Michael Haiden / Apr 2025
Image: Shutterstock
Europe wants economic growth. But to make pro-growth policies popular, it must educate the next generation about how modern economies work. The emerging field of ‘folk economics’ might be the solution.
After years of sluggish economic expansion, European politicians are beginning to talk about competitiveness and productivity again. With Europe battling to stay relevant on the global stage, growth suddenly matters in Brussels, Berlin, London, and Paris. This is a welcome development. Economic growth sustains the continent’s high living standards and provides Europe with bargaining power in an increasingly hostile world.
Europe must ensure this goal remains relevant in the long term. After all, Europe’s period of stagnation was not only caused by external factors. It was also a reflection of voters’ preferences. In recent years, European citizens voted against free trade deals and favoured regulation which harmed businesses. The fact that professional economists champion free trade and warn against overburdening regulation left them unimpressed.
This is no surprise. If there is one thing which unites right- and left-wing populists, it is a disdain for elites. For both, economists are part of this class. Populist forces also agree on a scepticism about market forces, hence they both dislike free trade. These ideas will not improve Europe’s economic malaise, but only make it worse.
If they harm growth, and thereby living standards, why are these ideas so popular? Professional economists have, in fact, looked into why many voters do not believe the experts. This is the research field of “folk economics”, which studies how people without training in economics think about the subject.
Their insight is we all share similar ideas about how the economy works – and, importantly, how it should work. People naturally believe trade is zero-sum, immigrants steal jobs, or regulation usually has its intended effects. Professional economists think the opposite.
This is important because people’s intuitions affect how they vote and how elected officials may behave. When Donald Trump imposed tariffs to resolve trade deficits with countries like China, he appeals to common intuitions about trade as a zero-sum game. China exports more to the US than the other way around, so the US must be the loser. In modern market economies, where trade can be mutually beneficial, this kind of thinking can lead to economic self-destruction.
Europeans may think themselves to be more enlightened than Trump and his supporters, but on the old continent, we believe in many of the same things. Europeans have protested against free trade and increasingly support anti-immigration parties. These policies hamper growth, but can prove winning strategies on election day.
This is because, as folk economists theorise, we inherited these intuitions from our evolutionary past. Our common beliefs about trade, fairness, or labour were honed in a time where we lived in small, nomadic tribes. Back then, we couldn’t produce much and naturally, we came to believe in any trade, there have to be winners and losers. If someone takes more food from me than I take from them, I have lost out. These intuitions seem to not be affected by personal status or by general education. The only thing which seems to combat them is training in economics.
For European politicians, this creates a dilemma. Voters want growth, but dislike the policies which ensure it – and they seem to actually like those which hamper it. If the continent is to escape economic stagnation, voters must overcome the lure of intuitive economics. Leaders who are interested in long-term growth should thus educate the next generation in folk economics. This would not be a formal education in economics, but a historical explanation of why we think the way we do. Such an education would allow students to reflect on their own beliefs.
Those who fear indoctrination by economic elites should not worry. Putting folk economics in schools would not tell students how to think. Instead, it would allow them to confront their own intuitions and compare them to the insights of professional economists. This would help ensure voters are more informed about economic issues. It would also serve one of the core ideals of a liberal education system: the enlightenment ideal that education should also allow us to question our own thoughts.
