Opinion polls consistently find that young Americans view socialism favorably. For example, in a recent Gallup poll, 49 percent of millennials and Gen Z’ers held a favorable view of socialism versus 32 percent of Baby Boomers. Does support for socialism indicate a need for more economic education in America’s high schools and colleges?
As an economics professor, I would certainly like more college students to take economics! States could emulate Texas’ requirement of a high school class in economics teaching the benefits of free enterprise.
Does learning about economics and markets necessarily reduce support for socialism? Or would economic education about markets just amount to indoctrination?
Our views on most public policy questions mix information and values. By information, I mean facts about the world and testable predictions about cause-and-effect. Values refer to ethical evaluation of outcomes in the world.
Economics education should improve the information content of peoples’ policy views. I can use electricity without understanding electrical engineering and people can use markets without understanding how they work. The amazing coordination that occurs through markets, what economists call the “invisible hand,” should inform policy view. Markets allow people enormous freedom while delivering a rising standard of living.
Understanding how markets work does not require acceptance of the values of capitalism. Two people might agree on the effects of the minimum wage (reduced jobs and higher pay) and disagree on the policy’s desirability due to differing values.
Economic education could also teach young people what socialism meant historically. A hundred years ago socialism meant government ownership of the means of production (e.g., factories). Today politicians like Bernie Sanders and Alexandria Ocasio-Cortez primarily advocate a generous welfare state. They point to Scandinavian countries, not the Soviet Union, as examples of socialism that works.
In the 1930s and 1940s, economists debated whether bureaucrats could coordinate an economy as effectively as markets. Potentially bureaucrats could mimic markets by setting the same prices. In practice, political influence over price setting and the lack of a profit motive leads to inferior performance.
The position of modern socialists, I think, reflects this learning. The gains from substituting bureaucratic commands for prices are nonexistent and the U.S. Postal Service shows the limits of government production. Taxing a prosperous market economy to fund government spending better achieves socialist goals.
Scandinavian countries employ this approach, as the 2020 edition of the Fraser Institute’s Economic Freedom of the World Index demonstrates. Countries are score between 0 and 10 in five areas, with 10 representing more freedom, and the components to generate a country’s score. The U.S. ranks 6th with a score of 8.22; Hong Kong ranks first at 8.94. (The data do not reflect COVID-related spending and restrictions.)
Denmark, Finland, Norway, and Sweden rank from 11th to 46th, with scores ranging from 8.10 to 7.58. Venezuela, a more traditional socialist country, ranks last with a score of 3.34. Clearly, the Scandinavian countries resemble the U.S. far more than Venezuela.
Their reliance on markets is even greater than this. The Scandinavians lag the U.S. in the size of government component because they choose more government spending and higher taxes. On the other four areas – property rights, money and inflation, international trade, and regulation – the Scandinavians match the U.S., with Denmark averaging one third of a point higher on the other areas. The nations where socialism “works” are largely market economies.
If market forces and not politics determine prices, wages, and salaries, an economy can continue to prosper. High taxes will reduce prosperity some; when the government taxes away half (or more) of incomes, people will work less hard. Exactly how much high taxes and government-paid health care, college, and housing reduce prosperity is an empirical question.
Socialism today does not mean what it did a century ago. This is fine and arguably reflects economic education. Economic education may additionally ensure that young Americans know that the countries so many socialists admire rely on prosperity generated by market economies.
[Originally posted on Alabama Today]