A fundamental economic principle is that voluntary trade creates wealth, and the more people trade, the greater their well-being. Most economists agree that the more a nation’s citizens can trade with each other and with other countries, the better off they become. Since the end of World War II, the United States has generally worked to reduce trade barriers across the globe; as a result, world trade values are more than 381 times higher today than in 1950. Unsurprisingly, Americans now enjoy one of the highest standards of living in the world.
Yet, despite widespread agreement among economists, many American citizens and policymakers ignore this fundamental economic principle and still support tariffs and other trade barriers. Since the Trump administration’s tariffs throughout this year, the American economy has flashed one negative indicator after another. The recent Bureau of Labor Statistics report showed the economy adding fewer than 100,000 jobs since April, while the unemployment rate increased for the first time since the pandemic. Consumer confidence remains low, with Americans expecting high interest rates and increased inflation to persist. Global bank UBS now predicts a 93% chance of a recession this year.
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However, it isn’t just trade policy coming out of Washington, D.C., that should worry Americans. One need look no further than our nation’s largest city for more examples of misguided economic thinking. Zohran Mamdani, likely to be New York City’s next mayor, has embraced a litany of questionable economic commitments, from having the city government run grocery stores, to freezing rents, to raising the minimum wage more than 20%, to making the city’s bus service free across the board. Basic economics textbooks would agree that Mamdani’s suite of policies would be ineffective at best and destructive at worst. As the calendar turns to October and the nation observes National Economic Education Month, it’s fair to ask: How did our economic policies come to this?
Unfortunately, basic economic literacy — the understanding of how to think about economic choices and how economics affects our daily lives — has been declining in our society and culture. High school curricula are partially to blame. Today, only 29 states require high schools to offer a stand-alone economics class to their students, according to the Council for Economic Education. This is concerning. By teaching decision-making, how people react to incentives, and the allocation of scarce resources, economics provides the critical thinking skills that guide individuals through hundreds or thousands of decisions on the path toward prosperity.
The same choices confront policymakers seeking the best economic decisions for their city, state, or nation. The economy is a complex system containing an unlimited number of participants, decisions, and actions. Economic theory teaches that in this disordered world of consumers, producers, workers, employers, and investors, no one individual knows how to allocate society’s resources perfectly. Given this reality, only the market (not government edicts) can aggregate consumer preferences and allocate limited resources to their most valued uses.
For example, the economic way of thinking indicates that today’s tariffs are counterproductive because they violate the principle of comparative advantage. Essentially, free trade is good because it allows people to specialize in the goods or services they’re best equipped to produce. Tariffs act as a tax on consumers and erode American prosperity. This outcome would be obvious if more high schools taught economics, like the Foundation for Teaching Economics and other organizations are doing to prepare the next generation of citizens and leaders to comprehend these issues.
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FTE introduces high school teachers and students to the economic way of thinking, helping them better understand the implications of economics in their own lives, as well as for public policy. FTE programs are hosted virtually and in-person on college campuses, combining economic lessons with leadership development exercises. This summer, FTE hosted more than 30 Economics for Leaders workshops, helping high school teachers and students integrate the economic way of thinking into their everyday decision-making.
October is National Economic Education Month, a public education campaign involving the Federal Reserve System and other organizations that promotes the importance of teaching economics and helping students understand how economic principles and financial decisions affect their lives. The state of economic thinking espoused by many of our leaders is concerning, but a solid understanding of the economic way of thinking can help get our country back on track. This October, we’d all be better off if our elected leaders joined students around the nation and studied a little more basic economics.
Ted Tucker is the executive director at the Foundation for Teaching Economics, a nonprofit educational organization that operates as a program of The Fund for American Studies.
