Surprisingly, there has not been much of a movement promoting economic literacy. A cursory Google search resulted in very few relevant hits. There was an instance where the Minneapolis Fed co-sponsored an economic literacy symposium in 1999 where they looked at integrating financial education in school curriculum. However, there were very few other initiatives. Certainly, it is important when one learns how bad debt can impact your ability to buy a home, land a job, and retire comfortably.
While that is one aspect of economic literacy, we also need to be aware how economics play a role in our jobs, community, and even our household. We need to be cognizant of the role our U.S. Congress, state and local politicians have in shaping policies that directly impact our way of life. Therefore, it is critical that everyone be economically literate.
Economic literacy is defined as the competence in identifying and evaluating economic concepts as it relates to personal finance, the economy, and political systems. When one possesses a sufficient level of knowledge in each of those three areas, do not be surprised if that does not result in higher living standards.
All individuals should be well-versed in personal finance principles. We need to understand how to work money in our best interests, rather than have money work against us. This means understanding how to open a checking account, rather than using check cashing services, so that you are keeping more of your income. It also involves learning how to budget properly, so that you can avoid debt, which destroys wealth. Lastly, one has to have basic knowledge on how the bond and stock market works because both can be vehicles in enhancing wealth, as long as you properly manage the risks.
Basic economic principles are applied in every aspect of our life and that is due to the principle of scarcity. Scarcity is acknowledging that while our wants might be unlimited, our resources are not. There are three types of resources. Natural resources include water, energy, and land. Labor is another resource and is the primary source of income for workers. The last resource is capital where resources are used to make more resources. One example is investing in a video camera, so that one can produce films. A cursory look at our energy bill, paycheck, various appliances and technology used at home and work lets you know that nothing is free. By applying logic and common sense, one can improve decision-making that will allow one to make more efficient use of all of those resources.
Whether we like it or not, politicians pass legislation that will affect our quality of life positively or negatively. We want to know that taxes taken out of our income will be used properly in order to enhance our quality of life. If we recognize that actions of local businesses and our neighbors affect us negatively in the form of pollution or loud music, then we want mechanisms in place to minimize the cost and burden to us. With jobs being scarce, policy makers can make a difference by crafting solutions that boost our educational skills, facilitate economic growth and job creation, and protect the rights of both employees and employers. If we do not conduct proper research on the background and behavior of our politicians, then do not be surprised when their performance does not align with our interests.
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