How I Failed to Explain Capitalism to My Daughter
by Sergei Boukhonine
by Sergei Boukhonine
Kids ask the darnedest questions! A few weeks ago I was driving my eight-year-old daughter to a tutor when a big sign "Going out of Business Sales" caught my eye. The Albertson's grocery chain was leaving Austin. Now, I love a bargain as much as the next guy and, since we had time to spare, I decided to check it out. Everything was marked 60% off and I got a few bargains such as vitamin supplements. My daughter ran around the mostly empty store managing to find a few knickknacks she really, really wanted (e.g. she really likes flashlights).
When we walked out of the store with a feeling of deep satisfaction that only buying something (necessary or not) for half-price could provide, my daughter started asking questions. It went approximately as follows:
Dad, why was this store so empty?
Well, they are going out of business.
But what does it mean?
They are closing for good in a few days.
Probably because they couldn't compete successfully.
Who do they compete with?
Well, we usually go to HEB, other people go to Wal-Mart or Costco. But those stores also want Albertson's customers, so they compete with Albertson's.
But why do they do that?
Hmm, I didn't really have a ready answer suitable for the situation at hand. An explanation such as "competition maximizes efficiency of resource allocation" might work just fine in a graduate seminar, but would it work with an eight-year-old? Meanwhile, the evening commute was getting heavy and driving demanded my undivided attention. So, without further ado, I blurted out the following gem:
They compete because they are greedy!
Ah-oh, that didn't go too well. "Greedy!!!" — screamed my daughter — "That's not very nice!" The traffic was getting heavier and since I was at a loss for words, I decided to follow my grandma's favorite tactic — when you have no good argument, keep quiet at all costs "like a Communist tortured by Fascists!" The last phrase must have come from some old Soviet movie… In any case, didn't my wife and I tell our daughter countless times not to be greedy and selfish and share her toys??? And in her elementary school, doesn't everyone get a prize of some sort even when they finish dead last? With my unfortunate slip of tongue, didn't I just smear competition and even capitalism itself as brutish and nasty? With luck, I thought, she would forget this conversation very soon!
We still had a few minutes left, so I took my daughter to a gelato and coffee shop where I got her two scoops of gelato in a nice wafer cone. Yum! As she was enjoying her treat, she looked around and said: "Dad, will this place go out of business?"
I looked around… good location in a busy strip mall… nice gelato and coffee… a suburb full of young professionals and UT students… "No" — said I — "this place will stay open." And here is when my daughter administered the coup de grace. In a triumphant voice, she announced her alternative explanation: "Yes, they will stay open because they are not GREEDY!!!"
The Agony of Defeat and My Search for Lessons on Competition
As you may imagine, I felt humbled, perhaps even humiliated. I always thought of myself as a good instructor and supervisor who could explain things patiently and creatively to even the dimmest students and employees. My teaching evaluations supported this opinion. But here I failed my own child! So I started searching for ways to explain capitalism to children. Here are a few scenarios. All are based on an imaginary visit to an ice cream parlor.
Price competition: imagine that there are two ice cream places within the same distance from our house. They sell the exact same ice cream. One charges two dollars per scoop, the other — three dollars. Which place would you go to?
Superior service: imagine that there are two ice cream places within the same distance from our house. They sell the exact same ice cream and charge the same amount. The lady at the first place always smiles and serves ice cream very fast. The lady at the second place is slow and never smiles. Which place would you go to?
Superior selection: imagine that there are two ice cream places within the same distance from our house. They charge the same amount but the first place has ten flavors while the second place has only five. Which place would you go to?
OK, these scenarios are pretty simple (or, as my wife put it, dumb). More complex scenarios would involve tradeoffs — price versus service versus selection versus distance from home etc. These would demonstrate that competition provides us with a variety of choices. Because of the competition, everyone, from a spendthrift to a profligate spender can find what they want — as it should be.
Before I finish this article (or perhaps abandon it as articles and books are never truly finished), I would like to ask the gentle readers for their input. Maybe someone could write a children's book explaining competition (two feline friends going for ice cream?). Maybe such books are already out there — please let me know what are they. In any case, child development experts assert that childhood memories and impressions are lasting and formative — let's help the kids regard competition as a beneficial force it is!
November 22, 2007
Sergei Boukhonine [send him mail] writes out of Austin TX.
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