Solutions Economic and Market Watch

Hello, and welcome to this holiday episode of the Economic and Market Watch podcast. I'm Kathy Ryan, the producer, and I'm here with CFC's economic research team, John Suter, Sam Kem, and Antony Davies.

Among other things, being the producer means keeping track of all the story ideas the economists come up with. Earlier in the year, John had an idea.

Well Kathy, you know, a blind hog finds an acorn every once in a while. And the idea had to do with our first lesson in economics. Everybody has one, and more often than not, they're often quite memorable.

Everyone thought that sounded great. But it's not quite the crunchy financial analysis we try to bring every Monday, so so I put it in my back pocket in case we ever found the right time for it.

So since we're on hiatus, this is a good time for a bonus episode.

And so here we are. Which of you wants to go first?

I can go first. Well, believe it or not, my first economic lesson actually involves multiple theories, supply and demand, monopoly, price elasticity, and government intervention. When I just started school, I learned very quickly how desperately my dad wanted me to wake up early to arrive at school on time because he was in charge of getting me up and ready for school every morning.

Some of my colleagues may know this already. I'm not a morning person. Never have been since I was born. So my dad tried all sorts of methods to get me up, from getting me to bed early and setting multiple alarms to carrying me out of bed and brushing my teeth while my eyes were closed. Nothing worked.

One day, he offered me a small amount of money in exchange for my promise to wake up when the alarm went off the next morning.

In that moment, I realized there was strong demand for me to get up in the morning. I didn't know what the term was then, but I understood the concept. I took the money and got up on time the next morning. A few days later, I asked for a higher price. My dad agreed.

I raised the price multiple times as I gradually learned that I was the only one who could offer this service. Now if you can actually call that a service. In economics, we kind of we we call this monopoly. Again, I didn't know the term then. Also, the fact that my dad was willing to pay no matter what I asked for suggest that his price elasticity was very low, which means that his demand was very fixed regardless of what the asking price was.

The high demand, the low price elasticity from the demand side, and the monopoly on the supply side led to me extracting a large amount of money from my dad. And this went on for a while until well, now I know it's called government intervention. My mom finally learned about it and shut down my business. And, yeah, she did it in a very authoritarian way. There was no room for negotiation whatsoever.

I guess that was also my first lesson about forms of government.

Antony, what was your first economic lesson?

Yeah. My first economic lesson is, I guess, similar to Sam's and it involves getting money. Of course, Sam did it the right way. I did it the wrong way. And this starts at about age five or six.

I'm going, as kids do, with the parents to the grocery store and my mother pulls out her wallet and pulls out dollars and hands it to the person and we get groceries. And being a kid, all I ever saw was that the money comes out of her purse. I didn't see the money going in through my father's paycheck. And so I took the lesson that well, you just reach into your pocket, you get dollars and people give you things. So I figured, I'll print my own and then I'll be rich.

So I made up, cut up lots of papers and made them all fancy and started hand them out to friends and family saying, you want something from me, give me this piece of paper. If I want something from you, I'll give you this piece of paper. This is money. And of course, nobody used it. And I realized at the young age of six that money only has value when people are willing to give you goods and services in exchange for it.

Simply printing the money doesn't do anything. So I guess I learned a lesson at age six that unfortunately some of our politicians still haven't learned.

And John, what was your first lesson in economics?

Well, rounding out the three of us, mine also had to do with money but in a little bit different context. See, my family ran their own business. It was a meat market. I was the fifth generation to work there. I really didn't have a choice.

I went to work for my father in 1976, and I was expected to work. I had to fill in for the regular employees there when they were taking vacation. There was no horsing around. So the bar was a little bit higher for me within the business, but then again, I always had a job when I got home from college during the summer. I didn't have to look for one.

But the thing that sticks out most in my mind is that when I did start in that early age, I was working 50 hours a week, but I was only making $2 an hour. But since I never had a permanent job at that time, that was a lot of money coming in to me, and so I thought everything was great. Until one day I read in the Dayton Daily News that Ohio was raising the minimum wage from $2.65 to $2.85. And I thought to myself, my own father's ripping me off. You know, I'm only making $2 an hour, working for him.

So one day I had up got up enough nerve to approach him when we're driving home from work and I said to my father, Dad, can you explain to me why I'm only getting $2 an hour and minimum wage in the state of Ohio is $2.85? And without even blinking an eye, his answer was, "When the work improves, the pay will improve." And the thing is, it all revolves around productivity. The more output we get from individual worker, the faster the economy will grow, and the productivity can be used to offset inflation. That's why there's such a buzz about artificial intelligence, and I understand the concept now, but back then I did not.

Well, thank you all for being here, and thank you listeners for joining us for--

Wait a second, Kathy. What about you? What's your first economic lesson?

Me? I'm not an economist.

Everybody has one. And actually, I believe that everybody is an economist deep inside.

Okay. Well, I guess I do kind of have one. When my brother and I were little, my parents were worried about how much TV we were watching. So they went out and bought a set of poker chips and sat us down and said, Okay kids, new system. These chips are called TV tokens and you're each going to get 10 of them every week.

They're good for half an hour of TV apiece and you pay them into this little box when you want to watch a show. Oh, and educational things like NOVA or the News, those are free.

Aside from the educational shows though, I didn't really watch that much TV, or at least I didn't feel the need to once it was rationed. I was just as happy with a book, and I was naturally a save it for a rainy day kind of a kid. So I'd spend a token or two a week, and my brother plowed through his pretty fast. After a while, Mom and Dad were running out of poker chips. I pretty much had them all, and I wasn't spending any.

The velocity of money in our little economy, as far as I understand it, was zero, though I didn't think of it that way at the time.

Our parents could have gone out and purchased more chips from the store, which I guess would have been the printing more currency solution, but they didn't do that. Our tokens could only be exchanged for one thing and I wasn't interested in that one thing.

So the Central Bank of Mom and Dad had to bring in something else I was interested in. They started redeeming the scrip -- buying the tokens back with real money -- from me. I'm not sure what economic principle that solution was analogous to. And I don't know if it taught me much about not watching TV, but it kept me in candy and let me feel like a big girl buying presents for everyone at Christmas with my own money. Mom and Dad didn't keep the experiment going on for much longer after that.

This is really interesting because what just happened with your parents and having to buy the tokens from you? We see often with lesser-developed countries. You have a country that has its own currency, and for whatever reason, the currency starts to lose value. What does the government do to prop up the value of this currency that nobody wants? They buy it up from people using what we call hard currency like US Dollars.

And that's exactly what your parents did. They bought up the tokens with U.S. dollars because you had determined that the tokens themselves weren't very valuable. So in that sense, your family was operating very much like a lesser developed country.

Wow. Okay. I'm not sure I'm gonna put it to my parents exactly like that.

Yes. Apologies to your parents.

Okay. Now, thank all of you for being here, and thank you listeners for joining us. Just as a reminder, the email newsletter, the intelligence brief and dashboard, and regular episodes of the podcast will be back in your inbox and on the Solutions website January 13. Happy New Year.