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Saturday, June 27, 2009

Even Children Can Understand Economics

Every once in a while (actually, make that "on a regular basis), the Unknown Daughter comes out with something that really floors me.

The other day, UD was asking about my grandparents. I told her that both grandfathers worked it the fabric mills in my hometown (back in the day, there were three mills in town). Somehow, the topic morphed into what happened to the mills, so I told her that the mills eventually moved a lot of their business down south, and then (eventually) overseas.

"Why?" she asked?

I answered, "Because the people there would work in the factories for less, so the mill owners could make the fabric more cheaply. Unfortunately, that means that a lot of the workers in the mill lost their jobs."

"So why did they do it if the workers lost their jobs?"

"Well UD, since it cost less to make, they could sell the fabric at a lower price. So, while the workers lost jobs, the people who bought it actually benefited. This means that some workers lost money, and the people who bought the fabric benefited."

Here's what she said: "But Daddy - the people who bought the fabric weren't the only ones who got something out of it. The people who sold the fabric and the people who owned the stores made more money, so they could spend more on other things, like movies and meals and stuff, so they helped the people who sold those things. And then those people had more money, so they could hire more workers, so they benefited, too."

I asked her how she came up with this idea, and she said she just did. Then she gave me "that look" (i.e. 8 years old going on teenager), and said, "After all--my dad IS a finance professor, so I should be smart".

After thinking about it, I realized that she'd gotten that right, too. But the "genetic" story wasn't what I was thinking about--she picked this up largely through osmosis, since I'm often trying to get the Unknown Wife to think in economic terms (i.e. who benefits and who loses, and how). Of course, when I do this, it only serves to tick UW off.

But UD misses little, and remembers most things she hears or sees. So, when she turns teenager, I'm in biiiig trouble.

I shared this with one of my colleagues, and he suggested that I should have UD talk with our state legislators - she could teach them a thing or two.

But given this Wall Street Journal article, I'm skeptical.

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