In fact, however, Cramer is not just “below average.” One really need look no further than Jim’s language: touting any stocks with the words, “they go up…they go up consistently, almost every day” is, to any sane investor, simple charlatanism. In the 19th century a man may have been able to stand on a sidewalk touting an elixir that cured hangovers, gout, typhus, and the Clap, and people did not know enough not to believe him. Today, anyone attempting such snake-oil entreaties would be met with general head-wagging and laughter, because consumers are scientifically literate enough to know of the several biological mechanisms underlying such maladies and understand the impossibility of any one elixir curing all of them. Similarly, someone recommending stocks because “they go up consistently, almost every day” to investors possessing a basic understanding of markets and finance will induce precisely the same head-wagging and laughter. Unfortunately, biological literacy is more widespread than is economic literacy, and Jim Cramer manages to stay on the air, pitching financial snake-oil to the general public nightly.
We have a national public education system, meant to provide every American the basic tool kit with which to operate in society. It has always baffled me that financial education has not been a part of the core curriculum. After all, aside from death, the only infamous certainty of adult life is taxes. Why aren’t high school students taught how to do taxes? Why is there never a day of school devoted to the basic rudiments of filling out a 1040, especially given that it’s illegal to not do so once you’re out in the world and earning money?
While this basic deficiency of the American education system has long bothered me, I’ve never realized, until reading the above, how thoroughly public education fumbles the ball when it comes to general financial education, and why it matters so much.
Why do we teach everyone basic biology, even though a very small percentage of students go on to use biology in everyday life, or become professional biologists? The immediate answer is: so any student who is interested is prepared for college and an ability to pursue the subject further. This is the common educational fallacy that has plagued our teachers and educational administrators, that public school is about planting seeds for higher education. It’s why we’re locked in a cycle of ever-inflating college tuitions, and an economy that places irrational faith in the meaning behind a Bachelor’s degree.
The real benefit of teaching teenagers basic biology isn’t education for education’s sake, or throwing knowledge darts at the great dartboard of childhood hoping that a future genius will emerge. That’s a secondary, accidental benefit. The real reason to give teenagers a solid understanding of basic biology is so charlatans cannot prey upon their ignorance as adults. It is notoriously difficult to make lying illegal. It takes a twisted legal code with expensive layers of oversight, and runs afoul of our natural expectation of free speech. Lying is wrong, but it is not illegal, at heart, in a society that values free expression and understands the variable nature of truth. The best method to defeat predatory liars is to educate the public well enough that most of them see through the lies, thus leaving a small marketplace for the liars to operate in (for ignorance can never fully be cured, nor can gullibility ever be eradicated), and limiting the damage of liars to society. Basic scientific education eventually defeated medical quackery—thousands of bogus medical products are still successfully marketed on natural food store shelves, but their claims are more humble (‘will give you more energy’ targets a less desperate and pitiful market of those willing to try anything than ‘will cure your cancer’) and the products themselves more harmless than in days of yore. This is because of, yes, regulation, but also the general public’s understanding of how complex the body is, why medicinal regulation is necessary, and how much good is too good to be true.
We have no such safeguard for financial charlatans. The general public is never given any tools with which to navigate the highly complex world of Wall Street. Sure, the details of high finance are far too convoluted to teach to high schoolers, but so are the details of molecular biology. The point is not to make every teenager in America smart enough to invest on Wall Street, but to make them smart enough about Wall Street to know they need expert help, government oversight, and a healthy attitude of skepticism about the advice they receive in order to invest successfully.
The rationale behind public sex education is the best parallel. Unlike academic subjects, school boards (even ones mired in misguided religious fear of opening the taboo topic to children) understand that sex is something everyone will encounter in life, that it can be dangerous, and that some information up front, before adulthood, will at least soften the blow of the inevitable mistakes and decrease the overall number of mistakes in the population. We teach children how sex works because the alternative—allowing them to discover its processes through rumor and blind experimentation—is disastrous to the public health.
Like sex, everyone will encounter money in adulthood. We must stop trusting rumor and blind experimentation to get the job done. Every kid who attends high school in this country should be exposed to information about 401(k)s, stocks, options, hedge funds, W-2 forms, 1099 forms, fiscal years, budgets, and the consequences of bad money management.
Now is absolutely the time to push for financial education. Not only is our economy reeling from the consequences of a sheep-like populace making bad collective guesses about the economy, thanks to unregulated (and unregulate-able) liars, but there are plenty of Wall Street experts looking for work. I’m sure they could teach basic algebra, too.
This entry was posted on Thursday, March 12th, 2009 at 12:13 pm and is filed under Commentary.
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12/09
Thursday, 12 March 2009 12:13
Here’s an eye-opening paragraph from a larger article that peels apart the layers of Jim Cramer’s position as a market expert, now under public attack from Jon Stewart’s Daily Show:
We have a national public education system, meant to provide every American the basic tool kit with which to operate in society. It has always baffled me that financial education has not been a part of the core curriculum. After all, aside from death, the only infamous certainty of adult life is taxes. Why aren’t high school students taught how to do taxes? Why is there never a day of school devoted to the basic rudiments of filling out a 1040, especially given that it’s illegal to not do so once you’re out in the world and earning money?
While this basic deficiency of the American education system has long bothered me, I’ve never realized, until reading the above, how thoroughly public education fumbles the ball when it comes to general financial education, and why it matters so much.
Why do we teach everyone basic biology, even though a very small percentage of students go on to use biology in everyday life, or become professional biologists? The immediate answer is: so any student who is interested is prepared for college and an ability to pursue the subject further. This is the common educational fallacy that has plagued our teachers and educational administrators, that public school is about planting seeds for higher education. It’s why we’re locked in a cycle of ever-inflating college tuitions, and an economy that places irrational faith in the meaning behind a Bachelor’s degree.
The real benefit of teaching teenagers basic biology isn’t education for education’s sake, or throwing knowledge darts at the great dartboard of childhood hoping that a future genius will emerge. That’s a secondary, accidental benefit. The real reason to give teenagers a solid understanding of basic biology is so charlatans cannot prey upon their ignorance as adults. It is notoriously difficult to make lying illegal. It takes a twisted legal code with expensive layers of oversight, and runs afoul of our natural expectation of free speech. Lying is wrong, but it is not illegal, at heart, in a society that values free expression and understands the variable nature of truth. The best method to defeat predatory liars is to educate the public well enough that most of them see through the lies, thus leaving a small marketplace for the liars to operate in (for ignorance can never fully be cured, nor can gullibility ever be eradicated), and limiting the damage of liars to society. Basic scientific education eventually defeated medical quackery—thousands of bogus medical products are still successfully marketed on natural food store shelves, but their claims are more humble (‘will give you more energy’ targets a less desperate and pitiful market of those willing to try anything than ‘will cure your cancer’) and the products themselves more harmless than in days of yore. This is because of, yes, regulation, but also the general public’s understanding of how complex the body is, why medicinal regulation is necessary, and how much good is too good to be true.
We have no such safeguard for financial charlatans. The general public is never given any tools with which to navigate the highly complex world of Wall Street. Sure, the details of high finance are far too convoluted to teach to high schoolers, but so are the details of molecular biology. The point is not to make every teenager in America smart enough to invest on Wall Street, but to make them smart enough about Wall Street to know they need expert help, government oversight, and a healthy attitude of skepticism about the advice they receive in order to invest successfully.
The rationale behind public sex education is the best parallel. Unlike academic subjects, school boards (even ones mired in misguided religious fear of opening the taboo topic to children) understand that sex is something everyone will encounter in life, that it can be dangerous, and that some information up front, before adulthood, will at least soften the blow of the inevitable mistakes and decrease the overall number of mistakes in the population. We teach children how sex works because the alternative—allowing them to discover its processes through rumor and blind experimentation—is disastrous to the public health.
Like sex, everyone will encounter money in adulthood. We must stop trusting rumor and blind experimentation to get the job done. Every kid who attends high school in this country should be exposed to information about 401(k)s, stocks, options, hedge funds, W-2 forms, 1099 forms, fiscal years, budgets, and the consequences of bad money management.
Now is absolutely the time to push for financial education. Not only is our economy reeling from the consequences of a sheep-like populace making bad collective guesses about the economy, thanks to unregulated (and unregulate-able) liars, but there are plenty of Wall Street experts looking for work. I’m sure they could teach basic algebra, too.
This entry was posted on Thursday, March 12th, 2009 at 12:13 pm and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.