You Can Teach Basic Economics to Your Kids: A 5-Part Guide (Part 1)

When people ask what I do, I confess that I teach economics. They often respond with a comment about how awful or difficult their high school or college economics classes were.

It’s true that few people enjoyed economics in high school or college. (There’s actually a good reason for that, but it’s too long to explain here.) The fact is, economics is one of the most important subjects to understand because we make economic decisions every day. Our world is profoundly affected by economics.

Basic economic principles are not beyond the understanding of most bright middle school and high school students. In earlier posts, we’ve talked about 10 Simple Ways to Teach Your Kids about Economics. There are other posts on this blog as well as our Economics for Everybody video series with R.C. Sproul Jr., that explains economics.

In this 5-part guide, my goal is to provide help for parents whose economics is a little rusty (or a lot rusty!) and who don’t know where to start when covering economics.

I’m not trying to explain economics as a textbook would. What I hope to do is provide some navigation through the vast amount of material available online and elsewhere in order to make the subject less overwhelming. The resources are chosen for their accessibility. Some are good for young readers, others are more suited for older students and non-economist parents. Here are the five parts:

Part 1: Scarcity and the Necessity of Stewardship
Part 2: Production
Part 3: Money, Markets, and Trade
Part 4: Entrepreneurship, Profits, and Losses
Part 5: Economics and Government

In each part, I’ll provide a few resources that might be of some help for parents. (BTW – much of this fits into the National Council for Economic Education’s 51 economic concepts common to all state high school standards for economics classes, particularly the “Fundamental Economics” and “Microeconomics” categories.) 

Part 1: Scarcity and the Necessity of Stewardship

The word “economics” comes from Socrates’ student Xenophon (c. 427-355 BC), an Athenian aristocrat and army general. His book Oeconomicus covered the efficiency of decisions by a household manager or a political or military leader. “Household management” was really one of the first applications of economic thinking. Since you are likely one yourself, then you know that household managers today are well aware of the problem of scarcity.

Key Concept You’ll Be Explaining:

When economists say that a good is scarce, we simply mean that there isn’t enough of the good to satisfy all of the things people would like to do with it. It doesn’t mean that the good isn’t available in stores. It means that we end up having to make choices about whether to use the good for purpose A or purpose B, since there’s not enough of it to use it for both A and B.

Economics is the study of how people make those choices.

Because a choice implies sacrificing one good, or one activity, in order to pursue another opportunity, economists say that the cost of an action is “opportunity cost.” That’s the best alternative that’s given up. We call that “opportunity cost” to distinguish our idea of cost from the concept of cost used by accountants and financiers. Their “cost” is focused on dollar costs only.

If I choose to write a blog post, the opportunity cost may be the run I had thought of going on instead, even though I don’t have to pay anyone to go for a run. Because almost everything is scarce, causing us to make sacrifices to get the scarce goods, economists are known for saying “There ain’t no such thing as a free lunch” (TANSTAAFL).

Stewardship is therefore our effort to make choices that meet the most important goals with the resources we have. Good stewardship means setting priorities appropriately, and it means making good decisions about how to cooperate with others in the accomplishment of our goals. Markets can serve as a very effective way of enabling that cooperation with others–even people with whom we rarely interact. Some of the later posts in this series deal with markets and trade.

Resources:

Economics for Everybody series, lessons 1 and 2. (You can watch Lesson 1 online here.)

Here is a basic article suitable for middle schoolers on scarcity and choices.

“The Economic Way of Thinking Part 1,” by Ronald Nash, at the Foundation for Economic Education.

“Scarcity,” by Russell Shannon, is a longer article appropriate for advanced high schoolers.

“Economists and Scarcity,” by Steven Horwitz, also at FEE, is shorter and deals with some of the misunderstandings of scarcity.

The whole FEE website is a great source for accessible articles on economics.

“Getting the Most Out of Life: The Concept of Opportunity Cost,” by Russell Roberts, is one of the best, down-to-earth explanations of opportunity cost I’ve seen. A shorter explanation is “Opportunity Cost,” by David Henderson.

Here is a whole set of articles on opportunity cost, with copious examples, at the Liberty Fund’s Library of Economics and Liberty.

Foundations of Economics: A Christian View, by Shawn Ritenour, chapter 2. This is an excellent book, but more advanced (probably best for high school seniors and up; or background for parents). You can read more about the book at Prof. Ritenour’s blog, and Jason Jewell provides a useful chapter-by-chapter summary of the book.