Economics Even A Six Year Old Can Understand–Part 2

Posted on March 19, 2011


My six year old son, The Fonz (so nicknamed because his middle name is Fonzarelli), recently started saying the word apparently.  He uses it correctly in speech, but I assume its use adds a flavor he didn’t intend.

If I ask him if Ethan is his best friend he says, “Apparently he is.”  In his answer, apparently hints at either sarcasm or a background story to give the answer more meaning.  Maybe Ethan was telling other kids they were best friends, but The Fonz wasn’t ready to move so fast and felt Ethan was rushing the friendship.

I ask if he likes Chloe, a cute girl in his class.  He answers, “Apparently I do,” making it sound like he has no choice in the matter, as though she handed him a note that read, ‘Luke loves Chloe,’ and he accepted the assignment with a shrug.

I asked him if he and Ethan would evenly split the profits from a table store they set up on the street, and he said, “Apparently we will,” as though he were still bitter about Ethan asking to re-negotiate the 100/0 split he had previously accepted.

A 100/0 split proposal by The Fonz would not surprise me, not because he’s a bad friend—although he probably is but for different reasons which I won’t cover here—but because he doesn’t understand the value of money and would make a terrible businessman.  Just this week he set up the table store outside our house to sell a selection of groceries from our kitchen unbeknownst to me.  The highest sellers were apples, seven of which he sold for the total price I paid for one.

The experience reminded me I needed to do more to teach him the value of money, working hard, and saving for the future.

It also reminded me to always distrust my neighbors because one of them bought all our groceries way below cost, knowing they were ripping off a six year old.  I’ve been going through all their trash cans at night looking for apple cores, but so far no evidence, or rather, no evidence of this crime, but I’ve found plenty of incriminating stuff to present the next time someone crosses me.

I’ve established The Fonz only knows two things about money:

1. He knows he wants it
2. He knows he wants a lot.

How much is a lot?

1. A lot of money is one million dollars.
2. A little bit is everything below that.

My kids have an excuse for their monetary confusion because we’re Americans living abroad in China and every day is full of questions like:

The Fonz: Dad, I want to earn some money.  If I clean the fondue fountain will you give me twenty yuan?
Me: Which fondue fountain?  Chocolate or cheese?
The Fonz: Mom said she would give me five dollars to clean the cheese fountain, but I’ll do the chocolate one for twenty yuan.
Me: You should have said yes to Mom because five dollars is more than twenty yuan.  Remember twenty yuan converts to only three dollars, which is less than five dollars.
The Fonz: (sigh) I only want to know how much money I need so I can buy soda.
Me: With twenty yuan you can buy about eight sodas.
The Fonz: How much soda can I buy with five dollars?
Me: Well, you can’t use dollars in China , but in America five dollars would buy you five sodas.  I know that’s fewer sodas than you could buy with twenty yuan, but the difference in soda prices is the result of other factors like the World Trade Organization and Coke selling at cost until the Chinese develop a taste for soda, and regional sugar prices, and tariffs, and–
The Fonz: Can I get paid twenty yuan for listening to this?

With no ability to comprehend why prices are so relative, it won’t be long before they ask themselves philosophical questions about why goods should cost anything at all and they’ll resort to stealing the soda if earning money to buy it always requires a speech from Dad.

Gifts from Santa create even bigger philosophical, economic questions and might explain why our sons don’t hesitate to send letters to Santa with a list of electronics worth thousands of dollars.

Me: Let’s start with the cheapest gift you asked for.  An iPhone costs six thousand yuan.  Also, you’re too young to have a phone.  Also, you only have one friend.  Also, that friend lives next door.  I don’t think you need a six thousand yuan phone to call him.
The Fonz: But I’ve seen iPhones on the street for five hundred yuan.
Me: Those are just cheap copies sold on the street.  They’ll break in two weeks.  A real one costs six thousand yuan, which is like one thousand dollars.
The Fonz: So it would cost me one thousand to buy an iPhone in America .
Me: No, it would cost about two hundred.
The Fonz: Why?
Me: Because Apple charges what people will pay, and the Chinese are willing to spend a lot more on iPhones than Americans.
The Fonz: Sounds like Santa should buy my iPhone in America.
Me: He can’t.
The Fonz: Why?
Me: Santa has a regional distribution agreement with Steve Jobs.
The Fonz: What?
Me: Nothing.  World Trade Organization.  Tariffs.  Markets.  Exchange rates.  Go to bed.
The Fonz: But it’s only nine AM.
Me: But if you convert it to US time, it’s nine PM Eastern.  See ya tomorrow, sport!

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Posted in: Columns, Kids