(Hemera)
This bleg comes from reader Wayne Smith, who asks for suggestions on which economic concepts are the most important for kids to learn:
What topics do the Freakonomics readers feel are most important to teach kids 8-13 years old? Aside, of course, from the fact that the man keeps you down.
I was listening to The History of Sesame Street audio book the other day and thought that it would be nice to come up with a YouTube show with decent production value that outlines basic economic concepts in an entertaining way. Concepts like capital, value, supply/demand, trade, time value of money, interest, saving and borrowing, opportunity cost, taxation,and so on. This would be more narrative than something like Khan Academy. Naturally each concept can have an episode devoted to it and each concept can be addressed in different ways in different episodes, but in scenarios geared toward kids. What do the readers think about this as a concept?
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1) The power of compounding interest!
2) Taxes – but you can’t – you can’t trust anyone not to spin the lesson toward they’re political ideology. Teachers will spin taxes as benevolent and outside parties will say they’re tyranny.
Hot debate. What do you think?
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Taxes can be approached without ideology. I explained to my kids that certain government services are assured us by the Constitution, specifically “common defense” and “domestic tranquility.” I started from a root concept “there are criminals” and “hostile dictators” and progressed to the military and police officers as the instruments supplying those services. I then explained that taxes are how those people are trained, equipped and employed. That was enough of an explanation to justify taxes to a nine year old.
Great idea. If there is one principle I’ll be hammering in to my kid(s) its the effect of compound interest on both loans and savings. Its something even most adults I speak to don’t understand and it has a massive effect on how they have approached pension funding for example.
Doing a little early on can be massively more beneficial than doing a lot later on.
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Compound Interest. Both when saving or borrowing. A simple example comes to mind of borrowing $100K for a mortgage. Based on the rate and time frame you can end up paying $100K – $200K in interest and costs to borrow the original $100K. Rates won’t be held this artificially low forever. I would hope they would go up a little bit in the next 10 – 20 years when these kids will be saving and borrowing.
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You could look at components of GDP, having an episode on each of Consumption, Investment, Governmental Spending, Imports/Exports.
A look at simple taxation would also go well I think. As long as you have Big Bird explaining it!
Just yesterday, I spent a while explaining to my six year old why Jabba had a bounty on Han Solo’s head. “Han agreed to move some stuff from one planet to another in exchange for money. Han never delivered, and since he had taken ownership, he had to pay Jabba for the lost inventory…but didn’t have the money.” So, I’m all in favor of some basic economics education.
Time value of money. Supply and Demand. Opportunity costs. Taxes. If you could get kids to really understand those, the world would be a lot better off.
But maybe you should start off with the basic concept of scarcity. What does it mean that resources are scarce?
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Opportunity costs!
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I think it would carry many social solutions along, assuming its success. Creating a less economically ignorant society, whose main attribute would be “not falling into the trap of debt” as many do today. In my opinion anything learned in the early stages of life can only blossom to great understandings of those particular topics in the later stages.
A more negative scenario would be that it could be creating 12 year old bookies in schools, collecting lunch money from classmates for certain “goods or services” and earning profits. Of course, the other students who also watch the show and are also able to apply the concepts to real-world scenarios, would be able to understand what is occurring. lol
Also, once the entertainment value is very high, keeping the current popular forms of comedy in mind, children will love it and engage in it without the conscious knowledge that they are being taught something. Any fun show will be successful with or without educational value.
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I’m a fan of any idea which allows children to be exposed to educational material. The difficulty I imagine will be doing it a way that is amusing, sustains attention, and has practical application. Regarding useful concepts, I find the idea of maximizing utility and sunk costs to have all sorts of application in my every day life.