The Importance of Economic Education

Thomas Sowell writing for the Wall Street Journal:

Some years ago, the distinguished international-trade economist Jagdish Bhagwati was visiting Cornell University, giving a lecture to graduate students during the day and debating Ralph Nader on free trade that evening. During his lecture, Prof. Bhagwati asked how many of the graduate students would be attending that evening's debate. Not one hand went up.

Amazed, he asked why. The answer was that the economics students considered it to be a waste of time. The kind of silly stuff that Ralph Nader was saying had been refuted by economists ages ago. The net result was that the audience for the debate consisted of people largely illiterate in economics and they cheered for Mr. Nader.

Prof. Bhagwati was exceptional among leading economists in understanding the need to confront gross misconceptions of economics in the general public, including the so-called educated public. Nobel Laureates Milton Friedman and Gary Becker are other such exceptions in addressing a wider general audience, rather than confining what they say to technical analysis addressed to fellow economists and their students. By and large, the economics profession fails to educate the public on the basics, while devoting much time and effort to narrower and even esoteric research.

The net result is that fallacies flourish in discussions of economic policy issues, while the refutations of those fallacies lie dormant in old books and academic journals gathering dust on library shelves. As former House Majority Leader Dick Armey--an economist by trade--put it: "Demagoguery beats data in making public policy."...

Many economic issues are complex, but sometimes a single fact will tell you all you need to know. When you know that central planners in the Soviet Union had to set 24 million prices--and keep adjusting them, relative to one another, as conditions changed--you realize that central planning did not just happen to fail. It had no chance of succeeding from the outset. It is a wholly different ball game when hundreds of millions of people individually keep track of the relatively few prices they need to know for their own decision-making in a market economy.

Simple stuff like this is not very exciting for economists and there is no payoff in one's professional career for clarifying such things for the general public. The only reason to do it is that it very much needs to be done--especially during an election year.

I think one can safely say that systematic economic illiteracy is the most dangerous problem in the world today.

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"I think one can safely say

"I think one can safely say that systematic economic illiteracy is the most dangerous problem in the world today."

Nope, the broader problem of political irrationality is worse.

John, Perhaps your right.

John,

Perhaps your right. But I don't even consider political irrationality a problem - it is simply a fact of life. It will always be the case, necessarily, because, as your post mentions, the costs to the individual of acquiring political knowledge greatly outweigh the benefits.

Is it rational to be ignorant about economics in the same way it is rational to be ignorant about politics? I hope not, but maybe so.

Agreed that economic

Agreed that economic illiteracy is a major problem. There's something strange about politics/econ that makes people think they don't need to know the basic science. Few people would build a skyscraper or try to fix a broken radio transmitter without having a clue about the engineering involved. Yet economic illiterates think they can design societies or set rules for economies - and predict the consequences of doing so - just as well as the economically educated.