Free Your Teacher Said What?! by Joe Kernen Page B

foregone.”
    Not, you may think, the easiest concept to communicate to a ten-year-old.
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    â€œBlake?”
    â€œYes, Dad?
    â€œWhat is the value of that new guitar you’ve been eyeing?”
    â€œYou mean, what does it cost?”
    â€œSort of. The value is what you’re willing to pay for it, not what someone wants you to pay for it—though they can be the same.”
    â€œI don’t know, exactly.”
    â€œOkay, let’s say it costs as much as your field hockey stick—and you can keep the hockey stick or get the guitar. Which do you choose?”
    â€œNot fair!”
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    Well, no one said it was easy. In fact, Blake was correct: Any decision by her parents to force her to choose is, by definition, arbitrary; we don’t have to give up the hockey stick to get the guitar, and she knows it. By the same token, any requirement that she “earn” the guitar by doing chores around the house is also arbitrary, since she isn’t creating anything of value that can be swapped for the instrument.
    Even so, the lesson is real. And so are the implications, which have been torturing economics students for decades. The opportunity-cost model, for example, confuses a lot of people because it seems to require that the quantity of valuable things stay fixed and unchanging, but while we know that wealth can and does increase over time , at any given point in time —which is where we buy and sell stuff—it actually is fixed. If it isn’t scarce in the short term, it isn’t really valuable.
    Teaching Blake and Scott about the inescapable reality of scarcity and the importance of choice—that they can’t have their cake and eat it too—is one of the most important jobs Penelope and I have. Whenever it becomes too much of a challenge, we console ourselves with the thought that they will figure it out. And with one other thought: Since everyone has a different set of opportunity costs (Blake and Scott would rather have an ice cream than a dollar, but the ice cream shop would rather have the dollar), it stands to reason not just that choice matters but that choices made by individuals are light-years more efficient than those made by bureaucrats. Once Blake and Scott learn that, they’ll be several laps ahead of virtually every elected official in the country.
    Smith, Adam. Scottish philosopher (1723–90) and the founder of the discipline of economics. Author of An Inquiry into the Nature and Causes of the Wealth of Nations .
    Even a decade before The Wealth of Nations (in which he wrote, “The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable”), Smith was on record as arguing that the first priority of government “is to prevent the members of a society from incroaching on one another’s property.” But Smith’s great insight was that the two conditions needed for the maximum amount of national wealth were perfect competition (or as close as possible to perfect) and complete freedom of buyers to substitute one commodity for another (or as close as possible to complete). This is how Smith’s famous “invisible hand” forces prices and profit to their lowest possible level.
    Though Smith didn’t realize it, he was living in the first human era in which wealth, profit, and competition all started to grow over time. What he did realize is that the invisible hand is a much better tool for creating wealth than the visible hand—that without direction, control, or even goodwill, human self-interest is by far the most powerful force for human prosperity.
    Stimulus, fiscal. Noun. An increase in government spending or decrease in taxes taken to limit the damage of an economic recession.
    Of all the things that define economic Progressivism, maybe the most dangerous is its belief in the ability of government to do things more