This is our last economics class for the foreseeable future. (Cue weeping, wailing, sorrow and lamentation. I’m feeling it, too! And, even if you don’t feel that way, we can still be friends.)
The format for this week is much the same as previous weeks, with one big difference. Because there are more readings (not a ton, just more) and more videos to watch, this week the final segment (watching the video about Milton Friedman and doing the write-up) is not required to attend class but is an opportunity to earn 5 vanbucks.
What’s in a price?
Have you ever heard someone say, “landlords can charge whatever they want.” Or, “there is no way that item (fill in the blank) is worth that much!” What goes into determining a price for something? What a great question! I’m so glad you asked! And what is the difference between price and value?
The answer is much more simple… and complex than you might think. While it is true that if I own the product, I can set the asking price to whatever I want, it does not necessarily follow that I will be able to sell the item for the price that I choose. This is the beauty of a free market exchange. I will only be able to sell the thing if the person looking to buy it values the item more than he values the money he will exchange for it.
The following quote is so applicable to this particular idea. Throughout history, there have been people who want to build societies without prices or think that government can dictate prices. But can it work? Let’s take a deep dive and see what we can find out.
Some of the videos/readings may feel redundant but see if each one can help you understand a little deeper.
Watch the following video. How would a rising price of your favorite food item impact your behavior?
Print, read and mark this article “What Mises Understood about Prices and Trade that Socialist Economists Did Not.” Circle and define (in the margin) at least 3 words you don’t understand. Watch the imbedded videos.
Read and mark chapter 15 of Economics in One Lesson, “How the Price System Works.” (Here is the link to the online version if you don’t own the book.)
***I know that these readings are challenging. It is ok if you don’t fully understand them but I do want you to give a valiant effort and pick up what you can. Please do not get discouraged.***
Think of an item that you frequently purchase. It could be a favorite snack, an item at a restaurant you like, or an item of clothing. Now, make a list of all the different factors that might impact the price of your item; for example, the ingredients or raw materials, the steps in the manufacturing process, the labor or transportation, etc. If you need some inspiration, consider the ketchup example from the first video. Don’t just think through this exercise: write it down.
Watch the following video. Take notes on anything that stands out.
Tuttle Twins and the Search for Atlas
Read the Tuttle Twins and the Search for Atlas. (If you don’t have access to this book, please text me and I’ll help you find one.) Then watch the following video.
Think through your answers to the discussion questions in the back of the book, especially
- Is anyone entitled to the product of your labor?
- What incentives exist that encourage you to work hard?
Come prepared to discuss your thoughts, backing them up with principles.
Throughout the week, pay attention to any examples you see of victim mentality, work ethic, and incentives. Also, notice how prices impact your choices. Ask your parents how their behavior changes as prices in gas, food, etc, rise or fall.
Is there such a thing as a free lunch?
Can you put a price tag on freedom? It could be argued that there is no freedom without price tags. The next time you hear a politician offering to do something for free, I encourage you to think through the implications of that promise. And, the next time you hear someone complaining about how expensive something is, consider what factors might be causing that increase in price. Could it be due to change in materials cost? natural disaster? fluctuation in labor? the need for more competition (i.e., a natural- and likely temporary- monopoly? What else?
Economist Corner: Milton Friedman
***Because the reading/video load is a higher this week than previous weeks, the following assignment is optional and is worth $5 if done well. Enjoy!*** (This offer is good up to Thanksgiving break)
By popular demand, here’s your chance to learn more about and from the great Milton Friedman! As you watch this video, note any statements that stand out to you. What examples of long term consequences do you find? Any illustrations of the concept of seen/unseen? Unintended consequences? What other things stand out? Write your thoughts on a page that you can turn in.
https://www.freetochoosenetwork.org/programs/free_or_equal
Looking forward to seeing you on Thursday and hearing about what you have learned.
