|Economic literacy is a vital skill, just as vital as reading literacy.|
— Robert F. Duvall, President and CEO, (US) National Council on Economic Education
The phrase "economic literacy" was coined at some time in the 20th century to naturalise the teaching of economics and place it on a par with literacy. "Economic illiteracy" is associated with profligacy and offered as an an explanation and justification for why the poor are poor.
As documented by John Taylor Gatto, a necessary pre-condition for the development of mass production was a generation of youngsters who had been sufficiently schooled to accept, even to desire, factory work. "Economic Literacy" is a part of this enterprise, and it consist of exposure to market-based thinking and values.
Similarly to mass compulsion schooling, there was no grassroots demand for such education at the time it was established. It was spearheaded by industrial leaders who made large personal donations to kick-start it.
|The future of our country depends upon making every individual fully realize the obligations and responsibilities belonging to citizenship. Habits are formed in youth... what we need in this country now... is to teach the growing generations to realize that thrift and economy, coupled with industry, are necessary now as they were in past generations.|
— Theodore Vail, president of American Telephone & Telegraph (AT&T) and co-founder of Junior Achievement , 1918
Theodore Vail was infamous for centralizing power and creating closed systems so as to maximise control over every part of the network - an approach that came to be known as 'vailism'. Given this background, it would be naive to accept his such altruistic rhetoric without considering that the group may have been a conscious effort to increase his power by undermining alternative value sets in the population.
Junior Achievement began as a collection of small, after-school business clubs for students on the East Coast of the United States. It has grown into "the world's largest organization dedicated to educating students about work readiness, entrepreneurship and financial literacy through experiential, hands-on programs". Headquartered out of Colorado Springs, it runs on a $32 million annual budget, and raises over $250 million annually. Its mission statement is "To inspire and prepare young people to succeed in a global economy".
"Economic literacy" has had considerable impact, especially on the US psyche, promulgating market-based values. According to the Strict Father Metaphor, submission to market discipline is morally good, so that those who accrue wealth in the market ipso facto deserve their wealth. While it was started with money from big industry, Junior Achievement has over 300,000 volunteers teaching over 10 million students per year, suggesting a widespread and genuinely held belief in the importance of "economic literacy".
|Economic literacy is crucial because it is a measure of whether people understand the forces that significantly affect the quality of their lives.|
— Gary H. Stern, President of The Federal Reserve Bank of Minneapolis
Increasingly younger children are being exposed to "Economic literacy". Its first program, JA Company Program, was offered to high school students on an after-school basis. In 1975, the organisation entered the classroom for the middle grades. During the past 30 years, JA Worldwide has expanded its activities and broadened its scope to include in-school and after-school students in grades K–12.
Targeting of ever younger children for education in "economic literacy" may be a response to the fact that even after a century or so of such training, society, simple behavioral economics experiments are all that is required to prove that the Homo economicus model of humanity is fundamentally flawed. As a bonus, it provides a money-making opportunity congruent with the interests of industry, which attracts large donations.
Here are some questions from an online economic literacy test from the Minneapolis Federal Reserve:
Q.4. What is the most essential characteristic of a market economy?
- Effective labor unions
- Good government regulation
- Responsible action by business leaders
- Active competition in the marketplace
"Correct" Answer (50% of students)
d. Active competition in the marketplace is essential for the effective operation of a market economy. Competitive markets force business firms to produce the products that consumers demand at the lowest prices that will cover costs. Although the other answers might help a market economy to work well, a market economy could function without any of them.
Q.6. In a market economy, individuals pursue their own self-interest. Does this serve the public interest because of the ...?
- Operation of competitive markets.
- Social responsibility of business leaders.
- Careful planning and coordination of market activity.
- or because individuals understand what is in the public interest.
"Correct" Answer (45% of students)
a. In a market economy, the desire of business owners to make profits and the desire of workers to obtain higher wages lead to the production of those goods and services consumers want most. A market economy relies on competition to assure that if consumer demand goes up, increased output is supplied at the lowest prices that will cover all costs of production and still leave a reasonable profit. Thus, competitive markets play a stronger role than any of the forces proposed in the other answers.
Q.7. Why are private businesses not likely to operate a lighthouse?
- Ship owners buy insurance policies to protect themselves from losses so they won't pay for lighthouses.
- The light from the lighthouse can be used even by ships that do not pay a fee for the service.
- It would cost private business more to operate a lighthouse than it costs the government.
- The cost of operating a lighthouse is too high.
"Correct" Answer (40% of students)
b. The lighthouse is a classic case of a public good, that is, a good not subject to the exclusion principle. In other words, beneficiaries of the lighthouse (ships at sea) cannot be excluded from consumption of the benefits of the lighthouse if they refuse to pay for those benefits. Therefore, a private business is unlikely to build a lighthouse because it would have great difficulty in identifying the consumer of its services and collecting fees from them.
Q.12. Which of the following approaches to pollution control makes the best use of a country's economic resources?
- Abolishing the use of toxic chemicals.
- Using resources to reduce all pollution damage.
- Controlling pollution as long as the extra benefits are greater than the extra costs.
- Prohibiting economic activities that cause pollution or harm the environment.
"Correct" Answer (38% of students)
c. The most efficient approach to pollution control is to increase controls as long as the extra benefits exceed the extra costs. The other solutions mentioned would reduce pollution, but the costs of these policies are likely to far outweigh the extra (or marginal) benefits.
- The Matrix Deconstructed (Why Strict Fathers teach "Economic Literacy"), a 2 hour radio show on this topic.