Most people, including almost all economists whether liberal or conservatives, would obviously say “no.” Yet many educators, as well as the general public, believe it’s true.
In 1994, the Federal Goals 2000 Act expanded the national standards movement to include the teaching of economics in K-12 education. This led to the creation in 1997 of the Voluntary National Content Standards in Economics (VNCSE), which were organized around the core principles of the discipline. While there has been almost no controversy within the discipline over the VNCSE, notes Robert M. Costrell, the objections have come almost entirely from those outside the discipline. Costrell adds that, “There are many who believe that mainstream economics provides an unwarranted defense of free markets, or at least gives short shrift to the case for government intervention.”
Joy Pullmann provides some examples of criticism from non-economists that Costrell chronicles:
• Teaching basic economics gives “no moral weight to the needs of the poor.”
• Students should instead “understand differences between the price of something [and] its intrinsic worth.”
• “Generally speaking, neo-classical theory emphasizes individualism over community.”
As Pullman says, “In short, the objections to an accurate representation of basic, evidence-based economics were based purely on people’s political beliefs. And unfortunately, their political beliefs contradict a great deal of convincing evidence that we have about how the world works.”
Political identification goes a long way toward explaining most of the misconceptions Americans have about economics on both ends of the political spectrum. Most people begin to align with a political party or ideology long before they learn (if they ever do) about the basic principles of economics. And since economics is usually translated into public policy, they tend to develop policy preferences without a solid understanding of the economic principles that the policies are built upon. (An example is the naive view — espoused by many on the political right since the Reagan era — that tax cuts always, or almost always, increase the amount of revenue to the federal treasury.)
This identification of microeconomics with conservatism makes it nearly impossible to have a fruitful debate about basic government policies with non-conservatives. Recently Jordan Ballor and I engaged with some fellow Christians in a discussion about minimum wage laws. We both made the banal and obvious point that the price of labor tends to reflect the value of the labor to the employer. If, for example, I were to pay you $10 an hour to mow my lawn and it took you two hours, the value to me of having a freshly mown lawn would reflect the price I was willing to pay — $20.
We assumed everyone would agree about how this basic microeconomic principle (i.e., price signaling) worked in the real world. Instead, we were accused of claiming that the price of labor reflected the value of the laborer. They seemed to believe that the price of labor was almost completely arbitrary, and that since people needed a certain amount of money to live, the value of the laborer’s life should determine the price of labor. Attempt to clear the tracks of that misunderstanding of price signaling became too difficult, and it eventually derailed the discussion about minimum wages.
That misunderstanding, however, provided me with a helpful insight: It’s not enough to try to convince people to understand and accept an economic policy — we must first get them to understand and accept the basic economic principle that lies behind the policy.
I’m convinced that the only way to make progress in discussions about economic policy is to first explain economics concepts in a way that people understand. Economic policies are complex, but economic principles are generally intuitive and obvious. It takes more effort, but we must do something to correct the public’s misperception that concepts like supply and demand are “free market propaganda.”