Don’t Go to College to Learn Economics

Does a college education help students learn economics? A new research article suggests that it does not.

Writing in Econ Journal Watch, Zeljka Buturovic and Daniel B. Klein examine some results from a poll conducted by Zogby International to see if college education correlates with better economic understanding.

Buturovic, a research associate with Zogby who holds a doctorate in psychology from Columbia, was interested in the use of polling to gauge the level of economic sophistication of people. She designed a survey that she thought would improve upon previous efforts to probe this question. The survey, administered in December 2008, yielded a sample of over 4,800 responses. Her working paper on the results came to the attention of George Mason University economics professor Dan Klein.

The two of them then focused their attention on eight questions that seemed to best reveal whether the respondent grasped the economic way of thinking or not. (Some of the questions were seen to be either too narrow or possibly subject to various interpretations.) Here are the questions they used, along with the answer that showed what they called “enlightenment”:

  1. Restrictions on housing development make housing less affordable. (Enlightened answer: agree.)
  2. Mandatory licensing of professional services increases the prices of those services. (Enlightened answer: agree.)
  3. Overall, the standard of living is higher today than it was 30 years ago. (Enlightened answer: agree.)
  4. Rent control leads to housing shortages. (Enlightened answer: agree.)
  5. A company with the largest market share is a monopoly. (Enlightened answer: disagree.)
  6. Third-world workers working for American companies overseas are being exploited. (Enlightened answer: disagree.)
  7. Free trade leads to unemployment. (Enlightened answer: disagree.)
  8. Minimum wage laws raise unemployment. (Enlightened answer: agree.)

Buturovic and Klein broke the respondents into three categories: those who had only a high school education or less (7 percent), those who had been to college but not earned a degree (27 percent) and those who had a college degree (66 percent).

And what do the authors conclude? The degree to which higher education increases one’s economic sophistication is apparently zero. Among the people with the least formal education, the percentage of answers indicating a lack of comprehension (such as saying that minimum wage laws don’t increase unemployment) was just the same as among those with the most formal education. (The middle group, with some college education, had a slightly higher tendency to give unenlightened answers, but it wasn’t statistically significant.)

How do we explain the somewhat counterintuitive result?

One possible answer Buturovic and Klein suggest is that the largely leftist professoriate doesn’t do much to convey economic comprehension to students.  In many academic fields, the faculty is mostly if not overwhelmingly drawn from people who have scant economic sophistication themselves and often tend to be hostile toward ideas that challenge their deeply-held beliefs and attitudes. Even if a left-leaning English professor, for example, may have heard that rent control has adverse effects on the housing market, she might block that idea out because it clashes with her world-view that government regulations are beneficial.

A second possible answer, explaining the perhaps unexpectedly high level of economic sophistication among those with the least formal education, is that they have learned some good economic lessons at work and from living independently.

Third, college admissions might be biased in favor of admitting students who are imbued with social activism—“fledgling social democrats.” The other side of that coin is that young people who are economically enlightened may be somewhat less inclined to enroll in college, preferring instead to get on with the business of living rather than remaining in the educational cocoon.

The most persuasive explanation is the one they offer last: Few students are exposed to economic thinking in their college coursework. Courses in the principles of economics are rarely required and even when students do take such courses, it is by no means certain that the professors will teach them in a way that causes students to grasp such lessons as “price controls cause shortages.” Many economics professors are registered Democrats and are comfortable with government intervention in markets.

It’s possible to teach an economics course without stressing the adverse impacts of rent controls, minimum wage laws, and so on. It’s also possible for students to take a course where the professor does stress such impacts, but not learn the lessons.

You certainly would not expect that all or even most college students would learn enough in their courses to give economically enlightened answers, but it’s rather startling to see evidence that, on the whole, they gain nothing.

That finding ought to be very bad news for college leaders. It’s rather as if a cleaning product that’s claimed to work wonders failed to make things any cleaner when put to the test.