The Seduction of Socialism and Willful Economic Ignorance

3 days ago

6 min read

Updated: 20 hours ago

More than 80% of colleges and universities surveyed do not require an introductory course in American history or government, and nearly 97% of them do not require a class in economics.

Prepared by Mark Goldberg | October 28, 2026

Mark M. Goldberg, Alternative Investments Market Intelligence, 28 October 2026, “The Seduction of Socialism and Willful Economic Ignorance”, https://www.altsmi.com/post/the-seduction-of-socialism-and-willful-economic-ignorance

Those are two of the findings in the American Council of Trustees and Alumni's annual What Will They Learn? survey published May 5, 2026.

We award college degrees without requiring students to understand the constitutional principles on which our democracy was founded or how an economy functions. I believe our failure to teach these fundamental principles contributes to socialism's interest and appeal.

Consider Columbia University. Its Core Curriculum requires students to study political and philosophical thinkers, including Karl Marx, but does not require a basic economics course. Its students study the competing ideas of government without necessarily receiving formal instruction in scarcity, opportunity cost, incentives, or capital allocation. Columbia also does not require a dedicated course in American history, although its Core includes American political thought. I find it remarkable that a university can consider the study of Marx essential to an undergraduate education while treating foundational economics and the principles underpinning the exceptional US economy in which they will live and work as optional.

Economics is the study of how scarce resources are allocated among competing uses. Every economy has limits, every allocation involves a choice, and every choice has a cost. Resources committed to one purpose are unavailable for another. And who should decide how to allocate capital? Adam Smith warned of the dangers of government making those decisions in the seminal book The Wealth of Nations. The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever.”

The US government does not have an independent reservoir of economic resources. Its ability to access resources depends entirely on the productive capacity of the economy's people and enterprises. People produce, and that is the source of prosperity. Governments tax the productive economy to fund their spending. Said more explicitly, governments produce nothing.

Government can tax, borrow, print currency, and lend to finance growth. It regulates markets, protects our environment, provides national security, and establishes the rule of law. Government policies can improve or diminish economic activity, but government is NOT the source of the resources upon which prosperity depends. This may be obvious to the reader, but I suspect it is far less obvious to the average recent college graduate.

Socialism offers a seductive proposition. Why shouldn't government provide more free benefits? The many promises are appealing, particularly to those unfamiliar with the costs and unintended consequences such policies can entail.

Politicians love to run in this lane. They routinely promise even more. The claim that government can expand its commitments absent considering the economy's limits rests on a fundamental misunderstanding of scarcity. Those resources come from people and productivity, not thin air. Every election, we hear bigger promises of what government proposes to deliver. Rarely do we hear what society must sacrifice to obtain it. The math I hear from politicians about where and how something will be funded is so flawed that I wonder whether they understand it or care.

Another escape hatch exists, but it's really a trap: national debt. The federal government spent $7.4 trillion in fiscal 2026 while collecting only $5.4 trillion in revenue. The resulting deficit is approximately $2 trillion, adding to a national debt that now exceeds $40 trillion. Yet politicians keep proposing new benefits with little discussion of how they will be financed or what other demands on the economy must be sacrificed. As clear as one minus two equals minus one, the day of reckoning on the national debt will arrive.

You can reallocate resources, but that doesn’t create MORE resources. Reallocation cannot sustain rising living standards. Incentives, capital formation, investment, and productivity create wealth and drive the growth in the overall standard of living. Further, the more the government consumes, the less capital remains available for the productive economy to generate wealth. The less the economy grows, the less the government has to tax to meet its obligations.

History has already shown us what happens when governments replace markets in allocating resources. The experiences of the Soviet Union, Eastern Europe, and other centrally planned economies should be part of every serious discussion of socialism.

The burden of demonstrating that an alternative economic system will improve living standards cannot be satisfied merely by describing the outcomes its advocates hope to achieve. It requires evidence that the proposed system can allocate scarce resources, sustain production and investment, and deliver those improvements in practice. That evidence should be the starting point for any serious proposal to replace the American economic system. That evidence doesn't exist, and if universities taught that unequivocally, our political dialogue would be quite different today.

Sweden is frequently cited as a model of socialism's success. Sweden was already among the world's wealthiest countries before dramatically expanding government spending and taxation in the 1970s. Its relative economic position deteriorated. According to the OECD, Sweden fell from fourth in per capita GDP among OECD countries in 1970 to sixteenth in 1993, measured at purchasing power parity. Government spending reached approximately 70% of GDP, and the country suffered a severe banking crisis and recession.

In its 2005 Economic Survey of Sweden, the OECD identified four causes of the country's relative economic decline:

Poor structural and macroeconomic policies
Insufficient competition in the business sector
Rigid labor markets
An overshooting in the size of government

Sweden subsequently reversed course, cutting spending, reforming taxes, deregulating markets, and encouraging competition. Its economy recovered. Yet Sweden is still cited as a model for the very policies it was forced to abandon. I laugh. If American universities taught that history, Sweden would be cited as evidence against the very policies they promote.

A lack of economic understanding doesn't seem to diminish the confidence with which politicians make promises or the willingness with which voters accept them. At times it appears there is an inverse relationship between understanding and conviction. Ignorance of economic principles can make those promises entirely reasonable. The fewer limitations someone recognizes, the easier it becomes to believe that government can deliver whatever it promises.

Government has essential responsibilities, but its funding has limits. Those responsibilities consume resources and must compete with every other demand placed on the economy. Every voter should consider those trade-offs. Some socialism advocates appear genuinely unaware of the consequences of the policies they embrace. Others may contemplate those consequences and choose to disregard them. Neither provides a credible foundation for improving Americans' standard of living, especially for those who need it most.

If economics is not required in nearly 97% of universities, no one should be surprised that our youth misunderstand the need to evaluate economic promises, understand their costs, and recognize the government's limitations.

Financial professionals are well schooled in these principles. We deal with scarcity, capital allocation, risk, and opportunity costs every day. We can fill the gap and play an active role in economic education, especially for our clients' children. Information is powerful. If you want to combat the seductive nature of socialism, education is the key. I would prefer it taught in the classroom, but financial professionals also have a role. We cannot expect educated economic decisions from people who were never taught the fundamentals.

No degree of uninformed conviction can repeal the laws of economics.

Mark Goldberg is the founder of Alternative Investments Market Intelligence (AltsMI.com). He has served as chief executive officer of investment management and broker-dealer firms and received the Institute for Portfolio Alternatives’ Lifetime Achievement Award for his contributions to the wealth management industry. Through AltsMI.com, Mark publishes the Alts Leaders Survey and research on private-market adoption in the wealth channel. His commentary and published research are widely read, and he is a featured speaker at industry events.

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