THE TEACHING ECONOMIST - William A. McEachern                 

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Issue 4, Spring 1992

William A. McEachern, Editor


The Dictionary of Cultural Literacy: What Every American Needs to Know, by E.D. Hirsh, Jr., Joseph F. Kett, and James Trefil, attempts to pull together "that shifting body of information that our culture has found useful, and therefore worth preserving." Given the attention this book has been accorded in the media, I thought it might be interesting to examine the authors' idea of cultural literacy in economics.

One of the book's 23 sections is entitled "Business and Economics." This section was evidently authored by Joseph Kett, a history professor at the University of Virginia. In the section's opener, Kett assures readers they need not become professors of economics to know what's going on. He says, however, that people should understand the difference between stocks and bonds and why the stock market declines when interest rates rise. I don't agree with that emphasis. I think, for example, it's more important that people understand why there are gains from trade when producers specialize according to the law of comparative advantage. Regardless, I found that neither his nor my questions were answered by the definitions presented. With regard to his two questions, the reader is told that bonds, unlike stocks, have a definite yield, but that's about it. The interest rate gets one sentence, and there is no link between the interest rate and the stock market. With regard to my question, the terms specialization and comparative advantage do not appear.

What topics are covered? The largest category of definitions among the 400 or so entries are financial terms, such as accounting, actuary, amortization, and so on, to windfall and yield. Among all 400 individual entries, there is a tie for the longest coverage (at 23 lines) between OPEC and the "affluent society" a la Galbraith. Economic concepts get short shrift. Missing are such key economic concepts as opportunity cost, public goods, externalities, and, as noted already, specialization and comparative advantage. Adam Smith gets four lines, only one-third the coverage accorded Karl Marx and Ralph Nader.

Some of the definitions are fuzzy or misleading. Here, for example, is how "elasticity" is defined: "A shift in either demand or supply of a good or service depending on its price. Demand is said to be elastic when it responds quickly to changes in prices, inelastic when it responds sluggishly" (p. 420).

If this were my only formal exposure to economics, I don't think I would like the subject very much. I come away with the feeling that economics does not have much to do with me. it takes place mostly on Wall Street, not on my street. The subject also seems dead, or worse yet, irrelevant. Professor Kett has drained the life from the subject, dissected the cadaver, and put the vital organs in jars. What he provides us is a description of what's in some of these jars. To be sure, the market economy is far from perfect, but much of his description is a chronicle of diseases. The people pictured are primarily those whose contributions focus on some sort of economic pathology--Malthus, Marx, Keynes, Galbraith, Nader, Chavez, and the "robber barons." And most of the scenes pictured suggest an economy that doesn't work very well--scenes of a strike, a Depression bread line, a sweat shop, and an OPEC meeting. This history professor is a poor guide to the vitality and ubiquity of economics. The results show what happens when specialization and comparative advantage are ignored.

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