Kids on the Bailout

I got a silly chain email, which proposed taking the $85 billion needed for the AIG bailout and distributing it among all 200 million taxpayers, so that we’d each get $425,000 to play with. I decided to test this idea on my boys, who are seven and eight. Ignoring the fact that $85B divided by 200M is $425, not $425,000, we had a conversation about what would happen if the government distributed half a million in cash to every American:

Kid1: That would be generous.

Kid2: That would be hard. There are like 150,000 people just in Bozeman.

Me: Where would the government get that kind of money?

Kid1: Make it (by printing).

Kid2: Steal it from another country.

Me: That would be the traditional option. What if they printed the money, what would happen?

Kid1: Would people have to pay it back?

Kid2: People would go silly and buy junk and pollute the earth faster.

Kid1: One of my theories is that that’s how mankind will go extinct.

Me: If everyone had more money, would we all be richer, or would there be the same amount of stuff in the world at the end of the day?

Kid1: People would buy everything in the stores, then factories would make bigger and better junk.

Kid2: Cheaper stuff too.

Kid1: Soon the atmosphere would just be a bunch of poison gases and we’d have to wear gas masks.

Kid2: There would be less talc, because they use talc to soak up all the sap when they make paper.

Me: What would stores do with all that increased demand, when they saw people buying up everything?

Kid1: Get more stuff. More TVs. More junk.

Me: Would they raise the price?

Kid2: If I ran a store and wanted to stop people from buying too much, I know how to do it. Wipe the grease off all the gear parts at the factory, to annoy the workers out of the factory. Then they couldn’t make any more things to sell.

Me: What if the government couldn’t just print money or steal it from another country?

Kid1: The government could use its own money.

Me: What if it didn’t have enough?

Kid1: It would have to make people pay.

Me: What do we call it when the government makes people pay for things?

Kid2: Taxes!

Kid1: I think the government would probably give all the money to some rich guy.

Kid1: Funny. Where did money come from? Why not do things the old way, gardening and trading?

Me: Money was created to make trading easier. Imagine if you went to Costco and the price of a jar of peanuts was a chicken, and you forgot to bring your chicken?

Kid2: Yeah, but now people have gone crazy with it.

Me: [after a long discussion of banks, bailouts, and the Bush administration’s Paulson Plan] Should we let one person run the bailout, so it would get done fast?

Kid1: Maybe one really great person that everyone could trust.

Me: How about you?

Kid1: I must say, I have a lot of followers.

Kid2: We shouldn’t do it fast. We should have a bunch of people decide, then have a vote.

Kid1: I have a feeling a lot of not-so-nice people would end up with a lot of money. A lot of people act nice, but they’re really money hoggers.

Kid2: People are acting nice, to sucker you into giving them something.

As you can see, I tried to draw out their systemic understanding of economics. It’s interesting what they know and don’t know. They seem to have a strong grasp of the material economy (the supply chain from factory to retail, and sources and sinks) but the information side (price signals) is new to them. Clearly they’re already cynical about politics, even at their tender age. Is is me, or the administration they’ve grown up under?

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