28 December 2010

Simple Economics

it really is this easy to understand

so anyway, here's the sitch: I've been involved in a running debate with the progressive wing of the family over the cost of health insurance. I'm told, over and over, that ObamaCare is a big f'n deal and I should be grateful that the Democrats are looking out for my best interest. Overlay this with the fact that our COBRA coverage is about to expire and we've been shopping for health insurance for the past several months. It's a topic of keen interest around Casa de Miguel.

The ObamaCare "pre-existing condition" provision and requiring insurers to cover "children" up to the age of 26 (that recently went into effect) were touted it as a victory for working people, courtesy of President Obama and the all-compassionate Democrats. I was branded a fool for my stubborn insistence that ObamaCare was anything less than a good thing.

We finally decided on a policy, and TheMissus™ was shocked when the final price was 23% more than this initial quote. "It all those greedy insurance companies. They want Obama to fail, so they're raising the prices to screw the working class" TheMissus™ exclaimed. (Yes, her "logic" escaped me, too. Actually, she went on for several days on the topic. Decorum prevents me from quoting her verbatim.) When I could get a word in edge-wise, I responded with a mashed-up paraphrase of Hanlon's Razor and BlackFive's Uncle Jimbo:

"Never attribute to malice that which is adequately explained by employing the antiquated, dead white male concept of doing the fucking math"
When she finally paused to catch her breath, I said "No, it's just simple economics. Gather 'round, children and I'll put you some knowledge." So the whole family plopped down on the couch to listen and I began:

"It was a dark and stormy night....." sorry, wrong story (ed)

"Suppose you're the owner of a restaurant, and it's a 'all-you-can-eat' buffet. You charge $10 per growd-up and they can eat all they want and their kids under 12 years old eat for free. Got it?"

There were general nods of understanding from the kids. TheMissus™ rolled her eyes.

"Now say the Government comes in and tells you that now you have to let kids under 18 years old eat for free."

At this point, TheMissus™, being both progressive and oh so "open-minded", stormed out of the room in a huff. Out of the room, but not out of ear-shot.

Twin the Youngest paused for a moment then said "Teenagers eat a lot more than little kids"

"Yes, usually that's true" I replied. "Not always, but usually a teenager will eat more than a 10 year old."

"A lot more" said Twin the Eldest.

"Here is the question" I said. "Now that you have to let teenagers eat for free, how much do you charge each customer for the 'all-you-can-eat' buffet?"

Twin the Youngest piped up: "You said that teenagers eat for free, so you wouldn't charge them anything."

"Good point" I said. "What would you charge the parents, the growd-ups?"

TheBoy™ leapt to his feet and said "A hundred dollars!" [My heart swelled with pride and I had to wipe away a tear. That's my boy!] "Well, buddy, a hundred dollars is a lot to pay for a meal, even if it is all you can eat" I said. "Good thinking, though."

"I'd still charge $10, but they could only have one plate of food" said Twin the Eldest.

I replied "Nope, you can't do that. You have an 'all-you-can-eat' restaurant and the Government says that you can not change anything about your business, except now you have to let teenagers eat for free."

After a long pause, Twin the Youngest said "But that's not fair". As soon as she said it, she knew what I would say.

"Fair is a weather forecast. How much would you charge?"

Twin the Eldest said $20, Twin the Youngest said $15. TheBoy™ said $30.

"OK" I said. "Why would you charge more?"

Both girls started saying the same thing at the same time. They're twins. It happens.

"Because teenagers eat a lot more than little kids and it will use up more of the food so you would have to charge more."

"Right," I said "your costs would go up because you have to provide more food." Around this time the snickering and snide commentary coming from the other room had all but stopped. TheMissus™ had become uncharacteristically silent.

We talked about it for a few more minutes and I was pleased with their grasp of the subject. The girls are eleven, TheBoy™ is six. All three of them seemed to have an intuitive understanding of Econ 101, and before the conversation was over they were offering up solutions to the question, such as "selling cheaper food" (the concept of reduction of quality), and "only letting people eat there once a week" (rationing).

It really is that simple, I'm surprised that more adults cannot (or will not) recognize the basic concepts of economics.

more soon

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At 15 January, 2011 05:27, Anonymous ed said...

Came here from Ace 'O Spades. Good story. Good kids. Smart.


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