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Economic Literacy

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William Polley [2] and I discuss economic literacy and economic education over at the WSJ’s Econoblog [3]. [3]  (This link should be permanently available to non-subscribers.)  Here is a nice excerpt from one of Bill’s posts discussing Adam Smith:

"The Wealth of Nations" is a treatise on man’s interaction with his fellow man in the marketplace. That is, it’s a study of prudence [4]. Today, it ends up being taught as constrained maximization, and in the rush to cover all of the techniques, essential insights can be lost if you’re not careful. A thorough examination of the virtue of prudence as Adam Smith perceived it would be time well spent, and it’s a nice complement to the idea of constrained maximization for those who are technically inclined.

"The Theory of Moral Sentiments," on the other hand, is a treatise on temperance. It is a study of propriety, sympathy, and justice. Sadly, many people don’t even know the book exists or that it was written by the man who is sometimes called the "father of capitalism." Ignorance of Smith’s other major work leads people to think that economics is only about greed, self-interest, and rational maximization. As a result, many intelligent people who would be quite capable of becoming economically literate are turned off to economics because they see it as promoting a "greed is good" mentality that doesn’t square with their world view. Unfortunately, this perception is so well embedded in the pop culture view of economics and economists that it may be very difficult to reverse.

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