John describes five groups of reasons why economic education is an indispensable part of any general education.
When I first began teaching economics at Oxford, many of my colleagues disapproved of the teaching of economics in schools. I thought they were mistaken then and I feel even more strongly now that they are mistaken. I don’t believe that the basic concepts of economics are particularly difficult, or that they should be confined to a discerning few students.
I want to define five groups of reason why I think economic education is an indispensable part of any general education. I want to start with the most wide-ranging and general, and move on to the specific and individual.
The first group of reasons concerns citizenship, democracy and the choice between systems. In the last fifty years we saw the largest controlled experiment in the history of social sciences. We divided Germany into two zones, gave one of them a régime based on central planning and co-ordination, and the other a structure that was decentralised and based on market economy. Halfway through the experiment a wall had to be built in order to keep the experiment going, and eventually the citizens on one side of the experiment tore the wall down with their hands. The conclusion, quite different from general expectation, was that these centralised régimes were destroyed, not by their effect on civil liberties, but by their economic failure. The reasons why that is so are not well understood today even by rather sophisticated and well educated people. But they represent the most important political fact of the twentieth century.
The second group of reasons why economics is important is that people talk about macro-economics all the time. Everyone recognises that economic issues are the most important of political issues, to such an extent that they frequently almost exclude all others. Economics fills our newspapers, and after football, is the most common subject of casual discussion in pubs. I think that it is important that that discussion should be a more educated discussion than it is. You can still hear commentators on the radio talk about a balance of payments deficit as the loss on trade. The words are drawn directly from the crudest of eighteenth-century mercantilists, who believed that trade was an institution in which wily foreigners attempted to inveigle you out of your money. To hear this kind of thing as the staple of popular discourse as if the phlogiston theory was still widely believed to be the foundation of chemistry. If that were so, we would think that something drastic needed to be done about education in chemistry and something drastic does need to be done about education in economics.
The third group of reasons is that the majority of our students will work in business and, if they are to do so, they need to be acquainted with some basic concepts about how business operates. We have lived for a hundred years with an absurd polarisation between people who thought that profit was the exclusive purpose of business, and people who thought that profit was immoral and in consequence all assets ought to be transferred to the state. There seemed no middle ground between these two nonsensical positions. It really is important that our students understand what the role of profit in a modern economy is and, more broadly, how a competitive market works.
My fourth group of reasons is that economic concepts are useful in ordinary life. Once you have understood notions like opportunity cost and comparative advantage – which as a matter of fact come very early in any economics course – then you simply think differently for the rest of your life about a range of everyday problems. People may learn the difference between averages and margins in mathematics, but they learn what it means in reality in economics.
And my final group of reasons is that economics, better than most – possibly any – other subject, integrates a range of other skills. If I think of why I am an economist, it is because I had an aptitude for mathematics and an interest in politics. And I was able to do it because I could write reasonably well as well. It also requires a historical sense. People who do badly at economics do so because they lack one or other of these components.
But we need to think about this issue in the context of one central fact. Economics education in both schools and universities, has been through a twenty or thirty year boom and is now well over the top of that. I think I know the reason. Economics became popular because students believed that it would illuminate precisely the questions, both national and personal, which I have been describing; and at its crudest that it would help them in business. I think it is the fault of my professional colleagues that the education they received did not, in the main, fulfil these expectations; and the caravan has moved on, in both schools and universities, to business studies. In the hope that this will offer the answers that economics failed to provide. But I believe that a high proportion of what is serious about business studies as economics, and a high proportion of what is important about economics is its application to business. That is why, a professional economist, I today find myself running a business school.