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By Mike Sims
Economics is the study of scarcity: how we struggle, exchange, and thrive with limited
resources. Its history began with a curse, when Adam and Eve were famously locked out of
paradise. While in the Garden, they had food, perfect weather, cute dinosaurs, and sweet-
smelling fruit trees in abundance. Out of Eden, things got scarce. They were thrown into a
world of thorns, dust, and eventually, sinful children who wanted something of their own.
Thus, scarcity appeared and the study of how to manage began.
While economics as a separate branch of study did not emerge until Adam Smith in the late
1700s, we’ve always had these questions. When Joseph managed Egypt during a famine,
the strategy God endowed Joseph with was pure, practical economics. When the ancient
Chinese settled their lowlands, they addressed the absence of sufficient arable land by
draining the wetlands to facilitate cultivation. Prior to the formal creation of economics as an
independent discipline, “economic” thoughts were authored by statesman, business leaders,
philosophers, and clergy. Ancient Greek, Roman, and Chinese thinkers addressed topics we
would classify under the heading of economics today: How many ships would Phoenicians
need to trade with Tangier in 1200 B.C.? How many giraffes should be transported from
Africa to China in 1400 A.D.? They had to understand the concept of marginal returns to
Disagreements in economics are common. Just as you can now hear “raise taxes” or “lower
taxes,” a certain Chinese ship captain likely had one advisor saying, “Take a herd of the
long necks” and another saying, “Just slaughter one and bring it home as skin and bones.”
Despite such feuds, economic history has established some points of consensus, including
these: Exchange is fruitful, and freedom spreads wealth.
Imagine a world where the transportation costs of trading goods were so high that
exchanges beyond a short distance were nonsense. For example, if walking is your only
means of locomotion, hand carrying the ore needed to smelt a silver spoon is too costly to
justify its manufacture. Conversely, we live with the endowment of thousands of years of
transportation investments. Roadways laid out by the Romans serve as the major freight
arteries of the European Union. The Port of New Orleans, established by the French
Mississippi Company in 1718, still thrives today. The Suez Canal, opened in 1869, actually
revived a canal system dating back to the Pharaohs. Dallas Fort Worth International Airport,
one the busiest freight airports in the world, was opened in 1974 and has spurred
tremendous growth in international trade in a landlocked region with no international
border. All such achievements allow exchange and thereby facilitate wealth creation.
Perhaps the first eBay Internet auction transaction, a broken laser pointer sold for $14.83 in
1995, will one day join these milestones as eCommerce continues to explode.
These all mean that exchanges of final goods, raw materials, and business services can
occur in a world market. Why care? Because you like Nutella, and international trade is the
only way you can get a product filled with hazelnuts. Because you like Pixar movies, and
Singapore computer specialists are the ones who animate them. Because you like iPhones,
and geeks in Israel are the ones who program the codes for it. These trades allow the most
efficient producer to deliver the product. In economic terms, exchange means that we are
efficient by minimizing the opportunity costs of what we produce. The Israelis could produce
Nutella but growing hazelnuts in the desert carries a very high cost.
Similarly, Adam Smith derided his native Scotland’s wet and chilly climate in this famous
example regarding opportunity cost from his classic work published in 1776, An Inquiry into
the Nature and Causes of the Wealth of Nations: “By means of glasses, hotbeds, and
hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made
of them at about thirty times the expense for which at least equally good can be brought
from foreign countries. Would it be a reasonable law to prohibit the importation of all
foreign wines, merely to encourage the making of claret and burgundy in Scotland?” Mr.
Smith is hoping you will say no. Indeed, each expansion in world trade has increased
worldwide wealth, decreased disease, and reduced hunger. Trade helps to eliminate
The success of trade in creating wealth leads to the next conclusion of history: freedom
works. The recently published book Nanocivics: Liberating the DNA of Civilization documents
the historical record of societies that allow individual freedom in forming relationships,
assessing value, and making exchanges. They have dramatically different results than those
societies with top-down management of their citizens. Societies that try to purge profit as
indecent actually only limit profit to the elite, ending progress for the common family. A
society that distributes the opportunity for profit widely spurs industriousness, competition,
For decades, the Wall Street Journal and the Heritage Foundation have tracked the Index of
Economic Freedom, a ranking designed to identify how individual countries perform on the
rule of law, openness, and competitiveness. In 2011, the top five freest countries were
Hong Kong, Singapore, Australia, New Zealand, and Switzerland, all growing, wealthy
economies. Meanwhile, the least free countries were North Korea, Zimbabwe, Cuba, Eritrea,
and Venezuela, all poor countries with little or no growth. These findings, including the
historical record, consistently show that the freedom criteria correlate with the purchasing
power of the average citizen. For example, in the Asia Pacific area, the top five freest
countries had a GDP per capita of $44,000, and the bottom five least free countries
averaged only $3,000. In Europe, the average family in the five freest countries is nearly
five times wealthier than the average family in the five least free countries.
Unfortunately, while the history of economics shows a clear path on the big issues such as
exchange and freedom, history also shows that such a path is too often bypassed. Societies
seeking to bring order to the activities of the masses through aggrandizing the power of a
ruling clique have suffered. To the extent we lean away from the lessons of economic
history and limit freedom in favor of collectivism, we erode the resources available for the
next generation to make their own choices and build their own wealth. Societies allowing
people to exchange the value of their own resources and skills, without the domination of
business or political elites, have succeeded. If we build small-scale strength through
individual freedom of choice, we build up resources for the next generation to thrive.
Friedrich Hayek, an economist whose ideas helped topple the Soviet Union, stated a
challenge that we as homeschool parents can adopt as our own: “We must make the
building of a free society once more an intellectual adventure, a deed of courage. . . .
Unless we make the philosophic foundations of a free society once more a living intellectual
issue, and its implementation a task which challenges the ingenuity and imagination of our
liveliest minds, the prospects of freedom are indeed dark. But if we can regain that belief in
the power of ideas . . . the battle is not lost.”
So your child wants to study economics but you’re not sure where to start? Join Mike Sims
on SchoolhouseTeachers.comthe curriculum arm of The Old Schoolhouse® Magazine, for a
fun and creative approach to a difficult subject. Mike has analyzed and taught economics
through units with titles such as these:
Gamma Ray Economics
Ski Slope Economics
Stop by and take a look at all Mike Sims has to offer on SchoolhouseTeachers.com.
Mike Sims is the author of Nanocivics: Liberating the DNA of Civilization. He and his wife,
Sarah, homeschool their seven children. Mike brings twenty years of experience in local
government leadership and the eye of a trained economist to the question of cities and
families. He has a B.S. in public affairs from Indiana University and a master’s degree in
economics from the University of Texas at Arlington. He was featured in the award-winning
documentary Subdivided: Community and Isolation in America.
Copyright 2014, used with permission. All rights reserved by author. Originally appeared in
the Annual Print 2014 issue of The Old Schoolhouse® Magazine, the family education
magazine. Read the magazine free at www.TOSMagazine.com or read it on the go and
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