Over the past several years, polling agencies and pundits have documented a disturbing trend: Increasingly, many Americans – especially young Americans – are struggling to comprehend the most foundational principles of economics. This growing economic illiteracy could have a potentially devastating effect on not only the country’s economic future, but its political identity and American democracy itself.
In 2022, the Cato Institute found that voters “displayed a depressing lack of understanding of basic economics,” especially when it came to the issue of inflation. This problem was particularly pronounced among young voters. In an op-ed for the Washington Examiner, Nonresident Senior Fellow at the American Enterprise Institute Samuel J. Abrams wrote that “large shares of young adults [are] unable to define inflation, explain supply constraints, or predict the effects of price controls.”
This decline in economic literacy has coincided with a dramatic rise in support for collectivist ideals – more specifically, socialist and communist policies. Polling by the organization Victims of Communism conducted in 2020 found that around 40 percent of Americans viewed socialism favorably.
Additionally, in 2025, a Cato/YouGov poll found that around 62 percent of people under the age of 30 held a favorable view of socialism with 34 percent having a favorable view of communism – the ideology responsible for roughly 100 million deaths in the 20th century alone. Poll after poll shows that Americans are embracing the false promise of the “warmth of collectivism” at an alarming rate, and that the shift toward socialism is being driven by profound ignorance about basic economic realities and the universal historical record of failure of socialist regimes.
Yet there is still hope. The antidote to fallacy, confusion, and collectivist temptation is knowledge and education – specifically about economics, a discipline that was once a major part of American civic life. Anyone can learn the basics of economics, or further his or her understanding.
But before making the case as to why one should study economics, it is important to begin by briefly taking a step back to answer another important question: What is economics? The word “economics” is derived from the Greek word oikonomia, meaning “household management.” To the ancient Greeks, particularly the thinkers Aristotle and Xenophon, the idea of oikonomia was centered on people’s stewardship of resources such that they could flourish and live a good life.
Today, economics has evolved far beyond its ancient roots. It’s also a social science, concerned not with abstract equations or sterile statistics, but with human beings and the choices they make. As the late Austrian economist Percy L. Greaves, Jr. once said, “Economics is not a dry subject. It is not a dismal subject. It is not about statistics.”
As Greaves points out, economics “is about human life. It is about the ideas that motivate human beings. It is about how men act from birth until death. It is about the most important and interesting drama of all — human action.” Economics is concerned with people, their interactions with others, and how those interpersonal relationships affect the ability of a society to produce, deliver, and consume goods and services.
More specifically, economics studies how people interact, cooperate, and respond to incentives. As a field of study, it is concerned with revealing the truth and principles that allow people to find answers to problems through business and commerce.
The study of economics does not teach what the “right” policy decisions are. The “right” tax rate or interest rate is ultimately a subjective judgment. Rather, as Shawn Ritenour, a professor of economics at Grove City College in Pennsylvania, puts it, “The object of economics is to discover economic principles that are true, so that policies developed in light of those principles will be suitable for achieving our goals.”
Learning economics helps us understand ourselves and the world around us. These principles are not academic abstractions. They explain the world as it is. Nobel laureate Gary Becker once said, “[Economics] will be judged on how well it helps us understand the world – and how it helps us improve it.”
The basic principles of economics go a long way toward illuminating why things are the way they are in our world. Take, for example, the famous law of supply and demand, which explains why prices rise and fall. When there is a low supply of a good and demand is high, the price of that good increases. When supply increases, the price falls.
This lesson is probably one that most Americans remember from Econ 101 – although certain members of Congress could probably use a refresher. But most Americans likely don’t know much about the law of scarcity, which outlines concepts like opportunity cost, incentives, and the margin, or the law of marginal utility, which reveals why we’re more satisfied with the first unit of a good we consume than the sixth.
These and various other economic principles can help us understand why certain individual actions and government policies have the effect that they do – and in turn make us more informed citizens and voters.
Increasing our society’s understanding of economics also helps people better detect economic fallacies and understand their damaging impact. As the economist Henry Hazlitt wrote, “Economics is haunted by more fallacies than any other study known to man. This is no accident.”
Hazlitt hits the mark when looking at today’s situation. Socialist politicians make their case by appealing to economic fallacies – such as the idea that the government can provide anything for “free” – so they can present themselves as self-anointed saviors that can solve all of society’s problems. These fallacies are built on ideas that conflict with reality and are easily recognizable to anyone with a basic understanding of economics.
The study of economics also reveals an important truth: economic freedom and political freedom are inseparable from one another. Milton Friedman saw this when he authored his book Capitalism and Freedom.
“Economic arrangements play a dual role in the promotion of a free society,” Friedman wrote. “On the one hand, freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself. In the second place, economic freedom is also an indispensable means toward the achievement of political freedom.”
Free market societies recognize individuals as self-governing in their capacity to make decisions through voluntary cooperation, not through the threat of coercion. Hazlitt made this point when he wrote Man vs The Welfare State. “The solution to our problems is not more paternalism, laws, decrees, and controls,” Hazlitt argued, “but the restoration of liberty and free enterprise.”
From the Soviet Union to Venezuela, Cuba, and North Korea, the historical record of collectivism is grim indeed. Even China, now the world’s second-largest economy, has only been able to succeed insofar as it has introduced market-oriented reforms to its socialist system. Still, U.S. per capita GDP remains roughly 6.5 times greater than China’s.
Economic freedom isn’t simply a policy preference. As Friedman said, it is a “necessary condition” for a free society, paving the way for human flourishing. A society that is economically literate understands that liberty cannot survive on economic myths. It survives on citizens who understand the principles that make freedom possible.
AMAC Newsline, Hunter Oswald
