Dakota Beacon

Once upon a time people who could not read were called “illiterate.” For the most part our schools have solved the reading problem -- sort of. Without a literate population, modern societies could never develop.

Other forms of illiteracy still prevail which makes one wonder how modern societies continue to function. The public education system has not prepared young people to form judgments and cast votes on programs that are economic in nature.

Let’s be clear. Economics and finance are two totally different subjects. Finance focuses on the management of money and assets. Finance emphasizes the maximization of wealth. Economics, on the other hand, is the study of the use of scarce resources which have alternative uses. Economics focuses on optimizing valued goals. Everything of value has a cost. Nothing is free. Ever.

Democratic nations allow voters to decide many important issues whether the voter understands the issue or not. Economic policies come wrapped in political pomposity and most of us are not prepared to differentiate between economic problems and political solutions. Public schools do not equip students and young adults with the tools to assess economic issues. When voters fail to understand the issues, they become easy prey for political rhetoric.

Schools don’t teach economics adequately, if at all. Economics is far more than boring classes saturated with statistics, graphs and charts. Beyond that, more often than not, economics courses are highly biased.

A recent Louis Harris poll confirmed nearly two thirds of young people and half the adults surveyed flunked the test of economic literacy.

George Mason University economist Bryan Caplan captured the phenomenon of economic illiteracy in his book “The Myth of the Rational Voter: Why Democracies Choose Bad Policies.” Caplan argues that most voters elect candidates based on biases involving economic matters.

Voters elect candidates that make them feel good. They acquired hostile economic biases about free market capitalism, international free trade and profits while growing up. As with most people, voters don’t like their world view challenged with facts. Ergo, voters choose their elected officials irrationally.

Unfortunately, voters are not prepared to envision the consequences of their choices. They support what makes them feel good. Interestingly, in their personal lives voters choose rationally because they bear the brunt of their decisions.

Caplan identifies three principle biases. Anti-market capitalism bias typifies people who feel trade and profit are bad. They see one person’s gain as another person’s loss. Anti-foreign bias describes people who distrust global trade even though US prosperity increases through global interaction. Finally, make-work bias maintains that “jobs” make us prosperous rather than the goods and services they produce, the essence of true wealth creation. Thus, any labor saving technology that increases efficiency and lowers costs for a better good or service is bad because it replaces some jobs.

These irrational biases explain why voters support price controls, foreign trade restrictions, laws against outsourcing and legal immigration. When confronted with evidence to the contrary, voters choose that which supports their world view. It makes them feel good.

Tax and spend policies have been successful politically, but disastrous economically. Killing the goose that laid the golden egg is a great political strategy -- as long as the goose does not die before the next election.

During campaign season a standing rule serves as good advice. Never listen to what a politician says. Instead, look at their pre-campaign behavior! Look at their record. Silver tongued foxes will tell you what you want to hear. Politicians will not tell the truth about the unintended consequences of their campaign promises. But they will tug at your heart strings. Political rhetoric keeps professional politicians in office indefinitely.

Tongue in cheek, Caplan asks questions. Should only the economically literate be allowed to vote? Should “get out the vote campaigns” (serving only to get the economically illiterate to the polls) be eliminated? Caplan thinks so. As much sense as it makes, there is only a snowball’s chance in you-know-where of that happening.

We owe it to ourselves and our young people to become economically literate for the sake of good citizenship and for our society.

Dennis M. Patrick can be contacted at P. O. Box 337, Stanley, ND 58784 or (JavaScript must be enabled to view this email address).