Better economic education?

[padren]

This whole bail out and the state of the economy is really starting to bother me, and my first thought is: do we need to start teaching better economics in highschool?

 

My second is: what are some good books on the topic - as free from political ideology as possible? I think I need to read up on everything from personal finances to Keynesian economics and the like.

 

 

What my common sense tells me, is we are far too leveraged in debt, and as a culture we don't understand the fundamental implications of debt well enough.

 

Americans are tied down with debt both personally, and nationally through our national debt and it seems to me unless a debt is going to bite someone within 6 months time, its almost off the radar.

 

I've heard it mentioned this bailout could make the taxpayers money if done right, but honestly, if we have to borrow it from overseas, and give these firms enough pennies on the dollar for the assets to keep them solvent is that going to net us a profit in the end? I am yet to hear how we plan to pay for a bail out (to the foreign lenders) and how much it will cost us by then, as we'll have to regardless of whether we make anything off it here.

 

 

One of the things that really bothers me is the degree to which economics and politics get intertwined - instead of myopic attacks on regulation/deregulation and the benefits/evils of "trickle down" vs "spending up" etc, why is it so hard to find scientific assessments of historical data that can provide insights into the benefits/dangers of various strategies?

 

Whenever I hear about unions, it's either about evil businesses trashing them or evil unions trashing business - whatever example is most extreme and can be used as a poster child for a political stance. It's always the same with economics in general - all rhetoric and no theory.

 

I hope this doesn't come across as just a rant, I am definitely interested in trying to nail down the science of "objective economics" and whether we as a nation are too debt-unconscious. That's what my common sense tells me but my common sense sure hasn't made me a millionaire either.

[Pangloss]

Some great questions there. I wouldn't worry so much about being "as free from political ideology as possible". You can avoid some superficial politics, but there's political ideology behind ALL of the major economic theories. That doesn't mean they're bad theories, though. And part of the problem here is that there's more than one good theory, which is in part why a managed/compromise economy is the best way (IMO) and also why you have to read multiple sources. Find a good Keynesian book AND a Milton Friedman book, for example.

 

In answer to your larger question, I think that's how we address the problem. You're absolutely right about the importance of education, and I believe macro economics is a part of almost every undergraduate program. Maybe it needs to move up to the high school level, I don't know. But I do know that it has to be presented openly and objectively, with all points of view represented, and not following some political/ideological agenda.

[Dak]

This whole bail out and the state of the economy is really starting to bother me, and my first thought is: do we need to start teaching better economics in highschool?

 

Definately.

 

afaict capitalistic theory states that capitalism will work given an active and well-informed society. Certain things that are true of capitalisms (and, quite often, the worst aspects) seem to be solvable simply if people knew more.

 

e.g., several people seem to act as if they're unaware that they could get free re-training and then a better, higher payed job; or even seem to be unaware of the concept of shopping around for an identicle job that happens to pay more.

 

people also seem to not savvy that if someone pays you a set wage for doing a set amount of work -- e.g., as is common in offices -- you're not obliged to work more than your contract stipulates anymore than they're obliged to pay you more than your contract stipulates. Too many people work hard in offices beyond what they have to that those who are disinclined to do this can just be replaced by the kind of workers that would have made communism work, whilst wages are kept low.

[Phi for All]

I think a better public education overall would help tremendously. It scares me that education isn't better funded for the majority, while those who are profiting most these days seem to come from private schools (another study which will never be done). Young people are portrayed as lazy delinquents, moochers and scofflaws, making it easier for those without children to vote down funding for their education.

 

And the economy needs consumers! The message for years has been work hard for your employer, go home and eat something quick and easy, then kick back and watch commercials tell you about how much better you would be if you bought something with that credit card that's so much better than cash.

 

Politics doesn't offer enough representation for the whole country with just two parties, both of which are fundamentally concerned with business. Add deregulation and bailouts to the mix and you have a market that doesn't care about sound, long-range economic plans, not when a few politically engineered loopholes allow so much money to be made *now*.

 

Sorry, but I wanted padren's OP to look less like a rant compared to my post.

[iNow]

I don't disagree. My minor was in Education, and I work in corporate training. I'm all about learning, and how powerful an impact it has.

 

But, who gets to define "better?" Isn't that sort of the problem right now (at least in the States), that "better" to some peopel is actually in the opposite direction from a focus on merit and accurate representations of reality?

[padren]

Some great questions there. I wouldn't worry so much about being "as free from political ideology as possible". You can avoid some superficial politics, but there's political ideology behind ALL of the major economic theories. That doesn't mean they're bad theories, though. And part of the problem here is that there's more than one good theory, which is in part why a managed/compromise economy is the best way (IMO) and also why you have to read multiple sources.

 

I do understand that economics and political ideology are hard to separate, but I get the impression most economic theories are vetted by "the chorus" in their respective camps, and then these theories become proposed legislation, compromised only as much as needed for the more powerful party at the time to get it to pass.

 

The second to last thing I want to do is read two books that are not heavily vetted and as such filled with many red herrings, because since I lean towards the left, I may not notice nearly as many of them in a more left leaning theory than a right leaning one. I don't want to have to dig through books on Monetarism theory to find the caveats Keynesian theory, especially if the criticism is in a vacuum, where you can end up with the "Michael Moore Effect" of someone not really bothering to back up their criticism as they think their view should be common sense.

(Not accusing Milton Friedman of that degree of laxness, I just haven't dug through his work and in this field I start out pretty skeptically)

 

The last thing I want to do is not read up on it at all, so I will hit the bookstore. I am curious if any specific titles may be especially good in the "devil's advocate" manner, where instead of pitching a theory as the savior of economics sales pitch, its more proposed as a set of thought out benefits and thought out caveats, even if it leans towards the benefits being greater.

 

An economics book club could be interesting if it has a diverse enough membership - could lead to some heated vetting of the theories.

 

In answer to your larger question, I think that's how we address the problem. You're absolutely right about the importance of education, and I believe macro economics is a part of almost every undergraduate program. Maybe it needs to move up to the high school level, I don't know. But I do know that it has to be presented openly and objectively, with all points of view represented, and not following some political/ideological agenda.

 

Agenda is definitely a huge factor - I wouldn't doubt it if our education system may be ailing as much as it seems to be lately due to the sheer amount of political polarization that gets tied into education reform issues.

 

But, who gets to define "better?" Isn't that sort of the problem right now (at least in the States), that "better" to some peopel is actually in the opposite direction from a focus on merit and accurate representations of reality?

 

Well, in quantum physics you often get competing theories - no one knows which is "better" yet but if you don't incorporate them into education students aren't prepared later, so they are taught as competing theories, complete with peer review. (at least, I think that's how it works, its been a while)

 

It may be easier to teach personal finance, which, if someone solidly understands the risks of debt, they should be able to ask obvious questions like "how much will that 700 billion cost us in interest to borrow?" and the like, and perhaps seek assurances from politicians that short-term deficit spending is treated as a bill owed out with a payback plan, not trust fund sponsored by our grandchildren.

 

I do think its possible to teach economics as competing theories, but it would be hard to keep the teachers themselves from biasing it, unless the material was really well produced and heavily vetted on both sides.

[bascule]

I support mandatory classes for mortgagors. I had to take them as part of my state-subsidized loan. They were extremely useful to me and certainly gave me pause to consider if I was really ready to take out a mortgage.

[Pangloss]

I don't disagree. My minor was in Education, and I work in corporate training. I'm all about learning, and how powerful an impact it has.

 

But, who gets to define "better?" Isn't that sort of the problem right now (at least in the States), that "better" to some peopel is actually in the opposite direction from a focus on merit and accurate representations of reality?

 

You're right. That's why teachers don't teach "better". They teach what has worked and what hasn't worked, and why. Then they shut their mouths.

[john5746]

I think economics education should be up there with history. However, in my experience, basic economics concentrated on how the market works, etc. and not much on government policy. I see how this is necessary to digest the material, but it leaves the impression that the "invisible" hand of the market is all the really is needed, except during a crisis. At least stressing the value of saving and diverse investment would be helpful to the individual.

[ParanoiA]

One of the things that really bothers me is the degree to which economics and politics get intertwined - instead of myopic attacks on regulation/deregulation and the benefits/evils of "trickle down" vs "spending up" etc, why is it so hard to find scientific assessments of historical data that can provide insights into the benefits/dangers of various strategies?

 

Well that kind of answers itself, since hard scientific assessments of historical data provides insights to the result of "mixed" strategies. We don't have a free market, we don't have an entirely regulated market, instead we have a market that is mixed, plus add in various politically strategic ideologies such as trickle down and tax and spend - there's no way any one ideology can be assessed without it's dynamics being unnaturally effected by other forces thereby cancelling the assessment.

 

It's the same reason why we'll never know whether republicans or democrats, or any other party really has it "right" because we always mix them together, as some kind of "compromise" and pretend as if we can measure them individually, and draw conclusions about them, as if they weren't effected by the intimate mixture of an entirely different ideological intent.

 

That's always been my hang up about compromise with logical problems. It sounds all nice and sweet to talk about the balance between them and yadda yadda, but that sounds like an intellectually asthetical trick of rationale. There's no reason to think that two ideologies rolled together will form one great ideologoy - or one great system.

[npts2020]

I dont see how any economic theory is relevant when nobody even seems to know any details. I have read literally hundreds of thousands of words on this matter and still couldnt tell anyone what the gist of it is other than to give more money to those who lost it all to begin with and hope they pay it back somehow. IMO they dont want anyone to know the details beforehand, anyway, which is one of the reasons for the big rush.

[ParanoiA]

I dont see how any economic theory is relevant when nobody even seems to know any details. I have read literally hundreds of thousands of words on this matter and still couldnt tell anyone what the gist of it is other than to give more money to those who lost it all to begin with and hope they pay it back somehow. IMO they dont want anyone to know the details beforehand, anyway, which is one of the reasons for the big rush.

 

Well there's been more detail than that. Pay it back somehow? I never heard any such thing. The details are still lacking, but it's fairly well known that the feds are to purchase the the bad loans for pennies on the dollar, supplying fannie and freddie with liquid and sit on them for however long it takes for the market to get rolling again, and then sell the loans back to the private sector for a profit.

 

They've been arguing the detailed variations on that theme.

 

Economic theory is relevant because it gives us a working knowledge of forces to negotiate this theme. Even without details, one can draw principled conclusions about constitutionality, free market consequences in the face of implied government rescue, and the value of the currency.

 

With details, we can draw those conclusions more specifically, and add to the list.

[padren]

That's always been my hang up about compromise with logical problems. It sounds all nice and sweet to talk about the balance between them and yadda yadda, but that sounds like an intellectually asthetical trick of rationale. There's no reason to think that two ideologies rolled together will form one great ideologoy - or one great system.

 

I do understand - its somewhat like two people in a lifeboat "lets head for the island NE," "No, we should go for the one SE," "Okay, we'll compromise and head for the open waters straight East!"

 

Still, the economy is like a machine, and should be able to be studied as one to some extent (even if its too complex to completely model of course) and you can draw lessons from it.

 

Is it really so hard to say "Okay, a policy like this, given the current structure of economic legislation, should help stimulate this, but may cost us in that, and may become more problematic than helpful should [x] gets too big"

 

I am not saying everyone should be college professors in economics, but it seems with every act of legislation, all people "understand" about it is whatever summary the politicians they prefer say about it, for or against.

 

 

The other thing is situations like this: A lot of people are watching this crisis on the news, on TVs bought with "no interest for 12 months" on their Best Buy card, in a house they hope to refinance on if things get hard, with a car they don't own, while juggling debts that make their financial solvency right on the edge - who really don't have much of a cushion for things to get worse.

 

I don't know enough about economics to know if:

* Are more credit cards going to default, leading to lobbying for yet more "teeth" in collections?

* Are people going to have less leeway when they are late on a car payment, and find it repossessed before they know what happened?

* Will refinancing a mortgage be possible when people hit hard enough times to do it?

* Will people having to "live within one's means" damage the latte economy* enough to produce notable negative growth?

 

(* by latte economy: buying expensive coffee, that newer car, the big grill, the new plasma, etc etc)

 

I do think people need to ask serious questions about the bailout and force out hard answers, but also consider the effects of not endorsing the bailout. Without an educated populous, leaving it in the hands of politicians barely a month before an election is very scary!

[npts2020]

ParanoiA, there has been very little detail about the plan. Getting a copy of the bill the house turned down before it was voted on was nearly impossible. There was some talk about allowing the treasury secretary to basically run the economy as he saw fit, that was changed but exactly how? Why should the financial institutions that are in trouble be supported by taxpayers (other than the corporate welfare mentality that has permeated Washington for a couple of decades now)? Are we going to run out of banks? When the "trickle down" stops trickling why should those at the bottom be expected to keep the system propped up? IMO the sooner things are allowed to crash, the sooner we can begin to correct the problem, which has more to do with lack of enough resources for an overpopulated world than the price of an American's house or how big his credit line is.

If we do buy up all of the bad mortgages, one of the few things I can see that would significantly push real estate values is to open immigration. Are we going to do that or is there some other concrete plan? No matter what happens most people are going to suffer some hardship.

[Realitycheck]

I know that many of you don't need to be told this, but this was brought about by a culture of government interference intended to artificially inflate income, taxes, profits, you name it, all for the sole purpose of inflating our paper profits.

 

Where Greenspan called a stock market bubble an era of "irrational exuberance", out of line with the true market value, I call this a bubble of "excessive prodding", forgetting fundamentals in order to chase the paper profits and keep the single mothers stretched out too thin in inflated lifestyles.

 

The latest things I am hearing sound a bit more reasonable. More stringent lending criteria, higher FDIC insurance, and a line of credit for Fannie Mae and Freddie Mac. The bailouts really need to stop. The gap between the rich and the poor is widening at an exponential rate. It's really quite appalling.

[ParanoiA]

ParanoiA, there has been very little detail about the plan. Getting a copy of the bill the house turned down before it was voted on was nearly impossible. There was some talk about allowing the treasury secretary to basically run the economy as he saw fit, that was changed but exactly how? Why should the financial institutions that are in trouble be supported by taxpayers (other than the corporate welfare mentality that has permeated Washington for a couple of decades now)? Are we going to run out of banks? When the "trickle down" stops trickling why should those at the bottom be expected to keep the system propped up? IMO the sooner things are allowed to crash, the sooner we can begin to correct the problem, which has more to do with lack of enough resources for an overpopulated world than the price of an American's house or how big his credit line is.

If we do buy up all of the bad mortgages, one of the few things I can see that would significantly push real estate values is to open immigration. Are we going to do that or is there some other concrete plan? No matter what happens most people are going to suffer some hardship.

 

Preaching to the choir. The capital was artificially inflated, so to speak, and now it's crashing down to their rational levels. There's really no mitigating the effect, unless unfair redistribution of loss is considered mitigation. I'm for allowing the market to correct itself, but I do sympathize with the concerns of those who wish to intervene. I am simply more concerned with the long term consequences of our dollar and national debt. I haven't heard any nightmare scenario that trumps that. And this is coming from someone who stands to lose if the credit market dries up for a time. The economic strength of the country is more important.

 

Still' date=' the economy is like a machine, and should be able to be studied as one to some extent (even if its too complex to completely model of course) and you can draw lessons from it.

 

Is it really so hard to say "Okay, a policy like this, [b']given the current structure of economic legislation[/b], should help stimulate this, but may cost us in that, and may become more problematic than helpful should [x] gets too big"

 

I am not saying everyone should be college professors in economics, but it seems with every act of legislation, all people "understand" about it is whatever summary the politicians they prefer say about it, for or against.

 

I can buy that notion, with that qualifier. Sure, you can say that "given our level of regulation" X would produce a bad result if we lift this particular piece of regulation. I'm just not signing on to the notion that because X produced a bad result, this proves that free markets don't work. Clearly that doesn't acknowledge the consequences of the current network of regulations that effect the free market.

 

It seems insane and almost suicidal that a capitalist republic would be composed of a populace that isn't savvy on economics nor the particulars of government. How stupid can we be? I indict myself here as well. We should all be far more intelligent about economics since our capitalist structure is based on individual understanding and achievement.

 

I know that many of you don't need to be told this' date=' but this was brought about by a culture of government interference intended to artificially inflate income, taxes, profits, you name it, all for the sole purpose of inflating our paper profits.

 

Where Greenspan called a stock market bubble an era of "irrational exuberance", out of line with the true market value, I call this a bubble of "excessive prodding", forgetting fundamentals in order to chase the paper profits and keep the single mothers stretched out too thin in inflated lifestyles.[/quote']

 

Nice summary. Our regulations have not been "value-free". Look at the windfall profits tax joke - that's all about envy. That's not a clinical analysis of economics, that's "hey, that dude is making too much damn money, and that's not fair!!". Sorry, that's not capitalism - that's envy, and then using sheer numbers to justify thuggery and taking it. We don't do it to NFL players. We don't do it to actors. And we sure as hell don't have any sympathy when they lose money, nor to even notice or pay attention.

Edited October 1, 2008 by ParanoiA

[padren]

I can buy that notion, with that qualifier. Sure, you can say that "given our level of regulation" X would produce a bad result if we lift this particular piece of regulation. I'm just not signing on to the notion that because X produced a bad result, this proves that free markets don't work. Clearly that doesn't acknowledge the consequences of the current network of regulations that effect the free market.

Well, very true - there isn't a human that has ever lived that can honestly say they have figured out the perfect economic model. It's all about educating people to look at any given current structure, note the benefits and weaknesses of that, then say "We have options to add regulation here, which could help X but could cost Y, or we can remove regulation here, which could help Y but could cost X" and instead of teaching some BS "silver bullet" ideal we would just teach people how to understand implications of economic policy changes.

 

 

Nice summary. Our regulations have not been "value-free". Look at the windfall profits tax joke - that's all about envy. That's not a clinical analysis of economics, that's "hey, that dude is making too much damn money, and that's not fair!!". Sorry, that's not capitalism - that's envy, and then using sheer numbers to justify thuggery and taking it. We don't do it to NFL players. We don't do it to actors. And we sure as hell don't have any sympathy when they lose money, nor to even notice or pay attention.

 

I've always kind of felt the "unfettered free market" idea to be pretty much an abstraction - if you wanted a totally "free market" then the only thing that would prevent pillaging/slavery would be whatever mercenaries you pay to guard your stuff/yourself as police enforcement is a form of "government interference" if you get right down to it. At the same time, in a truly capitalistic culture, people can convince enough other people to buy into the same "co-op" group of mercenaries where it gets large enough to bully even those who don't agree with it - and label it as the "FBI" or something, and agree to have smaller groups of mercenaries deal with more local enforcement. They can mediate these co-ops by creating branches to administer what people in the region can and can't do, and set up some sort of voting system with an electoral college and such, and bully the minority into adhering to a set of regulations (economic and otherwise) under penalties of law enforced by the mercenaries.

 

That is technically a result of "total capitalism" and yet it can create the societies we call "modified free markets" or straight up communism dictatorships.

 

Since we seem to want the government to prevent the purchasing and selling of human beings, we pretty much want some sort of government regulation - but I do appreciate the ideal that too much interference creates more problems than it solves when you interfere with natural market corrections. Just pointing out that a true "free market ideal" is still just an ideal, not something that can exist unless you use a definition that says all markets already are "free markets" since they are the result of people using their resources (capital) to effect the world and people around them.