Voluntary National Content Standards in Economics

Introduction to Standards

A coalition of organizations, the Foundation for Teaching Economics, the NCEE and its network of affiliated councils and centers, the National Association of Economic Educators, and the American Economic Association’s Committee on Economic Education, has endorsed the following voluntary content standards to guide economics instruction in American schools.

The actual writing committee consisted of John Siegfried, Vanderbilt University, chair; Bonnie Meszaros, Center for Economics Education and Entrepreneurship, University of Delaware, project director; James Charkins, California State University, San Bernardino; EconomicsAmerica of California; Nancy Hanlon, Willow School, Homewood, Illinois; Robert Highsmith, Donna McCreadie, Temple City High School, Temple City, California; Robert Smith, Texas Council on Economic Education; Mary Suiter, University of Missouri, St. Louis; Gary Walton, University of California, Davis, Foundation for Teaching Economics; Michael Watts, Purdue University; and Don Wentworth, Pacific Lutheran University.

The twenty standards are summarized briefly in this introductory section and can be viewed in their entirety by choosing the appropriate pages. Full text of the standards has been divided into four sections to reduce the downloading time for users. Permission to copy is granted freely.

Standard 1: Productive resources are limited. Therefore, people cannot have all the goods and services they want; as a result, they must choose some things and give up others.

Standard 2: Effective decision making requires comparing the additional costs of alternatives with the additional benefits. Most choices involve doing a little more or a little less of something; few choices are all-or-nothing decisions.

Standard 3: Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services.

Standard 4: People respond predictably to positive and negative incentives.

Standard 5: Voluntary exchange occurs only when all participating parties expect to gain. This is true for trade among individuals or organizations within a nation, and among individuals or organizations in different nations.

Standard 6: When individuals, regions, and nations specialize in what they can produce at the lowest cost and then trade with others, both production and consumption increase.

Standard 7: Markets exist when buyers and sellers interact. This interaction determines market prices and thereby allocates scarce goods and services.

Standard 8: Prices send signals and provide incentives to buyers and sellers. When supply or demand changes, market prices adjust, affecting incentives.

Standard 9: Competition among sellers lowers costs and prices, and encourages producers to produce more of what consumers are willing and able to buy. Competition among buyers increases prices and allocates goods and services to those people who are willing and able to pay the most for them.

Standard 10: Institutions evolve in market economies to help individuals and groups accomplish their goals. Banks, labor unions, corporations, legal systems, and not-for-profit organizations are examples of important institutions. A different kind of institution, clearly defined and enforced property rights, is essential to a market economy.

Standard 11: Money makes it easier to trade, borrow, save, invest, and compare the value of goods and services.

Standard 12: Interest rates, adjusted for inflation, rise and fall to balance the amount saved with the amount borrowed, thus affecting the allocation of scarce resources between present and future uses.

Standard 13: Income for most people is determined by the market value of the productive resources they sell. What workers earn depends, primarily, on the market value of what they produce and how productive they are.

Standard 14: Entrepreneurs are people who take the risks of organizing productive resources to make goods and services. Profit is an important incentive that leads entrepreneurs to accept the risks of business failure.

Standard 15: Investment in factories, machinery, new technology, and the health, education, and training of people can raise future standards of living.

Standard 16: There is an economic role for government to play in a market economy whenever the benefits of a government policy outweigh its costs. Governments often provide for national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Most government policies also redistribute income.

Standard 17: Costs of government policies sometimes exceed benefits. This may occur because of incentives facing voters, government officials, and government employees, because of actions by special interest groups that can impose costs on the general public, or because social goals other than economic efficiency are being pursued.

Standard 18: A nation’s overall levels of income, employment, and prices are determined by the interaction of spending and production decisions made by all households, firms, government agencies, and others in the economy.

Standard 19: Unemployment imposes costs on individuals and nations. Unexpected inflation imposes costs on many people and benefits some others because it arbitrarily redistributes purchasing power. By creating uncertainty about future prices, inflation can reduce the rate of growth of national living standards.

Standard 20: Federal government budgetary policy and the Federal Reserve System’s monetary policy influence the overall levels of employment, output, and prices.