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Economic and Financial Literacy Moves From the Schoolhouse to the Statehouse

Participants at a Washington, D.C., conference suggest ways to further integrate economic education in school curriculums.

September 1, 2002

Economic and Financial Literacy Moves From the Schoolhouse to the Statehouse

For more than 50 years the National Council on Economic Education has worked to bring economic education into K-12 classrooms, mostly by providing training and materials to teachers. That mission, always a challenge, may face its biggest test as schools—with pressure from state and federal agencies—move increasingly to standardized curricula. Will a new federal law ensure that economics gets taught in the nation's schools? Or will economics courses be marginalized by the growing emphasis on core skills, like reading, math and science? Or will such courses like math and science save the day for economics, allowing economic principles to be taught alongside those disciplines?

These and other questions were asked this spring at a gathering in Washington, D.C., of nearly 200 educators, policymakers, politicians and others interested in economic education. The purpose of this National Summit on Economic and Financial Literacy, jointly sponsored by the NCEE and the Federal Reserve Bank of Minneapolis, was to investigate "What Works" in economic education and, perhaps more importantly, "What Needs to be Done." In the latter regard, holding the conference in Washington, D.C., was an obvious choice.

"This is truly an opportune moment," said Robert F. Duvall, NCEE president, in his opening remarks, in which he addressed the 2002 enactment of the No Child Left Behind Act. The Act includes funding for Excellence in Economic Education, a new program to promote economic and financial literacy among K-12 students through teacher training, research, assessment and dissemination of best practices. "I believe that we are here in this place, at this time, with the opportunity to make a difference in the education agenda in this country," Duvall said.

Just how to go about making that difference was a matter of some deliberation. The No Child Left Behind Act, as suggested above, is largely focused on such core skills as reading, writing and math, with economics relegated to a subset of disciplines and activities. That means the economic education establishment still has a lot of convincing to do when it comes to influencing school districts, and it means that economic educators and their supporters must decide how best to accomplish their goals—whether at the federal, state or local level.

The following excerpts highlight the Summit's two keynote speakers, as well as comments from some of the panel debates; for more information on this event and other matters pertaining to economic education, please visit the NCEE's Web site, or the Minneapolis Fed's economic education site.

Federal Reserve Board Vice Chairman Roger Ferguson led off the Summit, and following are some of his thoughts about economic education pedagogy.

"I know that I could speak for much longer than you care to listen about why the understanding of economics and finance is crucial for individuals in a market economy. Knowledgeable and astute consumers promote competition among providers, which benefits us all. Personal financial security enhances individual well-being. Increasing national savings allows us to invest more productively for tomorrow. And, at a more fundamental level, our social fabric and national image are intimately connected to our material aspirations. The United States cannot be the land of opportunity unless all of our citizens have both the tools and the ability to use them to improve their lives and livelihoods.

"As you may know, I have been trained both as a lawyer and an economist. I think the point can fairly be made that the most critical underpinnings of our society are the Constitution and our market structures. From my perspective, however, the education that we provide our citizens about the rule of law differs dramatically from what we provide about the functioning of markets. By the time I graduated from junior high school I had read the Constitution; not until much later did I study how prices are set in a market economy. This imbalance can and will be addressed by your work and that of many others. Fortunately, as my Federal Reserve Board colleague Ned Gramlich pointed out recently, changes in our financial system—including the increasing complexity and diversity of product offerings—have created consumer demand for improved education."

The second keynote speaker, Anne O. Krueger, first deputy managing director of the International Monetary Fund, shared her thoughts on the need for a better understanding of economics, so that people could make more informed judgments about such important policy issues as globalization and international economic development.

"... What I want to do is turn to the viewpoints of the IMF and talk a bit about the importance of economic education to us, and of course there are several dimensions to this.

"First is the surge of popular demonstrations against so-called globalization, which, in a sense, can be interpreted as really against capitalism. ... Many of the young people—and I think they are mostly young, although I saw some demonstrators out here about a month ago and I wasn't entirely persuaded—most of the young people involved take part, I think, because they really have the best of humanitarian motives and I think they really do mean very well. But very often, at least according to my understanding and I think the understanding of most economists, what they are advocating is almost exactly the opposite of what they think they are trying to achieve. What they are saying they want to do and what effect it will have is exactly opposite. ... But sometimes it's self-interest and OK; but when, in fact, well-meaning people are advocating things that will achieve the opposite of what they intend, I get a little bit more concerned.

"... [W]e hear critics who are arguing that the pursuit of economic growth through global integration leads to a 'race to the bottom' in labor and environmental standards. There is precious little evidence that low standards deliver competitive advantage, and lots of evidence that [as] economic growth comes about, labor and environmental conditions improve because people are richer and they want that set of conditions. People do not have bad environments because they think they are wonderful, people have bad environments because they figure they better get a least one bowl of rice in their stomachs per day, because if they don't do that there is no point because they won't be breathing that air anyway.

"As incomes rise and per capita income keeps going up ... the evidence is very, very strong that people start beginning to clean up their own environment. And yet we hear all about environmental standards that we want to impose on others because we are well meaning and we think it is good. And yet, if we want a good environment, what we want to do is accelerate economic growth to get them there faster-and yet it's counterintuitive. This is part of what economic education needs to do.

"... [T]hese are just examples and I think I could go on all day [discussing] policy choices for which greater economic literacy would permit a more beneficial and a more productive debate, out of which would come an economically more viable, more productive society. There is a great deal to be said for it. Unfortunately, we live in a world in which the term 'textbook solution' has become almost a pejorative term. Textbooks don't provide the answer to every policy dilemma, but if you ignore some of the basic principles of economics they will come and bite you, very often, in much higher-cost ways that you were trying to avoid in the first place. So, I hope very much that all of you are very, very successful in your endeavors. I think it is an important cause and one that is underappreciated, on the part of almost everybody.

The first panel of the Summit delineated the current issues surrounding economic education, as well as those looming in the near future.

Time for a concerted effort on a national scale "There are many organizations working on economic education, from many different perspectives. The National Council, Junior Achievement, the Foundation for Teaching Economics, The Jump Start Coalition, the Federal Reserve System and many others really too numerous to mention in the short time that we have here. These organizations need to work more closely together to make a convincing case for economic education. An education that would include a series of courses covering personal finance, business, career education, public policy and basic economics. I think we need to form a national commission that would put this curriculum together and also be responsible for evaluating how well states and school districts do in terms of meeting and providing this economics curriculum for their students. ... I think that is really one of the basic purposes of this summit and I hope its going to be one of the outcomes-that we will have a more cooperative venture that will make a more effective case for economic education."

William Walstad, Director
National Center for Research in Economic Education

Integrating economics into other subjects
"Attention has been given and dollars have been allocated so we can bring economics off the back burner and into the mainstream of social studies education and the school curriculum. But this success does not come without challenges, which I think can be viewed as opportunities. To meet these challenges, or to take advantage of these opportunities, we need to develop new materials that meaningfully use economics and personal finance to teach reading and math, and that can be integrated into other content areas. We need to design new testing instruments, we need to develop partnerships with school districts and I think we need to rethink the way we design and deliver professional development for teachers."

Bonnie Meszaros, Associate Director
Center for Economic Education and Entrepreneurship
University of Delaware

Teaching economics the right way
"Unfortunately, often what we call economic literacy is a very fact-based approach: What does GDP stand for? Does the Federal Reserve deal with monetary policy or fiscal policy? Answering those questions correctly is the definition of an economically literate person. I don't believe that creates—it does create informed citizens—it does not create thoughtful citizens. And good economic education should be about creating informed and thoughtful citizens. Unfortunately that is extremely difficult, and I'm much more pessimistic than some of the other panelists, and some of the other speakers you have heard today and probably some of the speakers you are going to hear later on. I think the natural tendency is to create curricula and programs that can be drilled, taught via memorization, taught via reading, taught via repetition and then tested via multiple test questions. ... Most of what we teach at the college level is a dumbed-down version of what we teach graduate students, which is a waste of time for students who will never go on to become professional economists. What we should be teaching at the college level is what an educated person should know about economics, and that is not what we teach in most of our principles of economics classes."

Russell Roberts, Professor
Washington University, St. Louis

You still need the teaching tools
"The first point has already been made by Russ, which is the priority of teaching the economic method, the economic way of thinking ... [but] where I would differ is perhaps that the tools of economics are essential, almost as essential. I suppose if you have a really brilliant kid who could learn the way of economic thinking without a supply and demand curve, that would be fine, but I think for most mortals you need that. Then, once you have learned the economic method-the economic of way of thinking, economic logic-you can apply it to many of the other areas of great concern here in the public policy arena."

Robert Costrell, Director
Research and Development
Massachusetts Executive Office
of Administration and Finance

The final panel of the day discussed the need for setting a concerted economic education agenda.

An international agenda
"We talk about planning a national agenda for economics education. I tend to think we may not be thinking big enough by thinking national. I think we are going to have to increasingly think global. ... As someone who now teaches a number of international students, I have become acutely aware of the fact that the U.S. economic system isn't easily transferable to other countries. If you are just thinking about monetary policy, the major thing the Fed does is move short-term interest rates. If you don't have capital markets in your country you're not going to be able operate monetary policy by just changing short-term interest rates. You have got to have the full spectrum of maturities, you have got to have trading so that actual changes in interest rates can be reflected. I think that recognizing that the U.S. system is not always immediately transferable will help to heighten our sensitivity to some of these questions."

Susan Phillips, Dean
School of Business and Public Management
George Washington University

New teaching aids will make a difference
"I don't think there has ever been a more important time to focus on economic education, but I suspect that statement has been made at all meetings on economic education and it is always going to be true. The economy is going to continue to get more complex, we are going to have new products, new transactions. It's going to get more global, and it's always going to be the most challenging time to tackle economic education. But the good news is the tools of economic education—all education, but particularly economic education—are evolving so rapidly. It is easier to reach a lot of people and we have a lot of teaching aids and computers and interactive programs and games that make learning fun. Other tools are just beginning to show what enormous potential they have. I think the days of moaning [about] the lack of economic literacy are really behind us. This meeting is about what works, and there is a lot to say and that is very encouraging."

Alice Rivlin, Fellow
Brookings Institution

Time to get obnoxious
"It is very difficult for educators to make their case that economics should not go away while we teach our kids to read. Educators, principals and district superintendents and charter school operators have to make a decision about where they are going to put scarce resources. ... I need for you to be obnoxious. I need for you to say it is not OK to put aside economics. ... We really need to be making our case as professionals that economics, as a course, absolutely has to stay, that it does relate to so many things that are going to be important for these students. That, in fact, if we take economics a lot more seriously we probably could improve our other studies, like mathematics, the broader spectrum of social studies, history, and so on."

Lisa Graham Keegan, CEO
Education Leaders Council

Whose standards are important?
"It is extremely important to recognize the changes that have just been put into place, bringing increased focus on reading, writing and mathematics and science. ... The business community across this country has raised those issues, has said: We are short of mathematicians coming through our system at all levels, in higher education and into the workplace of science; we have problems with writing and reading and other issues. So the demand on those subjects in our education systems from here on out is going to go up. At the same time, there are growing voices saying we have to have standards and assessments for technology, so our students understand technology. We have a growing voice advocating for students to understand the global community, and there are standards and tests being talked about. And in economics we have just heard, and you have heard all day, how critical it is. Now, folks, all that ain't gonna get done—you can't come into a public school system in this country and dump all this on it and walk out the door and say: This is what students should know and what they should be able to do. That simply isn't enough and it isn't respectful of the system and the job that it has to do. ... We must get our hands dirty and work with the state people that are putting the curriculums in place."

Roberts T. Jones, President and CEO
National Alliance of Business

In addition to numerous other presentations, including those concerning national economic assessments, and presentations by award-winning teachers, the Summit participants heard from two members of Congress.

Working at the federal level
"I guess I would say on behalf of Congress that we've been a little slow on the uptake here. What you have been doing for years, we are just starting to appreciate. And let's make certain we work together to leverage what we can contribute at the federal level ... with what you are doing in terms of leadership on the ground, and hopefully we'll be able to make some headway in this situation."

Rep. Earl Pomeroy, North Dakota
Member, House Ways and Means Committee

"I think we need to redouble our efforts. I don't know whether this Treasury [Department] can serve the purpose, but I am interested in sort of getting feedback from you as we move ahead as to whether [Treasury] can be an appropriate coordinating point for all of the efforts that are being made. We need to really bring together knowledge about the initiatives and disseminate that to get the best practices working, and then figure out how you get a system working in each state, maybe through the state councils."The Economic Literacy Project Sen. Paul S. Sarbanes, Maryland
Chairman, Committee on Banking,
Housing and Urban Affairs

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