Our Daily Bleg: What Economic Concepts Should Kids Know?

(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?


Andrew

You've got my attention already!

Bob Boles

I think this is an amazing idea. I taught for Junior Achievements for a year during college, and it's surprising how kids can grasp these concepts so easily and actually apply them to their everyday life. It definitely would give them a head start in today's fast paced world!

John Coleman

I like this idea. Here is an interesting approach for teaching two the macro theories of Hayek and Keynes. Enjoy. http://www.youtube.com/watch?v=d0nERTFo-Sk

Scott Templeman

Unfortunately, thanks to our worship of standardized testing, kids today can graduate Highschool having never taken any economics. I would be happy if the typical American understood the simple concept of supply and demand. After that I would say opportunity cost/time value of money would be important.

NilsS

I think it's an excellent idea! Make sure u let us know when u have finished something for our kids to watch ;-)

Jeff S.

This is a great idea. When I was young, like most kids my sister and I would set up a lemonade stand in our front yard. Usually we didn't get many customers and would abandon the idea after a few hours until the next summer. However, my father who studied Economics as an undergrad, took this opportunity to teach me about price discrimination. His basic example was that if I were to see a Mercedes-Benz pull up to the stand, charge them a higher price than I normally would. However, if I saw a old beater pull up, to charge a lower price. He explained it simply enough that I understood the concept reasonably well, and I even ended up following in his footsteps and am currently studying Economics at Clemson University. I think the main thing I took away from his mini-lecture was that prices can be flexible, and there are more things behind a price than just production costs. As you can imagine this was an amazing concept to a young kid.

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Jeff Ack

-Sunk costs
-Comparative advantage and trade
-The importance of delayed gratification (More personal finance than economics, but a very important concept)

Tristan

Opportunity cost should be #1, and probably #s 2-5 as well. Anytime I end up discussing the economics of an issue, whether it's US policy, or our household budget, opportunity cost is the key issue I'm thinking about. And if I'm talking economics with someone who never studied econ, opportunity cost is the first issue that gets brought up to show how it's useful for making an economic discussion. Just about any economic concept will be explained naturally by applying the idea opportunity cost to the appropriate situation. It's also an issue that children don't grasp naturally, but isn't too hard to explain with some simple examples either.

caleb b

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.

Rich

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.

Joe

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.

Euan

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!

miles

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?

Barbara

Opportunity costs!

Cy Sebastian

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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olivier romo-leroux

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.

Ken Olson

I believe that the power of compounding along with saving and budgeting are key concepts. Our world focuses on immediate rewards and gratification so much I fear kids won't easily internalize these key concepts for creating economic stability unless taught at a young age.

Additionally, I think how prices are set would be good so they can make good buying decisions. Ultimately, an economic way of thinking might be the greatest skill.

Shane

Go Blue's Clues instead of Sesame street as studies have shown that children learn better when watching Blue's Clues. (Brink by Malcom Gladwell)

Chris K.

PBS has a show called Biz Kids. I'm not too familiar with it, but maybe thats a place to start and compare? http://www.bizkids.com/default.aspx

I'd suggest teaching kids about the difference between price and value (price doesn't necessarily equal value), return on investment, how to maintain a balanced budget (ha!), and the concept of debt/credit.

Ivy Tan

This is a great idea! Aside from the usual supply and demand, savings, time value of money, I think concept of substitution might be worthwhile. It gives them options and stimulates their creativity to think of substitutes...