Elementary Economics and the Bailout

In second grade, my teacher Mrs. Serikawa developed a long-term project to help us understand economics. Throughout the year we were all able to earn or lose "money" by our actions in class. Behaving well, turning in homework, acing spelling tests, and obeying classroom rules all earned a kid "money". Behaving badly, missing homework, and disobeying the teacher all resulted in "money" being taken away.

At the end of the year, we were to use the "money" we had to open a business for one day. We were free to partner up with other students or go solo. We had to pay for a business site (so many dollars per 12" by 12" tile in the classroom), equipment (chairs, tables), and advertising (posters). We had to come up with a name for our business, figure out what we would sell, and how much our products would cost. Parents were allowed to supply "products" for our businesses (baking cupcakes or buying cheap toys), but we had to do all the planning.

After a few weeks, maybe months of preparation (9-year-old time can be so unreliable), we had our Business Day. All classes for that day were suspended as we set up shop, sold our products, and even went shopping among other businesses with our "money". Parents came to see our work and even shop (they got a small stipend of "money"). The sixth graders were also doing the project, so there were lots of businesses to pick from.

My group's store was oh-so-cleverly named "The House of Things", since we sold many different items. Other students sold food, Pokemon cards, pogs, posters, art tools, etc. One sixth grader offered a substantial sum if you could beat him in Connect Four, which I couldn't.

I really liked the project because we learned about economics from experience, which made it stick better than a lecture. We learned to make "money" by being good, and that being bad would lose us "money". We learned that people wouldn't buy our products if prices were too high, but we wouldn't make any money if they were too low. We learned how to look for good deals (one kid might have cheaper and better tasting cupcakes than another). We learned that once our "money" was spent, it was gone, thus learning to spend it wisely. I personally learned not to get into gambling too much, since the odds are generally against you (sixth graders are smarter than second graders).

The exercise was a great way for us to learn about how economics work as well as fiscal responsibility, all without serious consequences we might have suffered later in life.

But what if there were bailouts in this exercise? What if today's socialist economic theory was applied?

By that theory, Mrs. Serikawa would never have taken "money" away from kids who misbehaved. In fact, she probably would have given them "money", to keep them from falling behind the other kids who had been good. In order to support misbehaving kids, some "money" would have to be taken from everybody else or the teacher would have to print more "money".

On Business Day, those who did not plan their businesses well, would not have suffered, but would have been bailed out by the teacher. Rather than let them fail for poor planning, they would be given ample amounts of "money" to offset their losses. If the businesses continued to fail, the teacher would just take them over herself, despite it not being her responsibility.

The whole concept of "money" would have been made meaningless. Students wouldn't have worked as hard to get "money", since they would have received it anyways. Good students would have been robbed of incentive and bad kids would have never felt the consequences of their actions. Nobody would have worked hard on planning their business, because success was guaranteed. The interference of the teacher in our experiment would have been destructive to all.

Now, if a second grader could understand that, why can't the government?