Let 'em learn some personal finance

I'm not in the habit of disputing my betters--in this case, a much better--but I beg to disagree with Greg Mankiw's conclusion in "Redefining High School Economics". Professor Mankiw notes that the California legislature is considering a bill mandating that one-half of the state's high school course in economics "focus on personal finance and financial literacy". Professor Mankiw opposes such a requirement on the grounds that personal finance is less important than the principles of economics:

The legislation is akin to requiring high school biology teachers to spend half their class time on issues of personal health and nutrition. Personal finance is a useful life skill, but students need a more thorough grounding in other basic economic principles than what can be learned in the other half of a single semester course. They need a framework to think about such as topics as market outcomes, price controls, taxes, international trade, environmental regulation, monetary and fiscal policy, and so on. The goal of high school economics should be to produce not just smarter decision makers at a personal level but better informed voters on election day.

I disagree on pragmatic grounds. Many of the topics in the principles course--price controls, international trade, monetary and fiscal policy--are rather remote from the experience and concerns of teenagers. (Yes, I know, they should be interested, they should be curious about how the world works. Go ahead, keep dreaming.) But money--how to manage it, how to save and invest, how to get wealthy--usually isn't. And of course, personal finance can tap into and illustrate larger principles: the magic of compounding, for instance.

(I give a talk each year at a high school about the importance of saving money. I show the students that even with a modest salary, consistent saving and smart investing could make them millionaires--in real dollars--by age 65. One boy memorably objected: "Sixty-five?! Who cares? By age 60 you're not, you're not even . . . mobile!")

Don't get me wrong: it's a close call whether personal finance and financial literacy are more important than the principles of economics. But for high school, I pick the former. Let the students learn about the latter from a college course or from a good book like Thomas Sowell's Basic Economics.

And, come to think of it, I wouldn't mind if they spent half their biology course learning about "personal health and nutrition" either.

Comments

[kyle8]

Agreed, a micro/macroeconomic course that began with personal and family finances and then slowly introduced concepts of macro economics would be more interesting to the average student, and might actually be helpful as well.

If you could explain how excessive borrowing and living beyond your means leads to problems, then its a short distance to point out the same is true of government.

If you can show the problems of government costs involved in small business hiring, then it increases their understanding of why good jobs depend on less government not more.

[Greg Ransom]

Greg Mankiw's macro is technically proficient but mostly brain dead -- and his intro to Macro textbook is a true embarrassment.

Let's not go overboard in belittle ourselves.

[Greg Ransom]

I'm amazed at how economists so rigidly adhere to the "rocket scientist" pecking order in economics -- even when the rocket scientists like Greg Mankiw have so profoundly discredited themselves over the last few years.

The rocket scientists are surprised by everything, seem to understand little, and produce a macroeconomics that is incompatible with the facts of micro.

Why bow down to these people?