Recent Trends and New Evidence in Economics and Finance Education

The teaching of pre-college economics has been widely researched for over 45 years with studies focused upon teacher training and improving students’ understanding. This paper reviews that research base, and reports the results of a new national survey, as well as a summary of several recent developments in the field of economic education. Young people can learn economics best when taught by knowledgeable teachers using well developed curriculum materials. But, to accommodate expanding state requirements, pertinacious state bureaucracies must increase teacher training and curriculum standards. Introduction and Overview The teaching of pre-college economics has been highly researched and reported upon since the 1970s dealing primarily with curriculum, materials, demographics, and effectiveness of teaching techniques. Previous studies have focused on how well students are learning economics, how teachers are trained, and other outcomes associated with improved understanding of economics. Several major survey articles have reported upon the current status of financial and economic education and noted several trends. However, almost nothing has been reported regarding the views economics teachers hold regarding the curriculum they teach, how they teach their subject, and their views on public issues. This paper will provide an overview of recent reviews of research in economic education and the results of the recent National Assessment of Educational Progress in economics. The paper will highlight the results of a recent national survey of a random sample of social studies and economics teachers. Recent Reviews of Research Today is an excellent time to pause and observe the trends that have emerged in the past several decades. Two recently published reviews of research are very informative in this regard. The first is a chapter by Steven L. Miller and Phillip VanFossen (2008) in the Handbook of Research in Social Studies Education. This chapter is designed in part as a starting point for graduate students and other researchers to gain an overview of research that has been completed and what remains to be done. Almost all of the studies cited by Miller and VanFossen address issues related to economic education. However, the authors acknowledge that personal finance has taken on new importance. In their conclusion, they state that, “in spite of the historic distinction between personal finance (or consumer) education and economic education, it appears possible (even likely) that financial literacy will become an increasingly important part of economic literacy and thus, economic education” (2008, p. 300). Miller and VanFossen draw several important generalizations regarding the current state of economic education, three of which are most relevant to our research. First, it seems clear that the development of the Voluntary National Content Standards in Economics published by the National Council on Economic Education in 1997 has played an important role in influencing what economics is taught at the pre-college 1 J.R. Clark, Probasco Chair of Free Enterprise, The University of Tennessee at Chattanooga, Chattanooga, Tennessee, 374032598; Mark C. Schug, Professor Emeritus, University of Wisconsin-Milwaukee, Grafton, Wisconsin, 53024-195; and Ashley S. Harrison, The University of Tennessee at Chattanooga, Chattanooga, Tennessee, 37403-2598. JOURNAL OF ECONOMICS AND FINANCE EDUCATION Volume 8 Number 2 Summer 2009 2 level. The standards were produced largely by mainstream economists and economic educators and represent something of a consensus regarding what content is most important at the pre-college level. While the debate continues, of course, as a practical matter, the Standards document remains dominant. Second, teachers remain poorly prepared to teach basic economics. This presents a problem because studies reveal that students learn more economics from teachers who have more formal preparation in economics. Most economics is taught by social studies teachers who have little formal background in economics. These are teachers with comprehensive social studies certifications. One study found that 80% of social studies teachers had four or less economics courses, while another found that 70% had two or less. Either result is not very encouraging. Third, research dating back several years shows that children, as well as adolescents, can learn basic economics. The question becomes how should economics best be included in the curriculum? Several studies show that high school students who take high school economics classes score significantly higher on standardized tests than students who had not taken economics as a separate course. Interestingly, students in consumer economics courses and students in social studies courses (with or without economics) scored the same on economics preand post tests, strengthening the conclusion that economics needs to be taught independent of other courses. These findings intensify the debate between those who favor an integrated approach versus those who favor a specialized approach to including economics in the curriculum. We do not find it surprising that improved knowledge of economics is hard to detect in courses like U.S. history where teachers claim they integrate economics into the host subject (history). In order to work, teachers of integrated courses would need to include explicit economics lessons designed for the host subject. When this happens, integration has a much better chance of being effective. One study, for example, found that when this is the case— when explicit economics lessons are taught in U.S. history—statistically significant knowledge gains can be achieved (Schug and Niederjohn 2008). So, we think there is some reason to believe that, under the right circumstance, integration can be an effective compliment to the capstone high school economics course. A second recent review of research by Michael Watts (2006) is noteworthy, even though it overlaps to some extent the work by Miller and VanFossen. Watts’ review was prepared for the National Council on Economic Education under a contract with the U.S. Department of Education and is unique in several ways. For example, it draws upon research studies published since 1990 in six different fields: economic education, studies on long-term behavior effects of economic education, studies from social studies education, studies from business and vocational education, education studies in domain-specific features of learning, and education studies on expert versus novice differences in cognitive understanding. Watts also presents findings from studies that involve pre-college, college, and adult education. For the purpose of this paper, we restrict our analysis of the Watts’ review to three highlights he addresses concerning precollege education. First, Watts finds that at both the elementary and secondary levels, students of teachers who know more economics, but also spend more time teaching economics and using appropriate instructional materials, are likely to learn more economics. This conclusion may strike many as mere common sense. Nonetheless, we find it reassuring that the research literature is so supportive. Closely related to this point, Watts finds (as did Miller and VanFossen) that the “safest” way to improve student understanding of economics is to take a separate economics course. Even here, however, he notes that taking one high school economics course does not ensure long-term knowledge retention or necessarily qualify students as economically literate. Second, while social studies teachers tend to dominate economic education, Watts notes that secondary teachers in the fields of business and vocational education typically have a better formal preparation in economics coursework than do teachers in other fields including social studies. This is an important finding that does not receive nearly enough attention in the bureaucratic struggles that go on in public education. It suggests that the high school economics course should not be a social studies monopoly. This is particularly important in states where economics is a required course for graduation. Finally, Watts notes that some studies suggest that economics itself is a domain-specific field where easy transfers of knowledge may be difficult to make. This same conclusion is also implied by the research he cites involving the expert versus novice studies. Watts goes on to suggest that if, indeed, economics is domain specific, then economic concepts ought to be taught early and often to be fully developed throughout the K-12 curriculum. Heavy reliance on the high school economics course is probably not sufficient to provide young people with an adequate understanding of economics at the pre-college level. JOURNAL OF ECONOMICS AND FINANCE EDUCATION Volume 8 Number 2 Summer 2009 3 Encouraging Results: National State Survey and the National Assessment of Educational Progress in Economics The most noticeable trends of the last decade include a continuation of the growth in the number of states in which economics and finance are a significant part of the pre-college curriculum. In a 2007 survey, the National Council on Economic Education reported that economics is now included, at least to some extent, in the educational standards of all states. The number of states requiring a formal course in economics to graduate from high school has continued to grow from 13 in 1998 to 17 states today. Surprisingly, however, the number of states requiring the testing of student knowledge in economics has actually declined from 25 in 2004 to 23 today. The importance of personal finance in the curriculum has apparently experienced significantly larger growth over the last decade than economics. Courses in personal finance were included, to some extent, in the educational standards of 21states in 1998, rising to 40 states today. In 1998, 20 of those states required implementation of the finance course standards, while that number has increased to 28 today. The number of states requiring a formal course in personal finance to graduate rose from 1 in 1998 to 7 today and the states requiring testing of student knowledge in finance increased from 1 to 9 over the decade. Late in 2006, the first National Assessment of Educational Progress (NAEP) was reported by the U.S. Department of Education. This national assessment was added in response to the growing emphasis on economics at the high school level. In 2006, about two-thirds of students reported that they had taken either an advanced or a general economics course. What are the main results of the NAEP economics test? Examining the results by achievement level, 79% of twelfth graders performed at or above Basic, 42% at or above Proficient, and 3% at Advanced. While one must be cautious in comparing the NAEP results in economics to the performance of students on other tests, this level of achievement was much higher than the levels attained in history, geography, or civics. What accounts for this relatively positive outcome? We do not know for certain. We suspect, however, that this may be the result of widespread agreement regarding what economics concepts are most important to teach. We also suspect that economics teachers might be more specialized within social studies departments at the high school level. For example, while nearly everyone is expected to share the duty of teaching U.S. history, we suspect that only one or two teachers are assigned the special responsibility of teaching economics. A National Survey of Economics in the Nation’s High Schools When it comes to matters regarding economics teachers’ views of the curriculum, how they teach their subject, and their views on public issues, almost nothing is reported in the research. Recently, however, a nationally representative random sampling of 1,201 pre-college economics and social studies teachers documented the continuation of several previous trends and added new insight into specifically what concepts are being taught and why, as well as the views, goals, and political orientation of the faculty. To assess recent trends and improve the understanding of the teaching of economics, Schug, Dieterle, and Clark (2009) analyzed data collected by the Center for Survey Research and Analysis (CSRA) of a nationally representative random sample of high school social studies teachers across the nation. The sample of U.S. public high schools, drawn from the National Center for Educational Statistics comprehensive database, was stratified by student body size, region, and urbanicity to ensure representativeness. Telephone interviews were conducted from December 2007 to April 2008 producing 1,201 completed surveys. Of the 1,201 interviews, 300 were with U.S. history teachers, 300 world history teachers, 300 economics teachers, and 301 civics/government teachers. What follows is a summary of some of the results of this survey. Why Economics Is Important? The first major issue of interest from the survey related to why teachers felt economics was an important and growing part of the curriculum or, more implicitly, why learning economics benefited the student. As illustrated in Table 1, when asked the specific reasons why economics should be included in the school curriculum, 87% of economics teachers emphasized that economics enables students to better understand important current economic affairs; 80% of economics teachers also agreed that economics JOURNAL OF ECONOMICS AND FINANCE EDUCATION Volume 8 Number 2 Summer 2009 4 helps students become well adjusted, productive members of society, and 79% agreed that it enables students to understand basic concepts and generalizations of the discipline. However, only 45% find it important to teach students economics in order to be activists supporting economic policies using marketoriented solutions, and only 41% agreed that it is important to teach economics to help students be activists supporting economic policies that use the power of government to solve social problems. Table 1 Reasons to Include Economics in the Curriculum Question: Here are some reasons offered by people as to why economics should be included in the school curriculum. Please tell me if each of the following is very important, somewhat important, not very important, or not important at all as a reason why economics should be included. Very important Somewhat important Economics enables students to better understand important current affairs issues such as unemployment, inflation, poverty, and international trade agreements. 87% 13% Economics helps students become well adjusted, productive members of society—helping them survive in an increasingly complex financial and economic world. 80% 20% Economics enables students to understand basic concepts and generalizations of the discipline such as the laws of supply and demand, inflation, and fiscal and monetary policy. 79% 21% Economics helps students become critically-minded, reflective citizens. 76% 23% Economics teaches students core values regarding economic freedoms such as respect for the advantages of a free-market system which favor private ownership, competition and the profit motive over non-market systems which favor a dominant role for government. 64% 31% Economics helps students learn about other countries and cultures in an increasingly interdependent world. 52% 42% Economics teaches students how to be activists supporting economic policies using market-oriented solutions. 45% 48% Economics teaches students how to be activists supporting economic policies that use the power of government for cleaning up the environment, reducing poverty and correcting social injustice. 41% 45%