Seniors Handle Broad Economic Principles

By Sean Cavanagh — August 14, 2007 5 min read

American students have a solid grasp of many broad economic principles, but they often lack a basic knowledge of the facts, rules, and institutions that shape their daily lives as citizens and consumers in a market economy.

That was how a number of experts who study and teach economics interpreted the latest results from the National Assessment of Educational Progress, which tested students on the subject for the first time.

Even so, those observers said they were mildly encouraged by the results showing that nearly 80 percent of high school seniors tested scored at or above the “basic” achievement level on the NAEP exam in economics. Forty-two percent of test-takers reached the “proficient” level or above. Just 3 percent scored at the highest level, “advanced.”

A number of observers said the results, released last week, revealed that U.S. students have a basic understanding of economic forces, such as supply and demand, and how it plays out in their daily lives. But they seemed lost when they were asked to explain the meaning of certain concepts and terminology, such as interest rates or gross domestic product, or the role of institutions such as the Federal Reserve.

“Students were reasonably good in street smarts—consumer economics,” said Robert F. Duvall, the president of the National Council on Economic Education, a New York City organization that advocates sound instruction in the subject. “What’s less strong is their understanding of the macro side, the economics side, the market side.”

Bruce L. Damasio, the president of the Global Association of Teachers of Economics, an affiliate of the NCEE, said students displayed a sound grasp of the “logic of economics,” but not the specifics.

Mr. Damasio, who taught high school economics and social studies for 27 years joined other school officials and economics experts at an Aug. 8 event in Washington where the NAEP results were announced.

Exposure Improving

The test was given to a nationally representative sample of 11,500 12th graders in public and private schools. Because the economics NAEP was administered for the first time in 2006, it will not be possible to judge student progress on the exam until after 2012, when the test is given again.

Sample Questions

In 2006, 11,500 seniors in public and private high schools were given a battery of economics questions for the first time.


SOURCE: National Center for Education Statistics

But some conclusions can be drawn, federal officials said, from students’ scores relative to various achievement levels on the test.

Those who achieved a proficient score were able to recognize a relatively broad set of concepts and relationships dealing with the market economy, the national economy, and the international economy—the three main areas covered on the exam.

A test-taker at that level, for instance, could explain the relationship between shortages and market prices, and use data in charts and graphs to analyze economic data or describe economic trends, federal officials explained.

Students at the basic level, by comparison, understood a more limited set of economic concepts and relationships, such as the link between market prices of products and what buyers can afford. Those at the advanced level showed a more extensive understanding of economic principles. Such a student might be able to explain how compound interest rates affect consumers, or how a change in exchange rates affects purchasing power, the officials said.

Darvin M. Winick, the chairman of the National Assessment Governing Board, which sets NAEP policy, drew a connection between the test results and students’ grasp of other subjects.

“While there is clear room for improvement, the results are not discouraging,” Mr. Winick said in a statement. “Given the number of students who finish high school with a limited vocabulary, not reading well, and weak in math, the results may be as good as or better than we should expect.”

Economics is a required course in 17 states, according to the NCEE. In a survey taken as part of the assessment, 87 percent of test-takers said they had received some kind of exposure to economics content during high school. Sixteen percent reported they had taken advanced economics; the greatest proportion, 49 percent, said they had taken general economics; 11 percent said they had taken a business or personal-finance class; 12 percent said they had been enrolled in some kind of combined economics course; and 13 percent said they had not taken any economics course.

Students’ different experiences with the subject are explained partly by the different academic requirements set by states, Mr. Damasio noted.

By one measure, students’ exposure to economics has risen over time. A recent federal transcript study showed that the percentage of high school graduates who had taken an economics class increased from 49 percent in 1982 to 66 percent in 2005. Only courses that were clearly related to economics were included in that study, which was separate from the recent economics exam.

‘School of Hard Knocks’

Gary H. Stern, the president of the Federal Reserve Bank of Minneapolis, said the test results “were a bit better” than he had expected, and had created “a good base to build on,” though they were far from satisfactory. The public’s lack of understanding of economic issues can have broad implications for the country, he said.

A better-educated public is more likely to accept tough-but-prudent economic proposals presented by policymakers, Mr. Stern said at the Washington event. Those citizens are less likely to make unwise financial and credit decisions that make more restrictive consumer safeguards necessary.

“It seems clear to me that economic policymaking becomes easier when the public is informed,” Mr. Stern said.

Students today have many opportunities to broaden their understanding of economics, because that subject is undergoing something of a revival in the general culture, said Mr. Damasio, of the economics teachers’ association. Newspapers have long covered business and economic issues, and several employ or syndicate columnists who focus on those subjects. Meanwhile, economics-themed books, like the best-selling Freakonomics, which try to explain how economic principles apply to different aspects of everyday life, have become increasingly popular.

Yet students who do not understand the basic mechanics of the economy, Mr. Damasio added, such as the role of the Federal Reserve in setting interest rates, or the principles of spending, borrowing, and debt, often lose out when they reach adulthood and are forced to make decisions about credit cards, mortgages, and business.

“You learn in the school of hard knocks. You learn by reality,” Mr. Damasio said. “They learn in the school of daily life, and that’s a hard school to come back from.”

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A version of this article appeared in the August 15, 2007 edition of Education Week as Seniors Handle Broad Economic Principles


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