Tuesday, October 26, 2010

Economics is not about cash, it's about benefits vs. costs. | TechDirt

Of course, the kids aren't expecting that they should get government handouts for free. They're getting marginal benefit from making (most) people happy in giving them free lemonade.

*** Economics is not about cash, it's about benefits vs. costs. ***

Yes, they're often calculated in cash terms, but if the marginal benefit to the children is greater in giving away the lemonade, there is nothing wrong with that at all, and it's certainly not against "basic economics" as she claims later in her column.

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Financial Columnist Lectures Little Kids Who Want To Give Away Lemonade That They're Destroying America

from the wow dept

Say That Again

by Mike Masnick

Wed, Jul 7th 2010 10:32am

Stuart sends over a column from a Chicago Sun-Times columnist, Terry Savage, that I could have sworn was satire until someone convinced me that it's not. Savage is apparently a "financial" columnist, who apparently is a bit confused about her basic economics. Over the long weekend, she decided to celebrate the American way by berating and lecturing some children who set up a lemonade stand because they wanted to give away the lemonade for free. According to Savage, these kids represent all that is wrong with America. I'm not joking.

"No!" I exclaimed from the back seat. "That's not the spirit of giving. You can only really give when you give something you own. They're giving away their parents' things -- the lemonade, cups, candy. It's not theirs to give."

I pushed the button to roll down the window and stuck my head out to set them straight.

"You must charge something for the lemonade," I explained. "That's the whole point of a lemonade stand. You figure out your costs -- how much the lemonade costs, and the cups -- and then you charge a little more than what it costs you, so you can make money. Then you can buy more stuff, and make more lemonade, and sell it and make more money."

I was confident I had explained it clearly. Until my brother, breaking the tension, ordered a raspberry lemonade. As they handed it to him, he again asked: "So how much is it?"

And the girls once again replied: "It's free!" And the nanny looked on contentedly.

No wonder America is getting it all wrong when it comes to government, and taxes, and policy. We all act as if the "lemonade" or benefits we're "giving away" is free.
Shockingly enough, you can read Savage's column -- for free -- online. I'm guessing she doesn't get the irony. Savage seems confused about a whole lot of things, from the concept of philanthropy and sharing to some very, very basic economics. For someone who presents themselves as a financial expert, this one column seems to undermine any credibility in the field.
Again, I need to remind everyone, that you can read her column for free on the Chicago Sun-Times website. Why? Because the marginal benefit to the Sun Times and to Savage herself is higher in giving away the content for free. In the case of the Sun Times, it's from the ad revenue it receives, and in Savage's case whatever (probably too high) sum the Sun-Times pays -- and also for the "free promotion" it's supposed to give to help her sell her books. In other words, the marginal benefit to having her columns online for free is greater than the marginal cost. Just as the marginal benefit to the little girls from seeing happy people by giving them lemonade outweighs the "costs."

If we can't teach our kids the basics of running a lemonade stand, how can we ever teach Congress the basics of economics?

Why don't we start by teaching our "financial experts" the basics of economics?

If that's what America's children think -- that there's a free lunch waiting -- then our country has larger problems ahead. The Declaration of Independence promised "life, liberty, and the pursuit of happiness." It didn't promise anything free. Something to think about this July 4th holiday weekend.

Wait, what? You know what the Declaration of Independence also didn't include? Anything about how much "life, liberty and the pursuit of happiness" costs. You know why? Because it has nothing to do with whether or not something costs money or is free. So that's not "something to think about" because it makes no sense.

But, perhaps we shouldn't be surprised that someone who thinks it's a good idea to lecture little children against sharing lemonade isn't exactly the most logical of thinkers out there.

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