Some Suggestions for Economic Education: Economics as Methodology

William S. Comanor (Professor, University of California at Santa Barbara & Los Angeles)

I am pleased to hear that in Japan more and more economists are becoming aware of the importance of economic education, not only at the college level, but also at the elementary, middle and high school level, as indicated by various activities of the Network for Economic Education in Japan (see the references). Some say that economic education in the U.S. is a model for that in Japan, but I disagree. Because there seems to be no clear understanding of what economic education ought to be in the U.S. or anywhere else for that matter.

First of all, I would like to emphasize that economics is a "methodology" and not a "subject matter." When you talk about teaching economics, people think that you are talking about the economy, and that is wrong. This is the important point that most people do not understand. That is the reason why economics overlaps sociology in terms of subject matter to a major amount. What distinguishes economics from sociology is not the subject matter but rather the methodology, which can apply to any situation with scarce resources.

The second point is that economics emphasizes the fact that all decisions are taken under constraints. Merely identifying a set of objectives is not sufficient to lead to good decision-making. Most people tend to think that for good decisions all we need to do is think about what you want to achieve. That misses the methodology that economists use to determine optimal decisions. People only talk about objectives, and it is not sufficient to permit you to decide what to do.

Economics specifically acknowledges that decisions are always taken under constraints, and being forced to accept the presence of constraints is a dismal thought. People do not want to hear that their rosy dreams are merely wishful thinking. That is the main reason why economics is viewed as a "dismal science."

Kids should be taught the fact that all decisions require identification of the constraints as well as the objectives. That is what economics has to offer. In particular, kids should be aware of realistic constraints, whether in daily living or in future career. In daily living they first have to decide how much budget they have. Furthermore, all constraints are not monetary constraints. There are constraints imposed by other people. The actions of others impose constraints on what you can do. Kids surely understand the fact that they have a limited budget and also understand that parents impose certain constraints on what they can do.

For their future career, kids should identify their objectives for sure. But again, that is not sufficient. Just "follow your dream" could be unbelievable non-sense, unless constraints are taken into account. One of the constraints is how many people want to choose the same career. If the career you choose is very popular, your income tends to be low. If you choose the career that attracts very few people, then your income tends to be high. Also risk is a constraint in choosing your career, but is often underestimated in career choice, as people tend to focus only on their "dreams."

Economics can tell you these important aspects of decision making, whether it is about your daily living or about your future career. I am startled by how little that is appreciated. Hopefully, this situation will improve, as more economists become involved in economic education in the U.S., Japan and other countries (see the references).

References:
Network for Economic Education (Japan): http://www.econ-edu.net/
National Council on Economic Education (U.S.): http://www.ncee.net/