Today, financial knowledge is more vital than ever. For young people to succeed, they must know how to manage money and understand the basic economic system. With older generations and the federal government racking up huge debt and crucial debates taking place over our economic system, our generation must have a firm understanding of economic principles so we can make better decisions.
Incredibly, many students — and even professors — do not understand basic economics. In my time at college, I’ve encountered professors who don’t understand the benefits of competition or the effect of a rent ceiling and students who don’t understand the effects of minimum wage. This is disheartening for several reasons: Professors are college-educated, professors and students vote, and these are basic economic concepts that shouldn’t be too difficult to understand.
I’d like to summarize five major points of basic economics to give a taste of what I am talking about:
1. Supply and demand: Prices are determined by how much consumers demand versus how much sellers are willing to produce. Higher demand usually leads to higher prices.
2. Competition: More competitors means lower prices. Otherwise, you create an oligopoly, which fixes prices too high.
3. Trade: Free trade generally makes everyone better off and society more productive.
4. Inflation vs. unemployment: Higher inflation does not lead to increased employment in the long term.
5. Minimum wage and maximum rent (price controls): In general, creating a minimum wage tends to increase unemployment, while a maximum rent tends to leave a housing shortage.
These are just a few examples of basic economics that are vital to understanding our own financial situations as well as understanding the general economic arena.
Economics is like a science in the modern world. Much of it is factual — it’s how our system is run. Economic rules determine everything, from the trade deficit to the prices we pay for ice cream. We have to deal with basic economic decision-making every day, while national economics affect every part of our lives. Understanding the economy affects what we believe and, more importantly, how we vote. No matter what our majors are, it is essential that we understand the principles of economics so we are educated and make better decisions, because economics affects everything.
To do this, most of us need to take some sort of basic economics course. The university does offer courses that apply to general education requirements, but these are not required. I know that general education requirements have always left many of us with mixed emotions. But like it or not, general education is simply not going away, so we ought to improve it.
The university should require all students to take at least one economics course as part of general education. This would be more useful than most of the current required courses, and many students find economics both productive and interesting. Even if it is unrealistic to expect general education to change, just research the points I mentioned so you can better understand economics. If Americans are better able to understand our economic system, our whole society will be better off.
Matt Dragonette is a sophomore accounting major. He can be reached at firstname.lastname@example.org.