Teaching the economy
Guest contribution published in the Süddeutschen Zeitung on 11.12.2017
"I’m getting on for 18 and clueless about taxes, rent and insurance. But I can analyse a poem. In four languages." Tweeted by a 17-year-old school pupil three years ago, this sparked off a debate on the importance of economic education in schools. One could say: been there, done that. For, as ever, what did all the subsequent talk lead to? That’s right: nothing. Reasonable people can disagree on whether public finances or Brecht’s The Threepenny Opera is more deserving of a place in a school curriculum. At any rate, numerous studies and surveys have exposed deficiencies in the German public’s knowledge of economics.
In a 2010 poll, for instance, half of the surveyed tenth-graders could not even identify the purpose of the most basic kind of bank account. According to a very recent survey conducted by Germany’s Gesellschaft für Konsumforschung polling agency, over 90% of respondents had heard of football star Mario Götze, but only half could identify ECB boss Mario Draghi. One major reason: economic education is in short supply in the German school system. Economic and financial topics are covered by a dedicated school subject in only one German state. In most states, they are included as part of geography, history or mixed-bag topics such as economics/politics instead. In many cases, however, there is no fixed number of hours of coursework. Schools are not obligated to offer economics courses in upper secondary school levels, either. Since, as we know, education is governed at state level, the curricula of the various Federal states are accordingly disparate.
Critics of economic education in schools contend that schools should not be held responsible for teaching everything. Others are fundamentally opposed to the idea of teaching economics as a dedicated school subject, arguing that economics should be explained and understood in the context of politics and social studies. Pragmatic approaches are put forward by non-school parties. Banks, savings banks and even the media industry have invested in economic education initiatives, providing teaching materials or hosting competitions for school students. The Bundesbank has also joined the brigade of providers of economic education, focusing on money and monetary policy. To this end, we provide teaching materials to prepare lessons and even visit schools first hand. In the past year alone, we have conducted 1,600 economic education events at schools and in our Regional Offices.
Yet the success of these initiatives hinges crucially on whether schools actually do ask for these services. The school system is, and will remain, the linchpin of education. A debate therefore has to be held on better economic education in our schools – we can ill-afford to sit this one out. For even everyday affairs can sometimes deal with fundamental issues. When several Italian banks were wound up a couple of months ago, quite a number of retail investors lost some of their pension pot because they had invested in bonds issued by those banks without understanding the risks or having been properly made aware of them. What ended up saving these investors was that selling these instruments to retail investors was standard practice throughout Italy, which was why the Italian government paid out compensation. Economic education, however, is not just about how savers can best invest their money, but also about understanding how the economy as a whole works. That is how we at the Bundesbank connect our educational activities to our monetary policy mandate: monetary policy can be communicated effectively only if people know and understand the fundamental relationship between money, inflation and interest rates.
It is not just a monetary policy problem, however – it goes much further than that. A case in point is globalisation. Without a firm understanding of the workings of an economy, people are more likely to fall for simplistic but flawed solutions, such as protectionism. If not already, this makes it clear that even the absence of economic education in the curriculum forms a society.
Paying lip service to economic education will get us practically nowhere. Things have been at a virtual standstill for decades. Reports dusted off from the 1970s were already calling for more economic school education at the time, using nearly the same words. One route towards major improvements in economic education in Germany could be to make it a school subject in its own right. This could prevent economic knowledge being relegated to the status of a by-product of other subjects. It is not necessary to teach complicated economic models in classroom lessons. Economics is highly intricate and also demands value judgements. Pupils should therefore first be given the tools to take part in a debate and to figure out their own answers to economic questions in everyday life.
The curriculum of such a subject should avoid overambitious aims and give preference to practical content. The focus should be on fundamental skills. This includes thinking in terms of scarce resources and understanding economic processes. The investors of tomorrow also need to develop a sense of the relationship between risk and return. Moreover, critically thinking about economic dogmas and economic history can help prevent ideological trench warfare.
Decades of resistance to broadly effective economic education thus seems surmountable. One hurdle still remains, however: economic education that deserves the name can only be administered by trained teaching staff. One or two afternoon training sessions cannot possibly do justice to the complexity of economic life today. I therefore call on all education policy stakeholders to do their part to close the gap in the field of economic education.