Teaching terms

Trying something new to get the word out about Cost Benefit Jr.: a series of definitions of basic economic terms. These infographics can be used by teachers and homeschooling moms to teach terms and hopefully spark an interest in the greater lessons of economics: the incentives of decision-making, the consensus nature of voluntary trade (how free markets rely on agreement), and the morality of ownership-based systems.

Breaking down supply & demand

Like demand, “supply” is sometimes misunderstood. We assume a supplier is any producer that can supply, forgetting that a supplier must also be willing. That’s what makes free-market capitalism a moral system; its transactions are voluntary. Just because a producer can supply a good or service doesn’t mean that producer must be forced to do so.

Breaking down supply & demand

When kids begin to understand supply and demand, a common mistake is to assume that “demand” means “wanting to buy.” That’s not the whole story. Actually, demand can only be expressed by a consumer who has both the willingness and ability to buy.

The theory of subjective value

Carl Menger hit on the subjective theory of value in the late 1800s, an insight suggesting that not everyone values a product the same. This was groundbreaking because it led to another huge insight in economics: in a voluntary exchange, both sides benefit. This is because each side values the item differently. The seller values it less than the amount of money the buyer is willing to spend on it. And the buyer values that amount of money less than the item being bought.

Making good choices is a skill

Kids are notorious for spending too much time watching TV, but when they begin to understand the opportunity costs they pay for this behavior, it can make a huge difference in their decision-making process. There are many other fun experiences kids give up to watch TV; let’s start pointing them out! When kids look beyond only the benefits of their decisions and really begin to understand the costs they pay, it’s easier for them to make good choices.

Sharing is a learned skill

The reasons (incentives) to engage in sharing are part of what makes capitalism a moral system: sharing with others raises the sharer’s esteem in any market, whether that market is your community or even just the friendship between two people. Esteem is a valuable resource in a market! And market participants with high esteem enjoy market benefits like discounts, access to credit, higher exposure, loyalty, and greater cooperation within the market.

If the idea of capitalism as “moral” seems out of place, remember that capitalism is only this: an economic system based on capital. Capital is a saved resource. So capitalism is a system built on the idea of saving as primary and consumption as secondary. It’s not capitalism that has caused severe economic inequality; it’s corporatism, the corporatocracy that exists within most government organizations. Current US economic policy is Keynesian and promotes consumption over saving, which is why there are so many penalties for saving and legal incentives to consume and spend.

Demand vs. quantity demanded

You’ll often see the claim that an increase in demand results in higher prices… this widespread error is the result of our failure to teach basic economics. Higher prices are actually the result of increases in quantity demanded and we cover this important distinction in Cost Benefit Jr. Understanding it helps us see that “price gouging” is an inflammatory, negative term describing the natural phenomenon that must occur when limited resources are suddenly in great demand.

Sharing isn’t socialist behavior

If it’s not yours, it’s not yours to share. Sharing not only implies, but requires ownership. Why do people share what they have with others? There are many economic incentives that might cause people to act selflessly. Explore some of them in Cost Benefit, Jr.!

What is a blockchain?

Blockchain technology is changing the world at a rapid pace. Kids just becoming familiar with terms like blockchain, hash, and hardfork might need some help to better understand them. So we’re going to spend some time explaining these concepts on a level kids can understand. And our first question would be, what exactly is a blockchain?

The answer is pretty simple: a blockchain is a ledger.

Way back when, a paper ledger is what accountants used to keep track of money: the incoming money and outgoing debits. Accountants were also called “bookkeepers” because these old ledgers looked like books: the sheets of data were bound for easy storage. And the accountants had to keep or maintain these books of information in order to keep business moving and banks running.

But they weren’t just for money tracking. We’ve used ledgers of all kinds to keep track of any type of data list. For example, a hotel ledger kept a running list of their guests. A sports ledger kept a record of wins, losses, and statistics. A payroll ledger allowed a company to keep track of payments made for the hours their employees worked.

Then, along came computers and we moved our ledgers from paper to digital spreadsheets. An accountant could input numbers rather than writing them down, and make automated calculations. These digital spreadsheets were a revolution in bookkeeping because the data could be rearranged and reorganized with a few simple clicks. Columns of data could be added together. Input types could be grouped.

Like the paper and spreadsheet versions that came before, a blockchain can be a list of financial exchanges (and many of them are). But a blockchain can be any list of information that can be digitized. Anything that can be turned into digital data can be recorded on the blockchain.

So a blockchain is very similar to both a paper ledger and a digital spreadsheet. But a blockchain differs from both paper ledgers and spreadsheets in one very important way: a blockchain can’t be altered. A blockchain record makes it impossible to “cook the books” – the act of committing fraud by changing the amounts of a financial ledger.

The reason it’s impossible to alter or “cook” a blockchain record is because it’s decentralized: no one person or entity has control over it. Its data can’t be removed. Its data can’t be altered. Its data can’t be censored. And that one difference makes all the difference!

Next time, we’ll look at how “nodes” work independently yet cooperatively to build the blockchain. (This series was originally published on the @geke account at steemit.com.)