Teaching Economics in the Classroom

[Jennifer]

Teaching Economics in the Classroom to Effect a Change in
Number of Bankruptcies Filed in America.

With the bankruptcy rates in America rising to the point that new legislation is written to protect the creditors from entering into bankruptcy themselves, it lies with the American people to investigate why our bankruptcies were increasing?  Who is filing bankruptcies?  Why are they filing bankruptcies?  What can we, as a society, do to help these people so they do not feel that bankruptcy is the way out?
The bottom line is that in order for business, and capitalism, to succeed businesses need to make money.  In order for business to make money, those who purchase their products must pay their bills.  But do the consumers have to pay their bills?  The short answer is, no.  Consumers may file for government protection if they get too far in debt to have a “reasonable” (as defined by The Federal Judiciary) chance to pay off their debts.
According to The American Bankruptcy Institute the following conditions play major roles in a person’s fall into “unrecoverable” indebtedness:

The factors that helped feed the bankruptcy boom of the last decade are certainly still in place. Those include:
• An enormous expansion of credit by the lending industry, including to customers with shaky repayment histories and questionable ability to repay. The amount of outstanding credit card debt was more than quadrupled since 1990, to $696.7 billion, according to CardWeb.com.
• A large segment of the public that’s financially illiterate. Only one-third of adults in a recent poll had a good understanding of basic economic and personal finance concepts, according to a Harris Interactive study prepared for the National Council on Economic Education.
• Interest rates with no caps. Many credit cards now come with penalty rates above 30% which can be triggered by a single late payment. Overextended consumers facing those kinds of finance charges can quickly find themselves unable to keep up with payments.
• A growing number of people who are uninsured, or underinsured, against medical bills. The Census Bureau counts 45 million uninsured, and a recent Commonwealth Fund study found 41% of moderate- to middle-income adults did not have health insurance for at least part of 2005, up from 28% in 2001. A Harvard University study found medical bills were a factor in half of consumer bankruptcies.

“A large segment of the public that’s financially illiterate.”  In other words, the populace of this country has not been educated properly in how to balance a checkbook, how to create a budget, how to live in said budget or how to invest.
According to Elizabeth Warren, the Middle Class of this nation are the primary targets of our credit card companies, banks and other financial institutions and the least capable of handling their money.  The following chart profiles the average bankruptcy filer in the United States of America:

Average Age: 38
44% of filers are couples
Slightly better educated than the general population
Two out of three have lost a job
Half have experienced serious health problems
Highest bankruptcy rates are Tennessee, Utah, Georgia and Alabama

As can be seen by the above referenced chart, the average bankruptcy filer is the average American citizen.  Neither rich nor poor, neither old nor young, usually experiencing an unexpected event such as job loss or a serious health problem.
But what can we do about it?  By starting the education of our children into the importance of financial matters early in life, we can teach them how to budget and stay on budget; how to save for the future so that unexpected bills do not throw them and their families into a financial quagmire that they cannot possibly escape; and how to shop responsibly.
James Madison University has a good lesson plan that, if implemented properly, could be used to teach our children how to handle money.  These topics could be broached over years, as students get more mature and could be expanded upon if the time and resources permit.

Lesson: How Has the Constitution Shaped the Economic System In The United States?
Concepts: economics, civics, private property, free enterprise, choice, self-interest motive, competition, markets, prices, role of government

Lesson: What Are the Economic Functions Of Government?
Concepts:  economics, civics, economic functions of government

Lesson:  Why Nations Trade & Limiting Trade
Concepts: economics, geography, tariffs, quotas, embargoes, licensing requirements, standards (health and safety), subsidies, infant industry, strategic industry, exports, imports, terms of trade

Lesson: Places and Production
Concepts: economics, geography, gross domestic product (GDP), measure of value, double counting, final goods and services, flow of product, consumer spending

Lesson: What Is a Stock? or Who Owns McDonalds?
Concepts: economize, ownership, profit, risk, social studies, language arts

Reading: How Can Entrepreneurs Control Costs?
Concepts: business, accounting, economics, fixed costs, variable costs

Lesson: How Can Big Business Make Money From Tariffs?
Concepts: economics, American history, incentives, tariffs, special interest groups

Lesson: Andersonville Prison:  An Economic Microcosm
Concepts: American history, scarcity, economic wants, markets, prices, economic systems, command economy, market economy

Lesson on The Economic Value of Education: Is the Tassel Worth the Hassle?
Concepts: e-consumer economics, choice, opportunity cost, incentives

Demand and Supply
Concepts: economics, demand, supply, equilibrium, income, prices, diminishing marginal utility

With proper training and a proper respect for money and the power of money, we can effectively reduce not the symptom of financial irresponsibility that is bankruptcy, but the cause of financial irresponsibility in this nation.

Bibliography

1. Administrative Office of the Courts, http://www.uscourts.gov/Press_Releases/
2. The American Bankruptcy Institute, http://www.abiworld.org//AM/Template.cfm?Section=Home
3. The Federal Judiciary: Administrative Office of the U.S. Courts , Office of Public Affairs, (202) 502-2600
4. Federal Reserve (1997) www.federalreserve.gov/
5. James Madison University, http://cob.jmu.edu/econed/High.htm
6. Source: The Fragile Middle Class: Americans in Debt; Elizabeth Warren, Harvard Law School; Smith Business Solutions

[Jennifer]

Okay, I wanted to seperate this from the background information above to make it easier to find.

So, do you, as a population, agree that this is an adequate solution or do you think there needs to be more, less or something else to the rising bankruptcy rate epidemic in this country?

[Jennifer]

Common guys, this is an action project.  I need responses so I can “prove” I took some kind of action on this issue.  I mean, I know you, Jermo and you Janus can think of SOMETHING to argue with me about in the above!

[Nukchebi0]

Getting rid of expensive, addicting habits would be an easy way to eliminate a large amount of bankruptcy.

[Jennifer]

I agree.  Americans do not need two cars in every garage.  It’s nice.  However, what possible purpose is there in two or more televisions?  Why should you keep up with the Jones’ anyway?  Do we really need to purchase 12 pounds of candy for halloween?  Where can we cut?  How do you budget?  Where do we teach these skills?

Credit card companies COUNT on the fact that Americans over spend, under budget and couldn’t pass 5th grade math exams. (Are you smarter then a fifth grader?  I know the contestants on the show are not!)

So what’s the dysfunction?  Maybe we need less cultural diversity classes and more life skills classes?  Maybe we just need a longer class day to cover all the material our children need to know to function in society?

[Nukchebi0]

I was more thinking of smoking, gambling, 4 dollar lattes, and 50 dollar bottles of wine.

Anyways, you can’t really teach these kinds of skills to high schoolers because many of them don’t really care about school that much. They don’t pay attention in class, and really don’t learn anything except for the tests, especially the ones who would be at risk of going bankrupt. The smart students, who pay attention, don’t really need this because they are intelligent enough to figure out how to manage their finances on their own, and how to budget.

In essence, the class would be preaching to the choir, and the atheists at the same time. People are either already going to know, or not care.

(I know this from experience.)

[Guest]

The only time I spend more than $10 for a bottle of wine is when I am at the vineyard or at a wine festival… the wine maker gives away free samples of their wares, I taste them all, and then I buy the wine I liked, and I usually pay in the teens for it in that case.

[Nukchebi0]

Oh. Well then I guess that could be just changed into drinking extensively in general.

Ten dollars is still a lot for glorified grape juice.

[Janus1]

believe it or not jen, I dont argue with you for fun (although it is at times very entertaining), but because I disagree with you. I agree with you on this issue though, its ridiculous how many people are completely clueless about basic budgeting and money management skills. I dont even know that econ is necessary, just a personal finance course.

[guildofblades]

Hi Jen,

I agree.  Americans do not need two cars in every garage.  It’s nice.  However, what possible purpose is there in two or more televisions?  Why should you keep up with the Jones’ anyway?  Do we really need to purchase 12 pounds of candy for halloween?  Where can we cut?  How do you budget?  Where do we teach these skills?<<

They need two cars for a number of reasons. Maybe even three cars. If both husband and wife work and they have jobs in different directions, then that right there is a need for two cars. A third car is a back up in case one of the other two fails or needs to spend a day in the shop. Myself and my wife only have one car at present and its 15+ years old. I’m not worried about keeping up with the Jones’. I drive an older car right now because it saves my wife and I an extra $300 a month between car payments and additional insurance and thats an extra $3,600 a year we can invest in our retirement. And we feel investing in our retirement while we are still relatively young is important. Newer cars will late to later. But I drive her to work each day, then work from home 3-4 days a week, and only head up to the shop to do printing and fill orders a couple days a week.

There are just the two of us in our household yet we own 4 tvs. On in the living room, one in the guest bedroom, one in my wife’s office and one in the master bedroom. We watch tv in all of those rooms at one time or another. But then, except for the TV in our living room, the other three are all 19" TVs that we bought on sale between $60 and $100 and we’ll own them for years, so its not like this is a huge expense.

Anyway, my wife puts 12% of her salary directly into her 401K with 6% matched from her employer. We recently set up a 401K plan here at the Guild for the staff and I am currently putting 10% of my salary into my 401K. It just makes sense. The second we have our first kid we’ll begin investing into a tax differred college fund for them to make sure we invest early and smartly into making sure their college tuition is taken care of.

As to the subject of teaching Economics, yes, I think that is VERY important. However, I very much fear the idea of economics being taught to children currently in the American school system. Such a large portion of educators in our country proscribe to a level of liberalism that it worries me and with that comes a completely different take on global economics than is conventional and, well, it just doesn’t match real economics much. If given the choice of having the children indoctrinated into the wrong teachings on economics vs having no teachings, I would prefer none. That way we can at least educate our children ourselves on this very important topic.

Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
http://www.1483online.com
http://www.thermopylae-online.com