Teaching kids about costs and benefits

When I wrote Cost Benefit Jr.™: Stories in Microeconomics, my goal was to show my kids that the world is balanced by a creative tension between costs and benefits. I was less interested in teaching them how an economy works; my oldest was only eight years old at the time. But I was very interested in teaching them, through stories, how people make choices.

At eight, my oldest son could usually recognize his benefits in any given situation requiring a decision, but he rarely recognized the accompanying costs. And while he could sometimes see what his own incentives to act might be, he hardly ever saw that other people's actions and behaviors are also governed by incentives.

I figured that by cutting to the chase regarding costs and benefits, I'd be able to stop explaining the specifics to my kids regarding every situation, and let them apply their understanding of costs/benefits to situations as they experienced them.

We know it's wrong, for example, to be jealous of what others have. But it's easier to let go of that jealousy when you understand there are hidden costs to every obvious (seen) benefit your friends are enjoying down the street. Hidden costs are a huge eye-opener for kids, and realizing they exist there, just under the surface, can diffuse a lot of interpersonal conflict in the minds of our kids.

Costs and benefits bracket every choice we make, from which brand of toothpaste to buy... to which person to marry... to how we spend our free time. Once we understand that, we can make informed choices; we can make good choices.

Even young children behave “economically,” and not just in choosing how to spend an allowance. Kids respond to incentives in their behavior toward friends. They compete for things they value. And even the most well-behaved children evaluate costs and benefits when determining the wisdom of following rules.

These features of decision-making are hallmarks of free-market economics. And though we might admit we’re economic beings out in the world, we tend to believe that we’re non-economic at home. After all, parents don’t compete with their children for food at the dinner table. But even “socialist” values like sharing, helping, and giving are, at their roots, economic. Sharing, for example, assumes ownership and is governed by subjective values and incentives. We never wholly self-sacrifice; we seek out mutually beneficial acts of charity. Sharing food with family members may seem like good socialism, but how much would we hurt – how much would it cost us – if the people we love went hungry?

Kids need to understand that we all have incentives to behave ethically. That human beings seek to benefit in some way – either financially, spiritually, physically, or psychologically – from every action they voluntarily make. And they also need to understand that we can be harmed by our own economic choices. Eating too much cake can cause a tummy-ache, a double chin, or even diabetes, and we can't focus only on the benefit to the taste buds that led us there. We need to recognize our hidden costs.

And we need to recognize that all decisions are economic decisions.

In an article published a while back in Markets & Morality, associate professor John E. Stapleford cited frightening research by Frank, Gilovich & Regan that found: “students completing an introductory course in mainstream economics were far more likely to be less honest at the semester’s end than were students completing a course in astronomy.” If this research is accurate, it’s time we start teaching our kids the mechanics of free-market economics from an ethical perspective.

We should teach our kids how the checks and balances of market forces protect us, and why we should let them exist rather than trying to legislate them away. Free markets do allow failure, greed, and malfeasance to exist, but the markets' own checks are the best tools for rooting them out.

Right now I've got a contest underway – I'm giving away five free copies of my book, Cost Benefit Jr.™: Stories in Microeconomics. And if the ideas above align with what you hope to teach your kids, I hope you'll enter the contest to win yourself a copy! I also sell this book on Peerhub and accept STEEM as payment. Plus, I'm looking into new vendor venues that accept STEEM, as well, and hope to make a post soon listing those different options.

May the benefits of your actions always outweigh the costs!

[other images courtesy imgflip and giphy]