Economic Illiteracy: Did Educators or Politicians Fail?

As economic educators, we wonder if we have let our students down.

Our nation is in the middle of a presidential campaign featuring campaign proposals that would be laughed out of the public square if we had an economically aware electorate. Had economic educators succeeded over the years, we would not have seen so many discredited policies from the past.

Economic education often focuses on college students, but a significant amount takes place earlier at the K-12 grade levels. The Council on Economic Education reports that 28 states currently require students to take a course in economics to graduate. Many millions of voters should now be economically literate.

We’ve spent our careers teaching, writing materials, and leading workshops to make economics more accessible. Our focus has been on showing young people how largely free markets lead to prosperity and human flourishing, while non-market systems like the old Soviet Union, Mao’s China, and today’s North Korea and, Venezuela and Cuba bring poverty and suffering.

The two of us look with dismay at the economic proposals of both major political parties in this election cycle. One of us is teaching introductory economics this semester. Many current policy proposals are concepts that mainstream college economics textbooks use to illustrate inefficient, prosperity-diminishing applications loaded with unintended consequences.

Do politicians regard basic economics as a threat in this election cycle?  Here are just a few of the ideas touted by the candidates that a broad spectrum of economists has rejected for decades:

• Price controls and rent controls
• Restrictive international policies like tariffs and restrictions on foreign direct investment (think Nippon and U.S. Steel)
• Aversion to highly skilled worker immigration
• Political control over the nation’s central bank

The nation’s swelling national debt, ignored by both sides but capable of much future disruption, is also in the background. 

A recent University of Chicago Booth School poll gathered reactions from the nation’s leading economists on their support for several policy positions taken by the presidential candidates.  Economists disagree with the candidates’ positions on tariffs (96% agree or strongly agree that American consumers would bear the costs), and presidential control of monetary policy (93% agree or strongly agree it would lead to worse policy outcomes) are stark.

A particularly egregious example of economic mischief is Vice President Harris’ proposal to impose price controls on grocery stores. This industry has tiny profit margins and high competition – hardly a candidate for government intervention. Mainstream economists (and quite a few from the fringes) know that price controls are a failed policy that will only lead to shortages.  The same University of Chicago poll found almost no support for price controls (over 90% found little empirical evidence that price gouging was responsible for high grocery prices, and another 99% agreed or strongly agreed price controls cause economic distortions).

In our workshops, we often highlight the folly of leaders like Venezuela’s Nicolás Maduro, who believe that government decrees can overthrow the laws of supply and demand. Maduro has attempted to curb Venezuela’s sky-high inflation using price controls for years, but this has persistently failed. We routinely show students depressing pictures of empty store shelves and people waiting in lines that are blocks long, the inevitable result of price controls.

Do these economic shenanigans in the U.S. campaign reveal a failure of economic educators to do their jobs? While that may be part of it, public choice theory suggests an alternative explanation. To gain campaign contributions and other benefits, politicians make promises to relatively small but well-organized interest groups who stand to benefit from policies such as price controls, high tariffs, and increases in the minimum wage.

Politicians claim these policies are for the public good, but in fact, they favor small groups of lucky beneficiaries. The costs of bad economic policies are real enough but are dispersed over thousands of unsuspecting consumers. How many thousands of dollars in extra expenses are consumers willing to pay to save the job of one steel worker?

Voters, on the other hand, are disorganized and busy. They have families, jobs, and private lives to live. They have little incentive for in-depth study to learn who really benefits from misguided economic policies. 

Politicians may be more interested in attracting votes and campaign contributions than maximizing prosperity and human flourishing. This explains why neither political party is interested in reforming our clearly broken entitlement programs or shrinking deficit spending.  In both cases, the costs are immediate. At the same time, the benefits come in the future (likely after today’s candidates are out of office).  Understood in this way, even flawed economic policies make perfect sense. For politicians, an economically literate voter is a threat to getting elected.