Not just math skill is needed

What purpose will greater financial literacy serve if those dishing out the numbers are cooking the books?

Federal Reserve Chairman Alan Greenspan this week urged schools to do a better job of teaching basic mathematics because financial illiteracy leaves many Americans vulnerable to losses from unscrupulous business practices.

He's right, of course, but as recent events have taught us, a solid understanding of math is useless if the numbers have been contrived to mislead even those with advanced math skills. In the case of Enron Corp., for example, not even the most talented accountants, Wall Street analysts and investment fund managers understood enough about the company's convoluted financials to avoid being victimized.

Going back a bit further in financial time, the dot-com bust was largely a function of investors and their advisers being caught up in a speculative mania. Of the trillions of dollars lost in the tech stock meltdown over the last two years, it's safe to say that many of those who lost great gobs of money were both math literate and able to make astute investment decisions. They were often misled by the "experts" because they wanted to be misled. Why? The rapture of watching their money grow blinded them to reality.

What has been happening in U.S. markets in recent years brings to mind a hoary joke about accountants and involves three candidates for a company's chief exec position. When the board calls each in individually for one last interview before making its decision, it asks one question: What does 2 plus 2 equal?

"It all depends on the 2s," replies the senior vice president for strategic planning. "If they have synergy, they might add up to 5. If not, you might be lucky to get a 3 out of them."

When the senior VP for marketing gets his turn, he responds, "Everyone knows they add up to 4, but they'll look a lot better at $3.99."

Finally, the board calls in the last candidate, who is chief financial officer. "What's 2 plus 2?" the chairman asks the company's top accountant, who thinks for a moment, then leans forward and whispers, "What do you want them to be?"

Even accountants always get a laugh out of this joke. Or at least they did until the Enron debacle called into question the basic integrity of accounting's role in the system of marketplace checks and balances.

If policy makers want to crusade for improving math skills, this is good. A high-tech world can always use more math whizzes. Somebody, after all, has to program the computers and calculators the rest of us use as math crutches.

Higher levels of math skills won't, however, ameliorate marketplace problems caused by duplicitous number-crunching designed to mislead the public. If the Enron case is proving nothing else, it's that nobody is safe when key segments of a society suffer a character breakdown. Enron was a massive systemic failure in which nobody responsible for ensuring the integrity of the marketplace discharged his basic responsibility.

More than better math education, it seems, America needs more emphasis on teaching the need for honesty, integrity, truthfulness and the virtue of following the golden rule.