other distinguished economists and individuals have already made that case.
The more essential question to be asked is: How can we improve economic
literacy in our society? Answering that question naturally turns the focus to
economic education.
The development of economic literacy must begin in the
schools. Even young children are capable of learning basic economic concepts
that help them understand their economic world. In the secondary years, that
initial foundation can be expanded to include instruction in a broader set of
economic ideas and concepts. This additional education gives students greater
capacity to understand more complex personal or national economic issues.
Some may think that economics is too difficult a subject to
be taught to children and youth, and that such instruction should wait until
college. Nothing could be more incorrect. No one would even think of making
such an argument for math or science education. Waiting until students are in
college to teach economics is simply a matter of "too little and too
late." The majority of students end their formal education with secondary
school, and even those students who continue their learning at a college or
university may not take an economics course. The fact is that the best
opportunity for economic education occurs before graduation from high school.
There are three essential ingredients for effective economic
education in the schools. First, teachers must be knowledgeable about the
subject and be able to help students learn how to use basic economic concepts
to analyze personal and social issues. Second, good curriculum guides and
instructional materials are needed that present economic content at an
appropriate level for the student to understand. Third, economics must have a
central place in the school curriculum—similar to math, science, history and
language arts—so that substantial classroom time is devoted to economics
instruction.
Over the past 40 years there has been a significant
improvement in each area.
Teachers now have more economic knowledge because they are
taking more economics courses. Instruction in economics in the classroom is
more analytical and less descriptive because of the development of curriculum
guides and national standards. There are now many high quality textbooks and
supplementary materials for instruction. More high school graduates are
completing an economics course and more instructional time is devoted to
economics throughout the school curriculum.
The Evidence
Although there has been progress, much more needs to be
accomplished in the coming decades if we are to produce an economically
literate population. A major problem in this nation is that too few students
are receiving an economic education before they graduate from high school. A
study of high school transcripts shows that only about 44 percent of high
school students take a separate course in economics. This course is usually
offered in the 12th grade as an elective and lasts for only a semester.
Although more states have made economics a required course for students, only
16 states require high school graduates to take some sort of economics course
before graduation.
Given this situation—that fewer than half of high school
graduates take a course in economics—it should not be surprising that study
after study show that there is widespread economic illiteracy among youth and
the American public. In one such study, I administered the Test of Economic Literacy, an
achievement measure covering basic economic concepts, to 11th and 12th grade
students nationwide and found that students supplied correct answers to less
than half the questions. In another study I conducted with The Gallup
Organization, I found that less than four in 10 high school seniors or adults
could answer basic questions about economic terms and concepts that are
essential for understanding economic events and issues reported in the news
media. No matter what the economic content of questions or the test format, the
study results remain the same—youth and adults show a great deal of ignorance
when it comes to basic economics.
Youth are aware of their deficiencies because they give
themselves low self-assessments of economic understanding in survey studies.
Some 87 percent of high school seniors rated their knowledge and understanding
of economic and economic issues as only fair or poor.
(Among the general public, 83 percent gave the same responses.) One reason for
these low self-ratings is that high school students are well aware that they
are not receiving an adequate education in economics. When asked whether they
were taught a lot, a littleor nothing at all about how the economy works, 76
percent said that they were taught little or nothing.
(Compare that percentage with the 7 percent who said they were taught little or
nothing about mathematics.) In addition, both high school students and the
general public had a recommendation for what should be done: Over 96 percent
said the nation's schools should teach more about how our economy works.
The Consequences
The question that can be asked at this point in the
discussion is "So what?" Why does it matter whether a student has
taken an economics course or knows something about basic economic concepts? The
answer is that economic knowledge has a direct and substantive effect on
people's opinions about economic issues. This relationship can be illustrated
with two examples from national survey studies.
The microeconomic example goes to the heart of support for a
market economy. One knowledge question asked youth to respond to the following
statement: To the best of
your knowledge, the prices of most products in a competitive market, like the
United States, are determined by: (a) supply and demand for products; (b) the
consumer price index; (c) local, state, or the Federal government; (d) the
monetary policy of the Federal Reserve. Just five in 10 youth knew that the
prices of most products in a competitive market were determined by supply and
demand. Two in 10 thought that prices were determined by the consumer price
index. Another two in 10 believed that prices were determined by government.
The remainder either thought prices were set by the monetary policy of the
Federal Reserve or did not know.
Knowing what determines prices in a market economy and
accepting the outcomes are two different things. If demand or supply conditions
change, prices in a competitive market will rise and fall. Having a basic
understanding of how markets work does not always mean that people will like
price changes, especially if prices rise, but it should increase the
probability of accepting the market outcome.
An opinion question was also asked to probe the degree of
support among youth for the operation of competitive markets:A bicycle
manufacturer raises the price of bikes because the demand increased even though
the cost of producing bikes has not increased. Do you think the manufacturer
should be allowed to raise prices? Two-thirds of youth said they were
opposed to allowing the bike manufacturer to raise prices, which is certainly
not a ringing endorsement of competitive markets. In fact, there are many
examples of businesses raising prices based on increased demand. The prices for
seasonal clothing are higher at the beginning of the season than at the end.
Airfare rises in peak travel periods. Auto dealers raise prices (or give fewer
discounts) when particular models become popular.
When you cross-tabulate the responses to the economic
knowledge and opinion questions, a distinct pattern emerges. Among youth who
knew that supply and demand determined the prices in a competitive market, 60
percent would allow the bike manufacturer to raise prices. Among youth who gave
an incorrect response to the knowledge question, only 41 percent thought the
bike manufacturer should be allowed to increase prices. The differences in the
percentages show that what many youth know about how markets work directly
affects their acceptance of the market result.
For a macroeconomic example, the basic economic question
was: What is an example of monetary
policy? Would it be a change in: (a) the discount rate; (b) a change in Federal
government spending; or (c) a change in corporate profits.Only 17
percent of high school students knew that a change in the discount rate was an
example of a change in monetary policy. About four in 10 thought it was a
change in government spending (fiscal policy), about two in 10 thought it was a
change in corporate profits, and another two in 10 did not know.
Although most high school students were ignorant of what
monetary policy was, they were quite willing to give their opinion on this
monetary policy question: Who should set
monetary policy? Should it be: (a) the President; (b) the Congress; (c) the
Federal Reserve; or (d) the United States Treasury? This issue is important because it
determines whether there will be an independent central bank, isolated from
direct political pressure, that can effectively control the money supply and
maintain price stability. Only 16 percent of youth thought the Federal Reserve
should be responsible for setting monetary policy.
When responses from the monetary policy knowledge and
opinion questions were cross-tabulated, they show that there were significant
differences in the support for the Federal Reserve having control over monetary
policy in the United States based on the respondent's correct or incorrect
responses to the knowledge question. Among high school students who could give
a correct example of a change in monetary policy, 32 percent thought it should
be set by the Federal Reserve, but among high school students who gave
incorrect examples only 15 percent thought that monetary policy should be set
by the Federal Reserve.
Similar cross-tabulations of opinion and knowledge questions
on such topics as unemployment, the federal budget, economic growth, profits or
trade protectionism could be performed with survey data to demonstrate the same
point. Survey data have also been collected from the general public on these
topics and the cross-tabulations show the same patterns as those for youth. The
survey findings clearly indicate that what youth and adults know about basic
economics affects what they think about an economic issue. What is especially
disturbing is that people who have no basic knowledge about an economic issue
are quite willing to state an opinion on that issue. This knowledge deficiency
affects people's ability to evaluate economic matters and produces uninformed
opinions. Among the informed, of course, there will still be differences about
what should be done on an issue, but it provides a solid basis for a reasonable
discussion of economic alternatives.
The development of basic economic literacy is an important
goal for a democratic society that relies heavily on informed citizenry and
personal economic decision-making. To achieve that goal will require that
significant gaps in the economic education of youth be closed by giving
economics a more central place in the school curriculum. More economics
coursework at the precollege level sets a foundation for economic literacy, but
it is only the beginning. As George Stigler reminded us long ago: "We
shall have to combine vast efforts and creative experimentations if we are to
produce the first economically literate society in history."
References
Stigler, George J. (1970). "The Case, if Any, for
Economic Literacy," Journal of
Economic Education, 1:2, 77-84.
Walstad, William B. (ed.). (1994). An International Perspective on Economic Education.
Boston: Kluwer Academic Publishers.
Walstad, William B. (1996). "Economic Knowledge and the
Formation of Economic Opinions and Attitudes." In P. Lunt and A. Furnham
(eds.), Economic
Socialization: The Economic Beliefs and Behaviours of Young People (pp. 162-182). Cheltenham, UK: Edward
Elgar.
Walstad, William B. (1996). Youth and Entrepreneurship. Kansas
City, MO: Kauffman Center for Entrepreneurial Leadership, Inc.
Walstad, William B. (1997). "The Effects of Economic
Knowledge on Public Opinion of Economic Issues," Journal of Economic Education, 28:3,
195-205.
Walstad, William B. and Larsen, M. (1992). A National Survey of American Economic Literacy.
Lincoln, NE: The Gallup Organization.
Walstad is
director of the National Center for Research in Economic Education and Edwin
Faulkner Professor of Economics at the University of Nebraska-Lincoln. Since
1992 he has been associate editor of the Journal of
Economic Education and
is a past president of the National Association of Economic Educators. Walstad,
who is the author of several hundred scholarly works in economic education, is
also well known for his national assessments of economic understanding and
prepared a report on American economic literacy with The Gallup Organization in
1992.
Walstad received his doctorate in economics from the
University of Minnesota and served on the economics faculty at the University
of Missouri-St. Louis prior to coming to Nebraska.
