| Wayne Hast E. Angus Powell Endowment Richmond, Virginia 
Wayne Hast is Director of Academic Instruction for the E. Angus Powell Endowment. He teaches economics at the Collegiate School and at the University of Richmond. |
History has always been an excellent teacher, and history teachers have an excellent opportunity to teach important economic concepts. Over time, I have asked various economists, "What are the most important, fundamental concepts of economics that students need to understand before leaving high school?" The following list draws on the economists' responses, summarizing many fundamental concepts of economics that can be taught in U.S. history class.
1. The private ownership of the factors of production may be the most important economic concept students need to appreciate. Individuals and business owners care more for their own property than anyone else will; therefore, they will use resources efficiently. As a result, private enterprise is more productive than any communal venture or system.
2. Economics is all about making choices about the utilization of scarce resources.
3. The relationship of supply, demand, and price is pivotal. Consumers and businesses use the price system to decide what, how, and how much to consume and produce.
4. Every decision has a cost; to do one thing means forgoing another opportunity. This is called "opportunity cost."
5. Profit is not a four-letter word. Profit is the reason businesses exist. Without profit, there would be no demand for labor.
6. Technology creates change that is later recognized as progress. New ideas, products, companies, and jobs displace the old. Many jobs, occupations, and even businesses are replaced over time through this process. Technology creates new ideas that displace the old (a process Austrian economist Joseph Schumpeter called creative destruction, or the churn.)
7. The jobs created today are better than those created yesterday. Each new industry that results from technological innovation produces jobs that require skills and knowledge that are superior to those they displace.
8. The entrepreneur is the hero of today's economy. Entrepreneurs work to bring together the resources to change the economic landscape and improve the world in which they live. They are the risk takers in the creative process.
9. The schools of today are responsible, at least in part, for the economic and productivity growth of tomorrow. Our investment in education has long-term effects on the economy's growth potential.
10. Trade improves people's lives. Trade provides greater choice; it allows people to specialize in doing what they do best and trade for the rest.
These ten fundamentals can easily be introduced to students within the framework of U.S. history. The following examples may suggest ways in which you can bring economics into your classroom.
Most history books give Christopher Columbus credit for discovering the New World, although some believe Leif Ericson beat him to it. Others believe Chinese settlers already inhabited the New World and welcomed Columbus.
In any case, we know a great deal about Columbus. He was well prepared for his role as explorer. He possessed the intelligence for the task and was skilled at seafaring, astronomy, arithmetic, geometry, mapmaking, geography, and history. He studied the Bible, cosmology, chronology, and philosophy.
Columbus also understood many of the fundamentals of economics. Even in his time, the profit motive was alive and well. The sovereigns who underwrote the expedition promised Columbus ten percent of the profits. Spain's Queen Isabella was driven by the same profit motive, as were the crewmembers of the three ships that set sail.
It is important to remember why they sailed. It was the desire to trade, to reach the Orient and its rich potential, by sailing west. Evidence of how long people have benefited from trade can be found under the ocean today, as the cargos of ancient ships are salvaged. Some of these vessels date back to 300 B.C. or before. The benefits derived from trade were the force behind these entrepreneurial ventures. Columbus' voyage was, in fact, an entrepreneurial venture. People benefited then, as they do now, from free trade, which improves people's lives by providing access to a greater variety of goods at lower prices. Trade allows for specialization: Nations do what they do best and trade for the rest.
When the Pilgrims arrived at Plymouth Rock, they traded one set of problems for another. They left a crowded ship cabin for crowded log cabins. Many in the group were sick and some were half dead. They faced hunger, disease, and severe winters. Under an agreement with their investors in England, the Pilgrims were to run a "collective" farming operation. When a shipment of supplies did not arrive as scheduled and the current crop prospects looked inadequate, the settlers made a strategic decision that would prove extremely profitable.
In his History of the Plimoth Plantation, first published in 1856, William Bradford wrote that the Pilgrims "begane to thinke how they might raise as much corne as they could, and obtaine a beter crope then they had done, that they might not still thus languish in miserie."
After much debate, they decided each family should own its own land, assuming all the risks and reaping all the benefits. This proved to be an excellent decision that established the American system of free, or private, enterprise.
"This had good success," writes Bradford, "for it made all hands very industrious, so as much more corne was planted then other waise wold have bene by any means ye Govr or any other could use, and saved him a great deall of trouble, and gave farr better contente." The collective, or socialist, approach to farming, the Pilgrims observed, squelched incentive and bred discontent and confusion.
In 1829, New York's Governor Martin Van Buren is said to have written — a perhaps apocryphal letter — to President Andrew Jackson, arguing that railroads should be outlawed. He claimed that the railroad would, among other things, cost jobs and put the nation at a disadvantage if war with England occurred.1 Governor Van Buren had not considered the number of jobs the railroad would generate, and the value of having access to fast, low-cost travel (eventually from coast to coast).
| January 31, 1829 To: President Andrew Jackson The canal system of this country is being threatened by the spread of a new form of transportation known as the “railroads.” The federal government must preserve the canals for the following reasons: One. If canal boats are supplanted by “railroads” serious unemployment will result. Captains, cooks, drivers, hostlers, repairmen, and lock tenders will be left without means of livelihood, not to mention numerous farmers now employed in growing hay for horses. Two. Boat builders would suffer and towline, whip and harness makers would be left destitute. Three. Canal boats are absolutely essential to the defense of the United States. In the event of the expected trouble with England, the Erie Canal would be the only means by which we could ever move supplies so vital to waging modern war. For the above-mentioned reasons the government should create an Interstate Commerce Commission to protect the American people from the evils of “railroads” and to preserve the canals for posterity. As you may know, Mr. President, “railroad” carriages are pulled at the enormous speed of fifteen miles per hour by “engines” which, in addition to endangering life and limb of passengers, roar and snort their way through the countryside, setting fire to crops, scaring the livestock and frightening our women and children. The Almighty certainly never intended that people should travel at such breakneck speed. Martin Van Buren Governor of New York |
Assuming that he actually did write this letter (some have doubted the claim), what Governor Van Buren failed to recognize is that the railroad — an example of creative destruction — provided, quite literally, wheels of progress for the nation, stimulating economic activity and creating new jobs from coast to coast.
While Abraham Lincoln did not appreciate the value of international trade to a young United States, he did grasp many important economic concepts. Lincoln made his position on free enterprise clear in what have been called the "Eight Commandments of Free Enterprise." (While these commandments have been attributed to Lincoln, they were originally penned by the Reverend William John Henry Boetcker, and later attributed to Lincoln. Source: Lincoln Presidential Library.)
Eight Commandments of Free Enterprise Attributed to Abraham Lincoln
1. You cannot build character and courage by taking away man's initiative and independence.
2. You cannot help men permanently by doing for them what they could and should do for themselves.
3. You cannot bring about prosperity by discouraging thrift.
4. You cannot strengthen the weak by weakening the strong.
5. You cannot further the brotherhood of man by encouraging class hatred.
6. You cannot help the wage earner by pulling down the wage payer.
7. You cannot help the poor by destroying the rich.
8. You cannot keep out of trouble by spending more than you earn.
Using quotations is an excellent way to introduce students to economic concepts. As mentioned earlier in this article, perhaps the most important economic concept students need to understand is the importance of the private ownership of property and the factors of production. In the American economic saga, the importance of property ownership cannot be overstated.
Here's how President Lincoln addressed the subject:
Property is the fruit of labor … property is desirable … is a positive good in the world. That some should be rich shows that others may become rich, and hence is just encouragement to industry and enterprise. Let not him who is houseless pull down the house of another; but let him labor diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built. (Reply to New York Workingmen's Democratic Republican Association, March 21, 1864)
Land, labor, and capital are the three basic factors of production. All three are necessary for economic success. Lincoln placed labor ahead of capital in his message to Congress:
Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. (Lincoln's First Annual Message to Congress, December 3, 1861)
President Lincoln addressed the issue of productivity — the efficient use of resources, in this case, labor — in the following:
No country can sustain, in idleness, more than a small percentage of its numbers. The great majority must labor at something productive. (Address before the Wisconsin State Agricultural Society, September 30, 1859)
It is not difficult to include economics in the teaching of U.S. history. In fact, the true difficulty arises from leaving it out. The topics of trade, protectionism, private enterprise, and entrepreneurialism are critical to understanding the past successes and failures of our great nation. Most figures and periods in U.S. history can be tied to these topics or to others among the ten economic fundamentals listed at the beginning of this essay.
I hope you enjoy using these ideas to enhance your lessons. The sample lessons that follow in this publication may provide some further assistance.