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Kartik B Athreya

Keeping Economic Education Relevant in a Turbulent World

headshot of Kartik Athreya

October 1, 2020

Kartik Athreya

Executive Vice President and Director of Research

Council for Economic Education’s Financial Literacy & Economic Education Conference


  • Economic educators are critical to fostering nuanced support for an economic system that, when done right, is maybe the greatest engine of uplift we’ve ever seen. They also are essential to making sure that individuals have the information they need to navigate our largely decentralized system.
  • But for economic education to stay relevant, we must acknowledge that we face a number of serious economic challenges, including the current COVID-19 crisis; widening inequality; and climate change.
  • There is a clear consensus among economists that insurance markets do not cover many risks. In addition, insurance possibilities (in the broad sense of the term) generally diminish as wealth and income fall. This may make disadvantaged individuals reluctant to invest in themselves and could contribute to growing inequality.
  • Climate change and pollution illustrate the caveats to letting free enterprise reign, as self-interest and common property (such as the ocean or atmosphere) don’t mix. We can serve students by acknowledging that these risks appear unusually large in their futures.
  • Informal knowledge via family or peer networks is likely important for how people learn about personal finance, especially for rare and complex financial decisions. Many students do not have access to these forms of expertise. We may need to tailor economic education in the future to help fill this gap.

Thank you for the privilege of being able to address you today. I’ll start with the standard disclaimer: The views expressed during this session are my own and do not necessarily represent the Federal Reserve Bank of Richmond or the Federal Reserve System.

With that done, here’s the big picture for my comments today. First, I’ll detail my view that you, as economic educators, are critical to fostering nuanced support for our economic system. It’s one that, when done right, is maybe the greatest engine of uplift we’ve ever seen. Second, I’ll offer thoughts on the qualifier “when done right” and what that might mean for keeping economic education relevant to students, especially during these unusual times.

So let’s start with the first topic: why I think your work matters so much. As economic educators, you play at least two key roles. First, you help us create a society capable of evaluating its current economic system and proposals for alternatives to it. Second, you help ensure our heavily decentralized system delivers for the individuals it serves.

When it comes to evaluating the current system against alternatives, the central question is always the same: “Where should we let decentralized processes, including markets, determine outcomes, and where should we not?” The United States appears to have achieved a broad consensus in its answer. I say this because many parts of economic life, and especially the role of the state in it, have remained largely unchanged for many decades now. Government consumption and employment as a share of overall economic activity and employment have remained largely constant, at around 20 percent and 16 percent, respectively. Tax policies have changed here and there, but in the end have been pretty similar over time for the bulk of the population. The shares of national income flowing to the labor that people supply and to the capital equipment they own have also remained largely stable, at around two-thirds and one-third, respectively. And monetary policy — which is the part of the landscape I’m professionally connected to — has generally been accepted as a limited-purpose tool.

I view this consensus as an amazing achievement — it’s not the way of the whole world. I also view our general attitude toward commerce as essential to making this happen. This broad acceptance of what you might call “trade-based betterment” may well come from the idea that an eminent economist dubbed “Bourgeois Virtue”— that pursuing one’s own ends in a commercial culture, in very self-contained ways — is indeed a virtue.1 But this virtue requires reinforcement. Because its truth is not an obvious one. I see your efforts as vital in making this notion stick with each new generation so it keeps on giving us the fruits we now enjoy.

What about my second claim? I said that our economic educators are central to making sure that the outcomes in our decentralized system actually serve people well. Economic educators help students achieve the personal economic competence needed to navigate a system in which no one may be looking out for them. The promise of market-driven outcomes cannot be realized if individuals don’t understand the terms into which they enter, or worse, enter into transactions in which they are exploited by their lack of knowledge. If people we never meet, who might live anywhere, can reach into our pocket, we need training.

The internet demonstrates the literal truth of this claim. It operates globally, demands savvy, and punishes naivete — all at arm’s length. It’s brought with it countless ways to entertain and enjoy ourselves, but also a boundless new frontier to cheat us of our resources, to bamboozle us into ill-fitting loan products, to lock us into steady bleedings through opaquely-priced subscription services, and so on. You, as educators, are our best line of defense against the set of risks that markets in general, and online engagements in particular, present our students today. COVID-19 has only forced the issue further.

So, that may be the most extended, though hopefully not boring, thank you you’ve ever received. I’m not alone in feeling this way: You’ll be pleased that Paul Samuelson, one of the 20th century’s greatest economists, noted that he didn’t care about who was in charge of the nation, as long as he got to write its textbooks. Well, you’re the people who make the textbooks come to life.

Let me turn now to what I think will help economic education to stay maximally relevant in the years ahead.

Keeping Economic Education Relevant in a Turbulent World

I noted the consensus over economic arrangements that we had achieved in the United States and implied that it lurked behind our incredible prosperity. Let me now push back against that and argue against myself, if you will.

The landscape right now is not one of placid sailing. It’s one where a great deal has gone wrong. At the macro level, the “fundamentals” are dismaying, to say the least: A serious virus has killed 200,000 people in our country in just six months and sharply exposes the lack of consensus on what people ought to do for the common good. We can’t agree, apparently. We’ve recently seen biblical flooding on the Gulf Coast, apocalyptic fires in the West, and the fracturing of some of the biggest ice sheets in existence. The empire of nature seems, by all accounts, to be striking back.

At the level of the economy as a whole, things are difficult. People with “remotable” jobs have been able to respond well to COVID-19. But they’ve done this by sheltering in place. And this has meant that millions of people with jobs that cannot be made remote have seen their livelihoods vanish: workers in restaurants, retail, travel, and so on. In the meantime, policy faces challenges. On the fiscal side, the understandable use of borrowing to ensure we buffer those who’ve lost work without raising taxes in the middle of a crisis has meant growth in the national debt to levels we’ve not seen in the post-World War II period. Monetary policy, for its part, faces constraints created by the “effective lower bound” on central bank interest rates. These constraints, to boot, are themselves partly a consequence of market dysfunction (e.g., a shortage of safe assets) and more implacable forces like demographics and slow productivity growth prospects. Our economic relationship with a major trading partner, itself a preeminent nation-state, is at best rocky and uncertain. And climate change is almost certain to create sizable macroeconomic costs.

And that’s just the macro picture. At the personal level, many things look grim. Job losses touch not just the millions who lost work almost overnight earlier this year, but also those who depend on them: their spouses, children, parents, etc. And many are now watching as initial loss of job calcifies into permanent loss of occupation.

Zooming out in time, we see that a large portion of the population has seen only limited income gains for several decades now, while those at the very very top (e.g., the top 0.5 percent) have separated from the rest of us. In 1970, average income for middle quintile households was more than 25 percent of average income for the top 5 percent. By 2019, that had fallen a full 10 percentage points, to 15 percent.2 Hourly wages have grown almost only for those with an advanced degree, which requires first earning a bachelor’s. And looking ahead, climate change won’t just matter for abstract macro statistics. Experience suggests that households — especially the least well-off — are at best partially insured against climate change, which means they face the risk of household balance sheet disaster, especially via property loss, and sometimes  worse, in terms of long-run health outcomes.

Five Pictures

How can we work to ensure economic education meets this moment head on? This is of course your area of expertise, but in the time I have left today, I’ll suggest one path that I think can help, coming from my admittedly very limited perspective not as an educator, but as a policy advisor. I’ll claim that we can boil the task of ensuring a relevant economic education down to helping students understand the meaning of just five pictures. Literally. My view is that if we succeed, the next generation will understand what is baby, and what is bath water, in the turbulent world around them.

two images on of each other: grocery store in the US and a store with Coke in Peru

Here are the first two pictures. Back when it didn’t seem scary to be out in public, I would cheerfully wander into grocery stores — often while hungry and ready to make bad choices — and would be amazed by the richness of offerings. “Look how many kinds of peanut butter, ice cream, fruit, candy, and even hamburger buns there are!” Milk without lactose, soda without sugar, cookies without fat, pasta without gluten. And on and on. The average American grocery store carries over 33,000 different items.3 Each store is a marvel of complexity, requiring a lot of new (and often small) entrepreneur-savvy, old business scaling power, and i-pencil-coordination to deliver. When you add to it what you might call “reliable ubiquity,” we get the small business in a remote place selling the big business products we love. And so much is cheap, relative to the value of our time. How do we see this? The share of food costs in U.S. household’s overall budgets is less than 10 percent on average.4 That’s lower than what most other people on earth pay.  And the average share of income going to clothing and shelter is relatively small as well. Of course, these averages miss entirely the burden that feeding a family and keeping a roof over that family’s heads place on those with low incomes. I’ll come back to that, but for now, let’s agree that averages matter too.

So maybe we can start getting triumphal: A key part of the market economy flat out (and nowadays literally!) delivers the goods — it gets people what they want, where they are, without interruption, and more affordably than almost anywhere else. In particular, it is almost never true in places that have turned their backs on letting productivity-chasing, competition-disciplined entrepreneurs and businesses learn, produce, and distribute what people want in the here and now.

For perspective, the almost-constant 2 percent per capita income growth we’ve seen in the United States for a century or more has left us with per capita income around four times that of China, which, after dropping central planning and autarky, has grown at 8 percent or more per capita for 40 years. But our head start means that even now we add about as much to gross domestic product per capita when we grow at 2 percent as China does when it grows at 8 percent. So much for everyone catching up with us.

Now notice that the modern American retail sector (which includes the grocery store I showed you) accounts reliably for over a third of all consumer spending. So we need to be very reluctant to mess with this goose, which, quite unlike the gifts left by the ones that often invade my neighborhood, lays golden eggs. Many proposals for changing economic outcomes do not show any clear recognition of this machine, and ill-conceived interventions in markets abound. Economic educators are a bulwark. And this is very much a part of economic education that I see you tackling head on. Thanks to you, our students tend to come away appropriately impressed by this aspect of the visible bounty of the invisible hand.

Indeed, even just the “reliable ubiquity” I talked about needs reinforcing. As the greatest economist of the 20th century, Ken Arrow, pointed out, “This experience of balance [between supply and demand] is indeed so widespread that it raises no intellectual disquiet among laymen; they take it so much for granted that they are not disposed to understand the mechanism by which it occurs. The paradoxical result is that they have no idea of the system’s strength and are unwilling to trust it in any considerable departure from normal conditions.” 5 Sound familiar?


images that convey aspects of markets that the author thinks may most concern our students: goFundMe, waste and contracts

Let’s now look at three new pictures.

Taken as a whole, they convey aspects of markets that I think may most concern our students, and many of us, today. We need ways to help them think about these issues, whether remedies are available, and if so, if those remedies are worth it.

Let me start with the first one. The wrong interpretation of this picture is that “We are a can-do nation that relies not on a distant government but on each other!” Instead, it is bluntly suggestive of a gap in insurance. For illnesses that are rare, verifiable, and severe, collecting donations from strangers through social media, just like saving for a rainy day, is indicative of missed opportunities for all of us. Adequate solo preparation would require a level of personal austerity that is both unduly severe and unequal to the task. Insurance, i.e., sharing the risk though small premiums, is the only sensible way to cope.

But for a variety of reasons, this does not work anywhere close to perfectly. In the COVID-19 era, household financial distress and fragility and the inability to buffer risks well is visible all around us.

I won’t get into details here, but a clear consensus among economists is that insurance markets do not cover many risks, and further, that absent alternative efforts — including those of the public sector — people will bear the full force of many risks that ideally they would share with others. So singing paeans for a market system to students who see pandemic-related job loss and families who can’t pay for cancer treatment will lose us the attention of kids.

This picture connects to something much larger: inequality. We are talking nationally much more about inequality and especially that which exists along racial lines. The “missing insurance” perspective is helpful here too. Namely, it asks us to imagine how likely success can be for two otherwise identical people when one faces many uninsurable risks, while the other does not. Our recent national discussion has highlighted some of these risks. They can be broad and should, in my view, include the risk of being physically predated upon; the risk of being incarcerated or entangled with the legal system, including wrongfully; the risk of not getting a job simply due to not having connections or getting the breaks. And all this is on top of the ongoing risks we just talked about: What if you get sick but have poor coverage? What if your child gets sick and you can’t arrange flexible work? What if a hurricane destroys your home or your business?

In essence, what if life is more chutes than ladders? Pervasive uninsured risk can effectively shorten one’s planning horizon, and that alone dims life prospects. Would you start a business that ties up a lot of your wealth in one place? Would you invest in expensive college when familial tragedy could lead you to drop out? Would you accumulate assets that could be wiped out in a heartbeat? Would you network in the hopes of landing a job at some later date?

The answer depends on how well-organized the market place is, and when it is not, how well you are insured — either formally by markets or the public sector, or informally by friends, family, and other networks. Evidence from income in the United States suggests that the net level of coverage may not be so comprehensive: Inequality even among like groups is high. As for a sense of the uncertainty that people face, a well-known paper finds that fully 40 percent of the variation in lifetime earnings we see in U.S. data can be attributed to shocks received over working life — after age 23. Moreover, my read of the best research on the subject suggests that insurance possibilities — in the broad sense of the term — generally diminish as income and wealth fall. A well-functioning economic system would not feature this.

I suspect students, the disadvantaged especially, get this — they face fragility and vulnerability up close and personal. So an economic education effort that doesn’t acknowledge the substantial messiness in the labor market when it comes to allocating “talent to tasks” will not seem relevant. And for those who haven’t yet seen the labor market work (and for any who have seen it not work), this will resonate. I hope economic education can convey the unforgiving, not at all frictionless way that this, the mother of all markets, works.

To be clear, none of this means that a public sector effort would succeed where private markets have not. Does the public sector have some advantage in its ability to verify the situation being insured against, in the ability to prevent late entrants from purchasing insurance after they understand their risk of loss to be high, or both? If not, that too is a lesson for our students that sometimes bad things can’t be fixed, period. But students should know to ask these questions, and economic education can give them a more clear-eyed view of the world in which they live.

What’s my point with the next picture? A blob of plastic waste like this is spinning slowly in the Pacific Ocean right now. It’s bigger than we expected it would be. It’s killing lots of ocean life as we speak. Showing it to our students can vividly drive home the point that self-interest and common property — the places were ownership is hard to define and defend — don’t mix. This picture is important to equip students with nuance in their enthusiasm for letting free enterprise rip, especially if their initiation into economics was the wonder embedded in the humble grocery store. The picture also conveys a diagnostic our students can use. They need to learn to ask: “What is not owned?” The ocean is not meaningfully owned. The climate is not owned. Landfills, by contrast, are. There is no uncontrolled land gyre of garbage around us. Maybe in normal times, we could cover tragic commons in passing, but in our era, I think we need to pay special attention to explaining the perils that lie ahead — for the biggest commons of them all — the atmosphere. Indeed, we should, I think, convey the logic of why those perils are hard to avoid and hard to mitigate. We can serve students by highlighting key risks they face in the long futures they each hopefully have ahead of them.

And what was the last picture? It is a loan contract. This to me illustrates the essentiality of informal knowledge for navigating personal finance. Let me explain what I mean. I own a home. I made a decision to get a mortgage with a particular duration and repayment plan, and I deduct mortgage interest at tax time. None of this, frankly, is because I read and understood the nooks and crannies of the contract. Instead, it’s all because of the pool I was marinating in. It’s parental input. It’s because I knew relatively reputable entities, and those entities wanted, in turn, to do business with me.

And I was doing pretty much what everyone else around me at that age was doing too. So who was around me? People like me. With parents like mine. In other words, I didn’t need formal economic education on this one. Nor did I need it when it came to navigating “the college decision.” Nor for the “saving for retirement” decision. I got it all for free, by osmosis and by parental experience and presence. As for the college decision, recall the paper I mentioned a few moments ago. It still left around 60 percent of lifetime earnings variation coming from variations in conditions of people at age 23. A portion of those conditions no doubt reflects, in part, the differences in early-life circumstances I’ve just described.

But of course this is hardly comforting. Many have none of these connections. They have little such support (parental, economic, or societal) for ensuring their major financial decisions go right. Osmosis isn’t a strategy for them. And I suspect that this is part of the set of forces that create the relatively low — and apparently slowing — intergenerational income and wealth mobility that has been documented by many economists.6 In other words, these information gaps may be inequities that really matter. More research is warranted, but it is hardly an unnatural idea. So the big question of who is a trustworthy source of guidance for students facing life’s biggest investments remains unanswered for many. Indeed, this perhaps dimmer view of information transmission has led us at the Richmond Fed to a guiding principle for our personal finance content. We aim to provide resources to help people with decisions that are large, complex, and rare during one’s life.

When it comes to personal finance, my view is that economic education in 2020 and beyond may need to be tailored to fill the now huge gaps that likely exist between those for whom some combination of osmosis plus mimicry works well, and the rest who may have fewer tools or savvy to navigate major personal finance decisions. 

Concluding Thoughts

I’ve tried — in these remarks — to illustrate some facets of economic life that, when taken together, will help keep economic education maximally relevant to students and leave them with the wisdom we think they need.

I started with the important message that decentralized outcomes coming from competitive market interactions work well to deliver many essentials. I went on to address three areas that are almost certainly salient to all young people: insurance market dysfunction, labor market frictions, and climate risks.

These additional messages aren’t happy ones. It’s not fun to tell students that markets can’t simply be assumed to deliver insurance against many relevant risks; that the labor market can be messy and replete with chance and generationally-conferred advantages; and that commons like the climate or ocean are currently not being handled with care, probably can’t be without very difficult-to-achieve collective action, and hence won’t be. But the messages are key for helping the next generation develop a sense of the possible and the realistic, a goal that I see as being at the very heart of your efforts as economic educators.

What I’ve clearly not done today is offer ready-to-use solutions. I’ve said nothing in each instance as to what precise curriculum or pedagogy I’d use to get this done. This is because I am not, unlike you, an economic educator; I’m an amateur talking to a group of pros. And if my dad, a lifelong teacher, were here in the room, he would have made it clear that I should know my place. Well, I do. Thank you for your time, and I’m happy to take your questions and comments.


The linked essay is based on McCloskey, Dierdre. The Bourgeois Virtues: Ethics for an Age of Commerce, Chicago: University of Chicago Press, 2006. I think by and large, we in the United States share her view: “I don’t much care how ‘capitalism’ is defined, so long as it is not defined a priori to mean vice incarnate.” The whole essay is relevant to economic educators seeking a look into the ethical dimensions of the decentralization we experience in the United States and what benefits such a system may embody and — more provocatively — promote.


Arrow, Kenneth J. “General Economic Equilibrium: Purpose, Analytic Techniques, Collective Choice.” Cambridge, Mass.: Harvard University, Nobel Memorial Lecture, December 12, 1972.


“The American Dream is Fading.” Opportunity Insights, December 2016.

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Kartik B Athreya

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