U.S. Students Found Illiterate in Economics

Economic illiteracy is rampant among America’s high school students, according to a first-of-its-kind survey that found only one in three able to define simple concepts like inflation or profits.

Results of the survey, involving 8,205 11th- and 12th-grade students in public and private high schools in 33 states, were released today at a news conference with Paul A. Volcker, chairman of the Federal Reserve Board from 1979 to 1987.

It found only 34% taking a multiple-choice exam in economics, popularly known as the “dismal science,” were able to correctly define profits as “revenues minus costs.”

And just 39% selected the correct definition of gross national product: “the market value of the nation’s output of final goods and services.” In each case, the questions had four possible answers, giving students a 25% chance of being right with a wild guess.

Economic education is “not in the kind of shape we want it to be,” Volcker told reporters.

The news is “not good if you believe that a basic understanding of our economic system is important if this country is indeed to be effective in what everyone realizes is a period of global competition,” said Volcker, adding that he himself had never taken economics in high school.

Students across the country took a 40-minute, 46-question multiple choice “Test of Economic Literacy” in May, 1986, said William Walstad, a University of Nebraska-Lincoln economics professor who developed the exam with John Soper, an economics professor at John Carroll University in Cleveland.

On average, students correctly answered only about 40% of the problems but were even weaker on simple questions pertaining to inflation, the effects of tariffs on trade and the impact of investment on economic growth, Walstad said in a telephone interview.

The report found white students who had some high school economics scored an average of 53%, blacks 42% and Latinos 46%.

Rudolph Oswald, director of research of the AFL-CIO, called the results “appalling.”

“They rationalize better than any series of speeches the reasons why organized labor feels it can only gain from an economically literate population,” Oswald said.

The survey was sponsored by the New York-based Joint Council on Economic Education, a nonprofit, nationwide coalition aimed at promoting economics instruction from kindergarten through high school.

The exam was the first to document the economic illiteracy of a majority of U.S. high school students. Economics thus joins a growing list of disciplines including writing, geography, foreign language, science and math where recent tests have shown U.S. students achieving at dismal levels.