By Timothy Verrinder
To understand the complex world around us, it is helpful to simply imagine everyone as children. Somehow, the thought of a boardroom of children in suits and dress skirts with pen, paper, phones and coffee cups makes the content of any business meeting seem more accessible. The courtroom with a seven-year-old on trial before a pudgy, bespectacled and robed judge and a jury of his “peers” might be another example. Even in politics, where it’s not so much a stretch of one’s imagination to view everyone as children, it is a helpful exercise not just in reducing the complexity of things, but also the intimidation factor which accompanies complexity. Little Mr. Stevens standing on a stool to write on the whiteboard doesn’t quite evoke the intrigue and competition associated with corporate life. The lawyer’s powers of persuasion and legal acumen are rendered laughable as soon as little Ms. Sanchez says “ladies and gentlemen of the jury.” As for politics, well, much of that realm is already laughable without such use of the imagination.
In all cases, there is a pattern and simplicity in human behavior which is readily observed in children. We never quite escape the tendency to foolishness and self-centeredness, though we may learn to hold it in check. We refer to this as maturity. Even virtues, though rightly associated with maturity in most cases, are at times equally more visible in children as vice. “Truly I say to you, unless you are converted and become like children, you shall not enter the kingdom of heaven.”
So, all of this being said, the proximity of Easter actually affords an opportunity to take a very complex topic and break it down through such observation and imagination. Namely, economics and government fiscal policy. The traditions around this particular holiday are surprisingly helpful for this subject.
Every Easter, for all my memory, the younger children of the family have taken part in an Easter egg hunt. The candy filled eggs are hidden throughout the yard and each child is given a basket and turned loose. There is a certain degree of adult involvement to ensure a level of equality of opportunity. Some eggs are nearby and unhidden for the youngest children. Others are placed so high out of reach that certain older children were clearly in mind. The involvement of the parents is often unnoticed. However, they seem to materialize suddenly if the lesser angels of some older child gain the upper hand. It is then made clear that systematically collecting all the unhidden eggs immediately is not quite the idea. Or, the occasional suggestion is made to the older sibling to leave a large egg for the younger child close behind.
I would be remiss if I did not mention the presence of the teenage children. During this transition phase, the neither-child-nor-adult somewhat but not entirely conceals his nature. Old enough to consider himself too sophisticated to participate in the hunt himself, but still not quite able to conceal the desire for its benefits, he patrols the grounds. Of course, with an air of indifference. Clearly, he is there to assist the children by pointing out eggs they may have missed or cannot reach. Yet, somehow, he seems to know where the largest eggs are and mysteriously, the contents of particular eggs. At strategic moments, he might suggest that perhaps a child would like to “donate” an egg to him. “Perhaps that large yellow one?” “No, no, that one, with the black jell-cough cough, yes, thank you.” “Want me now to help you reach that other one on the tree branch?” Some of the older teenagers are a bit more straightforward about it and will simply ask for eggs in such a way that the children don’t realize it is a question and readily hand them over. There is usually some form of thank you and a reference to it being a “tax” on their findings as the older teenager walks off laughing.
Finally, all the eggs have been collected, or nearly all. The children then proceed inside and, invariably, the following happens. They arrange themselves on the floor throughout the living room and begin emptying the contents of their eggs. The younger are not particularly systematic about it, but the older will sort by type and even color. There is then a frenzy of trading as everyone exchanges according to preference. There is of course much consumption as well until the adults intervene and the candy is “put away” for later.
So, where to begin? The analogies are endless! Already I see many socio-economic paradigms. The role of government in society (the parents?), equality of opportunity (everyone has a basket?), social injustice (they’re not all the same size?) and we can go on. Let us not even consider the recent high school or college grad turned loose with nothing but a baseline permission to participate due to his existence. Often, with little expectation of success by the parents but that it will be fun to watch him wander around confused for a while. However, to stick to the original goal of simplicity I will simply walk through relevant economic terms and concepts and their analogy:
Free Market Economics. – Clearly, the hunt itself. There are many eggs, large and small and of different colors. Everyone is free to chart whatever course they want through the yard, focus on all eggs or large only etc. The sense that while all can benefit from working and all are collectively bringing more and more eggs into circulation, there are practical limitations which render it a competition. However, it generally results in a balance of everyone having freedom and everyone getting eggs in the end.
Supply and Demand and the Law of Diminishing Returns – I connect these two because they can interplay with each other in the complexity of the real world. Yet again, this can be broken down simply. In the egg hunt, there is intense demand (empty baskets) which is satisfied by abundant supply (hidden eggs), until the two reach an equilibrium where baskets are full and the remaining eggs are much more difficult to find. This clearly leads to the Law of Diminishing Returns. There is still theoretical demand, yet the finite nature of the supply and the knowledge that the remaining eggs will take much more work to find results in a practical reduction in demand before the supply is truly exhausted. Thus, the interplay of two laws of economics is actually illustrated here quite nicely and can be easily understood.
Stock Market – Obviously, the trading after the hunt. The ebb and flow of the market which is so confusing in real life is simplified here. There is the initial enthusiasm when the market opens and everyone trades freely. Then, the more worthwhile investments become obvious based on which types of candy seem most popular and thus have the most growth potential as new markets open (i.e. baskets are emptied). Every time a new trader shows up with his goods it effects the market as traders rush in to do business (much like an exciting startup seeking investors). Sometimes, there is a bit of a crash associated with this as the new trader may appear to have a large quantity of the candy deemed scarce a moment prior. Things move fast on the stock market!
Reserve currency – Clearly, chocolate. Being the most stable form of candy in terms of universal trust and perception of value, most trading is conducted relative to the value of chocolate candies. “Hey, I just traded you two jelly beans for one Cadbury egg; we all know one Cadbury egg is equal to two gummies, so I’ll give you these four jelly beans for those four gummies.”
Gold Standard – This perennial concept is best illustrated by black jelly beans. Somehow, even those who don’t really like the flavor will acknowledge that they seem to have some sort of intrinsic value. There are always those who “invest in gold,” i.e., trade and hoard black jelly beans based on an assumption that they are always a safe investment. They are also the ones who will disagree with the paragraph above and argue that black jelly beans should be the reserve currency. Much like in actual markets, they always seem to end up with lots of black jelly beans but much less candy overall.
Insider Trading – Remember the teenager mentioned earlier? This bad actor is a perfect example of insider trading. By some means he knows which eggs have certain candies. As soon as the market opens, he moves in and trades at a low rate with the unsuspecting victim who just emptied the big blue egg full of Reese’s peanut butter cups. By the time the market at large realizes that is all the peanut butter cups in circulation, the inside trader has already made off with what he wants at a low price. Another example, having received a nondescript egg as a donation during the hunt, it suddenly becomes apparent that the inside trader knew the egg was full of black jelly beans and is trying to corner the market!
Stock Market Crash – This might seem an unlikely phenomenon to observe in this context, and yet… As in our world, uncertainty and panic tend to be the cause more than any actual matter of concern. For example, a younger child is observed licking a jelly bean and then returning it to the pile. The observer desperately tries to trade the beans he just obtained from the offender at a suspiciously low rate of exchange. Somehow the reason for the sudden change becomes known across the whole market and not only beans from the offender but now all jelly beans are suspect and panic ensues. Everyone starts dumping beans on the market at ridiculously low prices or almost giving them away. Trading in general slows. Strangely, black jelly beans actually increase in value for no rational reason while the gold standard people assure everyone that it couldn’t have been a black jelly bean that was licked. Like any market crash, there are a few cool-headed types who stoke the panic on the one hand, while casually stocking up on any candy which comes in a wrapper and then trading at a nice profit. The inside trader of course starts buying up all the jelly beans except the pink ones for a pittance and then strategically restores calm to the market by reassuring everyone that he saw it was only one pink one that was licked.
Government Overreach – This one tends to be a matter of debate in this context as in the world at large. Usually, the beneficiary sees no overreach. Namely, the person who just traded his last hard candy for chocolate has no problem with the market being closed and everyone being told to put away their candy “for later.” Whereas, the one who stayed outside longer looking for that last egg or two and just started trading may cry foul and consider the free market is being infringed upon.
Federal reserve/inflation/stagflation – This tends to be observed on more of a year-over-year basis. Some years, there are more chocolate candies and the value relative to other types is quite high. Other years, more candy in general, some years mostly chocolate and you actually get inflation where the value of non-chocolate candies is actually higher and you get a sort of “chocolate inflation” (black jelly beans always trade high in such years). Worst case, you get a large amount of chocolate introduced at a late point in trading (e.g., cousins show up with massive amounts of chocolate from their own hunt elsewhere). This results in a general slowdown in trading as enthusiasm is diminished and there is too much chocolate in circulation and in everyone’s stomachs (stagflation). It is often argued posthumously that this was a result of irresponsible government policy.
Interest Rate Hikes – Best illustrated as a limitation on consumption. “You may have two more candies and then we need to put them away for later.” The immediate effect is a rapid slowdown in demand in the market as everyone likely has two of their favorite candies already. Sometimes anticipation of this “rate hike” results in a sudden flurry of trading but the effect after is always reduced demand. An excellent example of responsible government policy to curb inflation/stagflation.
Federal Lands – There always seem to be some marshmallow peeps, Cadbury eggs and malt balls on the counter being enjoyed by the adults. These are excluded from free market enterprise and never enter circulation.
Taxation – This one is interesting, as there are two aspects which illustrate our world in different ways. First, the teenage child. This one might make it seem that paying a tax is actually an act of neighborly benevolence for the common good and an almost voluntary act. “Might I have an egg from your great abundance?” It is interesting that the very rich never complain about taxes. “Thank you and perhaps you would like me to reach that (smaller) egg on the branch for you?” We see that there is an assumption played up that paying taxes is not only good but we actually want to do it! Obviously, it must provide a mutual benefit as the recipient will then assist you in obtaining what you could not for yourself? In reality, it is not unlike the paying of larger taxes and excitement of receiving a much smaller tax return. The more overt teenage child at least has the honesty to call it a tax and rub it in that they are bigger, stronger and not to be denied. Of course, it is only considered in hindsight that perhaps they were not actually entitled to levy the tax to begin with…
The second of course is the parents. Admittedly, this one is not as easy an illustration. Maybe this is better an example of Tax Withholdings. Or, perhaps the better illustration is by comparison, with the parents as legitimate government and teenage children as tyranny in its subtle and eventually overt forms.
In summary, I hope that while being amusing, the above has illustrated my initial claim. One has merely to observe or imagine children at play for a while to understand the world on many fronts. We simply observe human nature in its raw and unrefined form. The world is full of people who were once children and very much show it from time to time. Reminding ourselves of this can be helpful. Perhaps this is why the adage, “let the little children come to me, for the kingdom of heaven belongs to such as these.” Maturity is right and proper to pursue, but in part this involves not thinking too highly of ourselves.
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