Geography is a critical part of the school curriculum. It is the subject we depend upon to convey to students "where things are and how and why they got there" (Geography Education Standards Project, 1994, p. 11).

But Americans are not well-known for their understanding of geography. The 1994 National Assessment of Educational Progress ranked the geographic understanding of American students on a four-point scale: advanced, proficient, basic, and below basic. The NAEP study revealed that only 2 percent of American twelfth-grade students scored at or above advanced, 27 percent scored at or above proficient, 70 percent scored at or above basic, and 30 percent scored below basic. More than two-thirds of American students performed at the basic or below basic levels.

How can economics help? Economics can strengthen the teaching and learning of geography by bringing into sharper focus some issues about which geography tends to be vague and sometimes confusing. Geography, for example, stresses the importance of the location of natural resources. Geography emphasizes correctly that the location of natural resources influences the distribution of people and their activities. Geography stresses how settlement is influenced by the availability of fertile soils, supplies of fresh water, and deposits of minerals. Geography suggests that the existence of natural resources tells us much that we need to know about the wealth of a nation. Analysis along these lines is fine as far as it goes, but it does not tell the whole story.

Mystery nations

What is the rest of the story? To illustrate the point, let me describe an activity I do in my class. It is called Mystery Nations (Schug, et al., 1997).

To get started, I present my students a list of unidentified countries (see Mystery Nations: Just the Facts).

After the students have a chance to look the list over, I ask them to guess which of the five mystery nations has the most wealth — i.e., produces the most goods and services. Middle school students and some high school students usually guess that nations A, C, and E have the most wealth. Their intuitive theory of economic growth is that large size and a vast store of natural resources translate into material wealth. Some students favor Country A, particularly because, in addition to having a large store of natural resources, it has a relatively small population. It is as if the students calculate a ratio between the store of natural resources and the number of people. High ratios mean wealth and low ratios mean poverty.

Then I reveal to the students the actual identity and gross domestic product (the value of the total goods and services produced within the country’s boundaries) per capita for each nation (see One Mystery Leads to Another).

Students notice, of course, that nations B (Japan) and D (Singapore) are the wealthy ones. But how are we to explain this outcome? How can some nations with no natural resources — like Japan and Singapore — be rich? How can other nations with vast amounts of natural resources — like Russia and Argentina — be relatively poor? Geography alone does not seem to have the answers.

The importance of international trade

The answer to the natural resource paradox requires some understanding of the importance of market economic systems. What are the non-geographic characteristics of nations that are wealthy? First, all the wealthy nations of the world are heavily involved in international trade. These nations with relatively open markets to trade include the United States, Canada, Germany, the United Kingdom, Singapore, and Hong Kong.

Why is trade so important? Technically, we know that some nations have a comparative advantage in production of the goods and services they can produce at a lower opportunity cost. Thus, even nations that differ from one another in their economies — like the United States and Mexico — can benefit by reducing trade barriers. Our recent experience with the North American Free Trade Agreement (NAFTA) is evidence of the success that reducing trade barriers can bring about for both trade partners (see After NAFTA).

Who benefits from expanded trade within NAFTA? It appears clear that all three nations — Mexico, Canada, and the United States — have gained. It is likely the case that Mexico has gained the most.

While understanding the principle of comparative advantage is critical to understanding international trade, there are additional points to be made. Nations that are open to trade find new markets for their domestic businesses. Ninety-six percent of the world’s consumers live outside the United States. One-third of the U.S. economy’s growth during this decade has been attributable to exports. These exports, in turn, have provided many new jobs for American workers.

Encouraging open trade is also good for domestic consumers. It keeps prices down so items can be purchased at lower prices. Moreover, trade reduces the power of business or other interest groups to restrict competition and raise prices through such means as higher tariffs, quotas, or other barriers to trade.

The importance of markets

In addition to being open to trade, there is a second characteristic of nations that grow economically. These nations establish and maintain institutions that provide for a market economy.

The contributions of market systems to human welfare are rarely mentioned in geography. The National Geographic Standards (Geography Education Standards Project, 1994), for example, makes only passing references to how market economies differ from other economies. Yet the characteristics of market systems offer the most powerful explanations about why some nations remain in poverty while others grow and prosper.

Market economies depend upon a system of law that provides for the protection of private property rights and the enforcement of contracts. These features, along with the other characteristics of a market economy, explain why some nations are rich while others are poor. Evidence to support this claim is provided most recently by Economic Freedom of the World 1998/1999 Interim Report, a publication by James Gwartney and Robert Lawson. These authors report that economic freedom — as provided by a market economy — leads to greater prosperity.

Gwartney and Lawson gathered data on 25 variables for 110 countries in 1997 and for 11 countries in 1990. These variables — grouped into seven major categories — amount to a definition of a market economy. They include:

• limited size of government;
• widespread use of markets to produce and distribute goods and services;
• pursuit of a strong monetary policy that favors price stability;
• freedom for individuals and firms to use alternative currencies;
• legal structure that enforces private ownership;
• freedom of trade with foreigners; and
• freedom of exchange in capital and financial markets.

Gwartney and Lawson assigned a score (1-10) for each variable for each country. Assessing the results, they found that economic freedom leads to greater prosperity. Countries that scored high in economic freedom had an average per capita GDP of $18,142 and an average growth rate of 1.84 percent. As economic freedom declined, so did the average per capita GDP, as well as the average growth rate. The bottom 20 percent of economically free countries had an average per capita GDP of $1,538 and an average growth rate of -2.10 percent.

Who are the economic winners? In 1997 Hong Kong, Singapore, New Zealand, the United States, and the United Kingdom were the five freest economies in the world. Other countries ranking in the top 10 were Canada, Argentina, Australia, Ireland, Luxembourg, Netherlands, and Panama. Between 1990 and 1997, New Zealand moved into the top five and Switzerland dropped out of the top five. Latin American countries, in general, fared better in 1997 than in previous measurements.

Who were the great gainers? The greatest increases in economic freedom were achieved in the Dominican Republic, Hungary, Ireland, Mauritius, Panama, the Philippines, Poland, Portugal, and the Czech and Slovak republics. Malaysia, Indonesia, and Venezuela were among those experiencing substantial declines in their rankings.

The least-free economies in 1997 were Myanmar, Democratic Republic of Congo (formerly Zaire), Guinea-Bissau, Rwanda, Albania, Sierra Leone, Malawi, Ukraine, Algeria, Central Africa Republic, Madagascar, and Romania.

Data from this and other earlier studies by the same authors provide strong support for the generalization that countries with consistently high levels of economic freedom perform far better than those countries with low levels of economic freedom.

References CIA Publications and Handbooks (1997). The World Factbook. www.odci.gov/cia/publications/pubs Geography Education Standards Project (1994). Geography for Life: National Geography Standards. Washington D.C.: National Geographic Research and Exploration. Gwartney J., and R. Lawson (1998). Economic Freedom of the World 1998/1999 Interim Report. Vancouver, B.C.: The Fraser Institute. National Center for Education Statistics (1995). NAEP Geography: A First Look. Washington D.C.: U.S. Department of Education. Schug, Mark C., and K.R. Johnston, J.S. Morton, and Donald R. Wentworth (1997). Learning from the Market: Integrating the Stock Market Game Across the Curriculum. New York: National Council on Economic Education.

Conclusion

Americans have much to learn about geography. Geography is a critical discipline that allows young people to understand much about their physical and cultural world. Geography teaching can be strengthened, however, by attention to some basic tenets of economic thinking. Economic thinking allows us to notice that natural resources do not necessarily determine whether a nation will be rich or poor. It is the economic institutions people choose to establish that determine their economic success.