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The Essential Workshop for Teaching Economics

ECONOMICS IN ONE DAY

ECONOMICS IN ONE DAY PAGE 1

L U D WI G V ON MIS ES


Economics in One Day

Facilitator Guide

Compiled and written by:

Jason Riddle

Dan Sanchez

FEE.org/Courses

The Foundation for Economic Education (FEE) is a non-political, non-profit, tax-exempt educational foundation and

accepts

and legal principles of a free society.

This work is licensed under a Creative Commons Attribution 4.0 International License, except for material where

copyright is reserved by a party other than FEE.

http://creativecommons.org/licenses/by/4.0/


I N T R O D U C T I O N

W O R K S H O P O V E R V I E W

The free market, rooted in economic freedom, is an essential part of a thriving society. It advances cooperation and

harmony, promotes strong personal character, and is the foundation of economic and social progress. Yet, millions of

students are totally unaware of the wonders and the importance of the free market, because they are never exposed to

the economic way of thinking.

Each year, FEE delivers nationwide seminars on the importance of economic freedom. Students who attend one of the

seminars often s

Economics in One Day is a ready-to-go workshop that provides an inspiring introduction to the principles of the

market economy. It is a 3-5 hour, self-paced learning experience with a focus on the humane value of free markets.

Best of all, this workshop is designed to be delivered by non-economists using interactive, hands-on activities and

guided discussions. This workshop guide contains all the instruction you need to host Economics in One Day for your

local audience.

During this 3-5 hour self-paced learning experience, your group will discover:

An introduction to key economic concepts

An inspiring vision of the market economy

The challenges of centralized economic planning

The key role of the entrepreneur in society

The connection between economic freedom and personal character

If you had one day to teach

someone about economics,

what would tell them?


G E T T I N G T H E M O S T F R O M T H I S W O R K S H O P

The workshop is designed to last 3-5 hours depending on the length of discussion you allow and whether you

use optional video resources.

The workshop is best suited for an audience size of 16-64, however the activities can be run with as few as 8

participants and can be expanded for larger groups.

The workshop is interactive. It is a hands-on introduction to economics and the market process.

Neither participants nor facilitators need to have any prior background in economics to enjoy this workshop.

Economics in One Day Online Course to learn more about

key concepts and learning objectives prior to delivering the workshop. This 4-hour online course is also great

for students to reference after experiencing the Economics in One Day workshop.

I S T H I S W O R K S H O P R I G H T F O R M E ?

Economics in One Day is designed to be a personally relevant learning experience that complements existing student

and teacher goals. These materials are excellent for:

Organizers of community groups (clubs, chapters, meet-ups, etc.) looking for lessons and activities around

economics, personal character, and civil society

Teachers seeking to complement learning objectives taught in introductory-level economics, business,

history, and civics classes

Students interested in learning more about the economic way of thinking

Parents wanting their students to get the most out of life through making better choices and better

understanding the tradeoffs involved with those choices

http://courses.fee.org/courses/economics-in-one-day


P R E P A R I N G T O F A C I L I T A T E T H E W O R K S H O P

This workshop guide contains everything you need to deliver Economics in One Day. Before the workshop please

follow the steps below to prepare for a successful program.

Step 1: Please first review and familiarize yourself with the resources provided.

Resources Provided

Facilitator Guide: Contains all instructions needed to conduct a workshop for your local audience.

Participant Guide: Contains all instructions needed for participants to follow along during the workshop.

Activity Materials: All physical materials you will need to print to conduct the group activities during the

workshop.

Companion Guide: A brief write-up and collection of articles and videos to serve as an optional resource for

facilitators that provides an overview of key concepts covered in the workshop, and also for participants to

reference after experiencing the workshop.

Feedback Surveys: Pre- and Post-workshop survey questions to collect information about the program and

measure program success.

Step 2: Print and prepare Activity 1 & 2 Materials for the appropriate number of participants in your workshop

according to the instructions provided. The approximate time needed to complete is 20 minutes.

Step 3: Review and prepare Required Materials and Required Pre-activity Preparation for Activity 3 The Trading

Game.

Step 4: [Optional] This workshop includes optional video and online content. If you would like to use video, confirm

your venue has the appropriate A/V setup and internet connection prior to hosting your workshop.

Step 5: [Optional] Some facilitators may wish to review the Companion Guide and/or Online Course prior to

delivering the workshop for an introduction to key concepts and learning objectives. The approximate time needed to

complete all lessons in the Companion Study Guide is 4 hours.

D E L I V E R I N G T H E W O R K S H O P A S A F A C I L I T A T O R

Here is what you need to know to smoothly deliver the workshop on the day of the program.

Room Setup: You will divide your audience into two teams of eight (Blue and Orange) for Activities 1 & 2. For larger

group sizes, you can assign participants to play the game in pairs or create multiple teams for each color. Arrange

tables and chairs accordingly in your event space to easily conduct these activities.

Video Setup: [Optional] For facilitators projecting optional video and online content to the group, prepare A/V

technology and queue video links prior to starting the workshop.

F a c i l i t a t o r T i p : Be sur e to c om pl et e t he pr e - a ct iv i t y pr e p ara t i o n for a l l ac t i v i t ie s p r i or t o

beg i nn i ng w ork s ho p .



Activity Setup: Before the workshop, arrange the materials for Activities 1, 2, and 3.

Step 1: Separate the Blue and Orange team materials printed for Activity 1 and 2. Place materials, grouped by team

color, in an accessible space in the room. These will be handed out at the start of Activity 1. The Blue and Orange team

should each have the following: 8 full page picture cards for Activity 1, and 4 Pencil Production sheets, 8 complete sets

of Pencil Components cards, and 90 Certificates of Service for Activity 2.

Step 2: Place the Land, Labor, and Capital Transaction Ledgers on an accessible table in the room. This can be on the

same table as the Blue and Orange team materials. Place the individually cut Land, Labor, and Capital cards just behind

each corresponding Transaction Ledger.

Step 3: Separate the Blue and Orange team printed Rule Cards for Activity 2 and place with Facilitator materials. You

will distribute these at the beginning of each round during the Activity 2. Place the Level 1, 2, and 3 Badges next to the

Rule Cards. You will also distribute these after each round in Activity 2.


Using this guide: Here are a few tips for using this Facilitator Guide effectively

As the Facilitator, you should read aloud all lesson introductions, activity instructions, discussion questions,

key concept reviews, and activity recaps as you work through the activities with your group.

Any text that appears underlined like this is an empty space in the Participant Guide for students to fill in the

blank during the workshop.

Other text that is written in orange like this is for your reference and does not appear in the Participant Guide.

Answers to discussion questions are written in orange. These should only be read after participants have a

chance

provided answers.

F a c i l i t a t o r T i p : Yo u wi l l f ind t i p s t ha t l oo k l i k e th i s t hro ug ho ut th e g uid e . T he s e ar e for

yo ur re f ere n ce o nly a nd s ho uld n ot be r e ad a l o ud t o th e gr ou p.


C O N T E N T S

Introduction ................................................................................................................................................................................... 3

Contents .......................................................................................................................................................................................... 8

Economics in One Day ................................................................................................................................ 9

Introduction ............................................................................................................................................................................ 11

Activity 1 Picturing the Process to Make a Pencil .......................................................................................................... 17

Activity 2 Producing Progress ........................................................................................................................................... 29

Activity 3 The Trading Game ............................................................................................................................................ 49

Closing Discussion ................................................................................................................................................................. 56

................................................................................................................................................................................ 59


E C O N O M I C S I N O N E D A Y

Welcome

Welcome to Economics in One Day

boring as you might have heard.

In fact, economics can be exciting and inspiring. Economics is about life, about how people can live together in

friendship and harmony, and about growing rich and fighting poverty at the same time.

ese ideas through a combination of activities and discussion. By the end of this session, you

will be able to explain how economic freedom empowers and uplifts the people of the world.

Overview

Today we will learn about some important economic concepts while playing three separate but related games. In the

first game, we will work together in teams to piece together an illustrated story that introduces a few fundamental

economic concepts. In the second game, we will simulate how the goods and services we need are produced using a

simplified representation of an economy. In the third and final game, we will reinforce the concepts learned

to

real prizes you get to keep. So pay close attention during the presentations and discussions, because the better you do

in the first two

Schedule

Welcome and Opening Discussion (30 mins)

Activity 1 - Picturing the Process to Make a Pencil (45 mins)

Activity 2 - Producing Pencils (60-120 mins)

Activity 3 - Trading Game (45 mins)

Closing Discussion (30 mins)

F a c i l i t a t o r T i p : E co n om ic s i n On e D ay . R e ad t he

fo l l owi ng a l o ud t o yo ur grou p t o o p e n t he wo rk sh o p.


Concepts and Terms

through it. Please note any terms you do not recognize.

Economics

Scarcity

Choice

Subjective Value

Tradeoffs

Incentives

Voluntary Exchange

Gains from Trade

Specialization and Division of Labor

Emergent Order (Spontaneous Order)

Institutions

Property Rights

Rule of Law

Knowledge Problem

The Seen and Unseen

Entrepreneurship

Our Objectives Today

After completing this workshop, you will be able to:

Recognize key economic concepts

Understand the fundamentals of how the market works

Describe the challenges of centralized economic planning

Discuss the important role of the entrepreneur in society

Understand the connection between personal character, free markets, and civil society

F a c i l i t a t o r T i p : A l l ow t he gro u p a br ie f m i nu te to lo o k t hr oug h th e t er ms.


I N T R O D U C T I O N

Description

Time Required

30 min

The goal for today is to learn how the market empowers you to increase your happiness by increasing the happiness

of others. Economics is a toolbox that helps us figure out how we can best do that.

Shared Values

People are very different, but we have a lot of basic things in common. Think back to when you last visited a busy

public place. It could have been a mall, a park, a city street, a movie theater, or even sitting in traffic. Now most people

you saw around you that day were basically decent. Like you, they want their families, communities, and society in

general to be happy. They also hate to see people suffer, and want people in need to get help. We all share these basic

goals. We all want prosperity for humanity.

What qualities does a society need in order to prosper and be truly happy? I bet there are certain basic qualities that

Prosperity

Cooperation

Harmony

Order

Opportunity

Responsibility

Freedom

Character

Community

Material well-being

Peace

Tolerance

Mutual Respect

Compassion

Benevolence

Honesty

Fairness

Justice

Equality

Productivity

Integrity

F a c i l i t a t o r T i p : M a ke a l i s t o f a t l ea s t 10 i m p ort a nt va lu es i de n t i f i ed by th e g ro up . W e

wi l l c om e b ac k to t h i s l i s t a t t he e nd of t h e w o rks h o p. B e l ow i s a s am pl e l i s t th a t m ig ht

he lp ge n er at e d is cu s s i o n . Be s ure t o add t he b old ed i t em s be low y our s e l f i f t he par t ic i p a nt s

F a c i l i t a t o r T i p : I n t h i s o pe ni ng d is cu s s i o n, we wi l l d ef i ne ec on o mic s a nd b eg i n t o d i sc u ss

why ec o n omi c s m at t ers for o ur l iv e s .


the time over political and

best way to reach these goals. What are the rules and policies we should live by to make the world a better place? What

are the rules and policies that would only make things worse?

Well, the good news is that economics can help us answer these questions! Economics can help us understand how

best to achieve our shared values.

Virtues and Character

You may have noticed that many of the values we have listed are good personal qualities. Good personal qualities are

Is strong character something you are born with or something you can develop?

to develop strong character.

Throughout this workshop, we will consider whether certain social arrangements encourage or discourage the

development of virtue and character.


Choosing Between Paths

Throughout history, people have had different ideas about how to achieve a prosperous society. These ideas can be

grouped into two broad approaches. Some think that centralized economic planning (or central planning) is the best

path to achieve our shared values. Some think that the free market economy (or the free market) is the best path toward

those same goals.

Think of our shared values as a destination that we all want to reach together: say the top of a mountain. Now think

of the free market and central planning as different paths we can take to try to reach the mountaintop. Now some

paths lead safely to your destination, while other paths are dangerous or even lead to a dead end. Does the free market

lead to prosperity or poverty? How about central planning? Economics can help us answer these questions and help

us choose the best path forward together. This is why it is a wonderful idea to learn about economics.

Understanding the Past

In order to decide where we want to go, we must firs

to helping us choose the path in front of us, economics can also shine a light on the path behind us.

In particular, it can explain why some people were either wealthy or poor during certain periods in history.

Let me ask you a question. Would you rather be fabulously wealthy 400 years ago or making minimum wage in the

Facilitator Tip: Be sure to include servants, palaces, etc.

-level workers that did not even exist 400 years ago. Facilitator Tip: Be sure

to include both relatively basic (flushing toilets, electric lighting, etc) and advanced (smartphones, the internet,

modern medicine, etc) technology.

rather be an entry-level worker today.

It is plain to see that, at least in America, Europe, and many other places in the world, the vast majority of people are

far wealthier than they were in earlier times. From the dawn of history for thousands of years, most people were

desperately poor and never very far away from starvation. Then about two-hundred years ago, something changed.

Since then, with every passing year, the average person became better fed, better clothed, and better sheltered. And

with every new decade, people had access to new technology that would have seemed like magic before.

The big question is: What changed? What deserves the credit for the new rising prosperity? Should the free market get

the credit or central planning? Economics can answer this question as well.

Optional Video Introduction: Over the past 200 years the rich have indeed become richer. But in relative terms,

economic growth has mostly helped

wealth creation of the past two centuries.

VIDEO: Hans Rosling's 200 Countries, 200 Years, 4 Minutes - The Joy of Stats (BBC, 4:47 min)

[http://at.fee.org/1R0xSDB]

https://www.youtube.com/watch?v=jbkSRLYSojo


According to the World Bank l

end of 2015

During the current era of globalized trade, we have seen the largest reduction in poverty in world history. Standards

-off countries catching up with the richest countries

in terms of human well-being.

Optional Video Introduction:

prosperity.

VIDEO: The Hockey Stick of Human Prosperity (Marginal Revolution University, 4:54 min)

[http://at.fee.org/1Oml1kM]

http://www.bbc.com/news/world-34440567

https://www.youtube.com/watch?v=t9FSnvtcEbg


The Free Market vs. Central Planning

Will human prosperity continue to rise: maybe even faster? Or will it come to a stand-still and even decline? That is

up to you and your generation. It depends on the choices you all make in the future.

Again, the basic choice is between free markets and centralized economic planning. Which of these two approaches is

down to four of

our shared values and their opposites.

Prosperity vs. Poverty

Harmony vs. Conflict

Cooperation vs. Isolation

Order vs. Chaos

Central planning occurs when a few people design, manage, or regulate certain

economic decisions for the many. For example, does this aluminum go toward making cars or soda cans? How should

people pay for the health care they need? Should we invest more in either schools or hospitals? What should be the

minimum wage employers are allowed to pay workers? Who should be allowed to start a hair braiding business? Under

the central planning approach, these kinds of decisions are made by a few people: namely, the government. In some

societies, the government may attempt to make complicated economic decisions based on the will of the people. In

others, the decisions may be made by an authoritarian ruler. In both cases, economic affairs are centrally orchestrated

in an attempt to accomplish a master plan.

Now you might think this arrangement would lead to order, harmony, and cooperation. After all, everything follows

the same plan. And so you might think this system would be very efficient, leading to greater prosperity.

free market, there is still economic planning, but each person plans for him or

herself. There is no central plan or design. All economic decisions are personal and voluntary

people can do whatever they want. Everybody must follow certain basic rules. They must respe

personal liberty and private property. Within those rules, people are free to follow their ambitions and plan for the

future they want. Nobody is forced to follow the plans of a few powerful people. Economic decision-making is the

result of voluntary, private cooperation. Whether aluminum goes toward making cars or soda cans is not decided by

some central planner, but by the resource owners alone (although their decisions are influenced by others, especially

their customers).

You might think this arrangement would lead to chaos, conflict, and isolation. Why would people cooperate if there

was nobody directing them to work together? Is the free market unfair? Would some people benefit at the expense of

others? Would those with money and power get richer while the poor get poorer? Does market competition destroy

community? How would a society even know what and how much to produce if there is no central plan?

that tells us about the free market vs. central planning.

F a c i l i t a t o r T i p : Wri te or ang e w ord s o n t he b o ard .


Civil Society

But, before we move on to our first activity, a note about community. Not everything in social life is about mass

production. Civil society is also hugely important. Civil society includes all voluntary associations: the family,

religious groups, charities, clubs, etc. Civil society provides help and security for the individual. So when we compare

social cooperation under different economic systems, we must also consider civil society. Does civil society thrive best

in the free market or under central planning?


A C T I V I T Y 1 P I C T U R I N G T H E P R O C E S S T O M A K E A P E N C I L

L E ON AR D E . RE A D , I , P E NC I L : MY FA MI LY T RE E

Description

sic essay I, Pencil. It may seem like a simple

object, but a pencil is the result of a coordination of thousands of activities by people who have never even met. What

is perhaps more amazing, is the absence of any single mastermind directing these people how to coordinate their

wonders made possible by cooperation through voluntary exchange.

Time Required

45 mins

F a c i l i t a t o r T i p : Af t er t he

wi l l th e n wa tc h a nd d is cu s s a br ie f v id e o f rom t h e C om pe t i t iv e E nt er pr i s e I n st i t ut e

http://fee.org/library/detail/i-pencil-audio-pdf-and-html


Facilitator Overview

Pre-Activity Discussion

What are the parts of a pencil? What jobs, materials, and tools were involved in making those parts? Now consider the

production of those materials and tools. What was needed to make them?

take 5 minutes to brainstorm all the jobs, materials, and tools involved in produ

yourselves to only thinking of the pencil factory. Think about the where the wood came from. How did it get to the

factory?

As complicated as all

Every single step in the pencil-making process involves the work and skill of many people. Millions of people have

each devoted only a few seconds of their time all toward one purpose: the creation of a single pencil. Would you call

that order? Cooperation? Does the process sound harmonious?

International Department of Pencils directing the whole thing. Pencil production goes on every day without central

planning, and yet is orderly, cooperative, and harmonious.

Now think about all the things you use on any given day. Many of those things are more complicated than a pencil,

and most of them are also the result of millions of people cooperating without central direction.

So, can order, cooperation, harmony, and prosperity arise out of the free market?

F a c i l i t a t o r T i p : Fo r t h is ac t iv i t y , y ou wi l l d i v id e th e gr ou p in t o tw o t e am s (B l ue a nd

Ora ng e) . E ac h t e am w i l l be t a sk ed w it h pu tt in g a s e t of p ic tur e s i n t h e co rre ct orde r t o

te l l t he s t ory of I , Pe nc i l . Th e B lu e t e am wi l l s i mul at e a s i m pl i f ied ve rs io n of t h e ma rk et

pr oc es s w her e t he l oc a l k no wl edg e of pr ic es he lp s i ndi v idu al s c oor di n at e t he ir a c t iv i t i es

ne ed s to b e u se d t o me et t he ch al le ng e s of a co mp le x e c on om y. Th e Ora ng e te am wi l l

co ord in a te th e ac t i v i t ie s of th e pe n ci l ma ki ng pr oc es s w i t h ou t t he l oc a l kn owl edg e of

pr i ce s (w i t h ou t t he c lu es) . Af ter th e t e am s h a ve c orr ec t ly ord er ed t he pi c t ur es , te a m

mem b ers w i l l re ad a lo u d t h e n arra t iv e o n t he b ac k of e ac h pi c t ur e to i ntr od uc e th e s t ory

a nd l es s o n of I , P en ci l .

F a c i l i t a t o r T i p : A l l ow s tud e nt s to a n swer .

F a c i l i t a t o r T i p : A l l ow s tud e nt s to br ai n st orm . Rev ie w re s u l t s to ge th er .


What if pencil production was centrally planned? Would it work as well as in a free market? The next activity will help

us think about that question.


Activity Instructions

1. Divide the group into teams of 8. Assign half of the teams as Blue team. Assign the other half as Orange team.

Note for different group sizes: You can assign participants to play the game in pairs of two or create multiple

teams depending on your group size. If you only have 8 participants, have them try the activity as the Orange

team first, and then they play as the Blue team.

2. Shuffle and Distribute one set of Blue pictures to each Blue team, and one set of Orange pictures to each

Orange team.

3. Read the following instructions aloud to the group:

a. There is no talking allowed during the first part of this activity.

b. Each person (or pair) will take one picture from the set and to study the picture without sharing any

information on the back of the page with anyone else in the group.

c. On the front of your paper is a picture. On the back is a clue and a brief narrative. The goal of this

game is to put the pictures in the correct order to tell the story of how an ordinary pencil is made.

Here is the catch: You are NOT allowed to talk or communicate with anyone on your team other

than to show them your picture. You are not allowed to share the clue on your paper with anyone

else.

d. correct order as quickly as possible

by repositioning yourselves into order. The first team to arrange their teammates who are holding

the pencil production steps in the correct order telling the story of how a pencil is made will win 1

extra Certificates of Service which will be used later to purchase prizes from the Marketplace." Here

is your only hint: The picture of the family tree is the first picture in the story.

e. On the Orange team, the person holding the picture of the family tree is the Central Planner. He or

she is in charge of putting the rest of the pictures in the correct order. Team members must come

up to the Central Planner one at a time to share their clue. The Central Planner will then direct each

team to correctly order the pictures in the story.

f. On the Blue team you will each use the clues on the back of your paper to try to properly order

yourselves as a group. Remember, you are not allowed to share your clue with others on your team.

g. When you think your group has your pictures in the correct order, please raise your hands.

Remember, there is no talking or sharing clues allowed.

h. Ok, ready? Begin!

4. Monitor the teams. When the first group raises their hands, tell the other groups to freeze while you verify

the correct order (Answer Key below).

5. Once the correct order has been verified, tell the other groups to order themselves to match the picture order

from the winning group.

6. Ask the winning team (should be the Blue team) to read aloud the now correctly ordered narratives on the

back of their pictures to introduce the key concepts for the day.

F a c i l i t a t o r T i p : F ol lo w th e i n str uc t i o ns be low to l e ad A ct i v i ty 1 . On ly re ad th e

in s tru ct io n s a l oud w h en in dic a te d .


7. Ask the other team (should be the Orange team) to read aloud the now correctly ordered narratives on the

back of their pictures once the Blue team has completed.

8. After the Blue and Orange teams have read their cards, give each participant 4 Certificates of Service for

helping to tell such a beautiful story! Give the winning team 1 extra Certificate of Service per participant for

skillfully ordering their pictures first.

Answer Key

1

2

3

4

5

6

7

8

F a c i l i t a t o r T i p : Be l ow is th e a n sw er ke y for Ac t i v i ty 1 s h owi ng th e pr o p er ord er of

p i c t ure s .


Narrative Cards and Clues for Activity 1 Picturing the Process to Make a Pencil

Blue Team (Simulating Market Process):

Card 1

Clue: Your picture our story begins, the next is a picture of graphite mining equipment.

Narrative: I am a lead pencil the ordinary wooden pencil familiar to all boys and girls and adults who can

read and write. I, Pencil, simple though I appear to be, merit your wonder and awe, a claim I shall attempt to

prove. I have a profound lesson to teach. And I can teach this lesson better than can an automobile or an

airplane or a mechanical dishwasher because well, because I am seemingly so simple. Simple? Yet, not a

when it is realized that there are about one and one-half billion of my kind produced in the U.S.A. each year.

Card 2

Clue: Your picture follows that of the family tree. After mining, the graphite is loaded into a truck to carry.

Narrative: My family tree begins with what in fact is a tree, a cedar of straight grain that grows in Northern

California and Oregon. Now consider all the saws and trucks and rope and the countless other gear used in

harvesting and carting the cedar logs to the railroad siding. Think of all the persons and the numberless skills

that went into their fabrication: the mining of ore, the making of steel and its refinement into saws, axes,

motors. Why, untold thousands of persons had a hand in every cup of coffee the loggers drink!

Card 3

· Clue: After the graphite is mined it is put in your truck. Next a tree is cut down with a saw if you have any

luck.

· Narrative: The logs are shipped to a mill in San Leandro, California. Can you imagine the individuals who

make flat cars and rails and railroad engines and who construct and install the communication systems

needed? Thousands more were involved in creating and transporting these materials.

Card 4

· Clue: Your picture is between the trucks two in number. The first filled with graphite and the second with

lumber.

· Narrative: Consider the millwork in San Leandro. The cedar logs are cut into small, pencil-length slats less

than one-fourth of an inch in thickness. These are kiln dried and then tinted. How many skills went into the

making of the tint and the kilns, into supplying the heat, the light and power, the belts, motors, and all the

other things a mill requires? Yes, and included among my ancestors are the men who poured the concrete

for the dam of a Pacific Gas & Electric Company hydroplant w

F a c i l i t a t o r T i p : B e lo w is a l i s t o f t h e c l u es a n d n arr at i ve s wr i t t e n on t he b ac k of e ac h

pi c t ure f or Ac t i v i ty 1 - P ic tur in g t he Pr oc e s s t o Ma ke a Pe n ci l . T he s e c ard s t e l l t he s t or y

of I , P en ci l , a c la s s i c e s s ay b y Le o nar d Re ad , l i ght ly ed i te d h ere f or a c ce s s i b i l i t y . B e s ur e

to re ad a l o ng wi th t he s tud e nt s , a nd h e l p t h em pr on ou n ce a ny t ec h ni ca l wo rds t h ey h av e

d i f f ic u l ty w i t h . I nfor m th e s t ude n t s t h at t h i s wa s wr i t te n i n 1958 , a n d t ha t th e c urre n t

co mp le xi ty a nd qu a nt i t i es i nv ol v ed i n p en ci l pr odu ct io n ar e e v en m ore a st ou nd i n g!


Card 5

· Clue: Your picture comes after the tree is cut with a saw blade and before the picture of plans for the pencils

to be made.

· Narrative: Once in the pencil factory, each slat is given eight grooves by a complex machine, after which

another machine lays leads in every other slat, applies glue, and places another slat atop a lead sandwich,

-

Card 6

· Clue: In this story, your picture comes after the lumber truck and before the erasers are cut.

· it contains no lead at all is complex. The graphite is mined in Sri Lanka.

Consider these miners and those who make their many tools and the makers of the paper sacks in which the

graphite is shipped and those who make the string that ties the sacks and those who put them aboard ships

and those who make the ships. Even the lighthouse keepers along the way assisted in my birth.

Card 7

· Clue: Here is your hint, your picture comes before the pencil is completed but after the design blueprint.

· Narrative: The graphite is mixed with clay from Mississippi in which ammonium hydroxide is used in the

refining process. After passing through numerous machines, the mixture finally appears as endless

extrusions as from a sausage grinder cut to size, dried, and baked for several hours at 1,850 degrees

Fahrenheit. To increase their strength and smoothness the leads are then treated with a hot mixture which

includes wax from Mexico and hydrogenated natural fats.

Card 8

· Clue: Right after the erasers are cut to the right size, yours is the final picture in this pencil making enterprise.

· Narrative: My cedar receives six coats of lacquer. Do you know all the ingredients of lacquer? Who would

think that the growers of castor beans and the refiners of castor oil are a part of it? They are. Why, even the

processes by which the lacquer is made a beautiful yellow involve the skills of more persons than one can

enumerate!

Orange Team (Simulating Central Planning):

Card 1

· Clue: Your picture our story begins, the next is a picture of graphite mining equipment.

·

How do you make resins and what, pray, is carbon black? My bit of metal the ferrule is brass. Think of

all the persons who mine zinc and copper and those who have the skills to make shiny sheet brass from these

products of nature. Those black rings on my ferrule are black nickel. What is black nickel and how is it

applied? The complete story of why the center of my ferrule has no black nickel on it would take pages to

explain.

Card 2

· Clue: Your picture follows that of the family tree. After mining, the graphite is loaded into a truck to carry.


·

rubber-like product made by reacting colza oil from Indonesia with sulfur chloride. Rubber, contrary to the

common notion, is only for binding purposes. The pumice comes from Italy; and the pigment which gives

Card 3

· Clue: After the graphite is mined it is put in your truck. Next a tree is cut down with a saw if you have any

luck.

· Narrative: Does anyone wish to challenge my earlier assertion that no single person on the face of this earth

knows how to make me? Actually, millions of human beings have had a hand in my creation, no one of

whom even knows more than a very few of the others. Now, you may say that I go too far in relating the

picker of a coffee berry in far-off Brazil and food growers elsewhere to my creation; that this is an extreme

position

of the pencil company, who contributes more than a tiny, infinitesimal bit of know-how. From the

standpoint of know-how the only difference between the miner of graphite in Sri Lanka and the logger in

Oregon is in the type of know-how. Neither the miner nor the logger can be dispensed with, any more than

can the chemist at the factory or the worker in the oil field.

Card 4

· Clue: Your picture is between the trucks two in number. The first filled with graphite and the second with

lumber.

· Narrative: Here is an astounding fact: Neither the worker in the oil field nor the chemist nor the digger of

graphite or clay nor any who mans or makes the ships or trains or trucks nor the one who runs the machine

that does the knurling on my bit of metal nor the president of the company performs his singular task because

he wants me. Each one wants me less, perhaps, than does a child in the first grade. Indeed, there are some

among this vast multitude who never saw a pencil nor would they know how to use one. Their motivation is

other than me. Perhaps it is something like this: Each of these millions sees that he can thus exchange his

tiny know-how for the goods and services he needs or wants. I may or may not be among these items.

Card 5

· Clue: Your picture comes after the tree is cut with a saw blade and before the picture of plans for the pencils

to be made.

· Narrative: There is a fact still more astounding: The absence of a master mind, of anyone dictating or forcibly

directing these countless actions which bring me into being. No trace of such a person can be found. Instead,

we find the Invisible Hand at work.

Card 6

· Clue: In this story, your picture comes after the lumber truck and before the erasers are cut.

· Narrative: I, Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite, and so on. But to

these miracles which manifest themselves in Nature an even more extraordinary miracle has been added: the

configuration of creative human energies millions of tiny know-hows configuring naturally and

spontaneously in response to human necessity and desire and in the absence of any human masterminding!


Card 7

· Clue: Here is your hint, your picture comes before the pencil is completed but after the design blueprint.

· Narrative: If one is aware that these know-hows will naturally, yes, automatically, arrange themselves into

creative and productive patterns in response to human necessity and demand that is, in the absence of

governmental or any other coercive master-minding then one will possess an absolutely essential

ingredient for freedom: a faith in free people. Freedom is impossible without this faith.

Card 8

· Clue: Right after the erasers are cut to the right size, yours is the final picture in this pencil making enterprise.

· Narrative: The lesson I have to teach is this: Leave all creative energies uninhibited. Merely organize society

tacles the best it can. Permit

these creative know-hows freely to flow. Then gaze upon the wonders that follow. Watch as millions, without

even meeting one another, cooperate to efficiently produce every single item in a great flood of useful goods

and services. I, Pencil, seemingly simple though I am, offer the marvel of my creation as testimony to the

power of freedom.

Optional Videos and Article

essay.

VIDEO: I, Pencil: The Movie (Competitive Enterprise Institute, 6:32 min)

[http://at.fee.org/1WtBN3N]

ARTICLE: I, Pencil: My Family Tree - Leonard Read (FEE.org, 5 pages)

[http://at.fee.org/1yAq6Jf]

Here is an additional optional video that shows how difficult it would be to produce a basic sandwich without

economic cooperation:

Video: How to Make a $1500 Sandwich in Only 6 Months (How To Make Everything, 3:44 min)

[http://at.fee.org/1siuArB]

F a c i l i t a t o r T i p : I f y ou do s h ow H ow t o M ak e a $1500 Sa nd wi ch, a s k t h e p ar t ic i pa n t s ho w

( u sed pr odu ct s a l r e ady cre a te d t hro ug h e c on om ic

co o per a t i o n) .

https://www.youtube.com/watch?v=IYO3tOqDISE

http://fee.org/library/detail/i-pencil-audio-pdf-and-html

https://youtu.be/URvWSsAgtJE


Post-Activity Discussion

.

1. Between the blue team and the orange team, which represented the free market and which represented central

planning?

a. The blue team represented the free market and the orange team represented central planning..

2. The blue team had no central control, and yet it beat the orange team which did. Why do you think that is?

a. In the blue team, knowledge and decision-making was spread out among all the team members. Each member

was free to act according to his or her special knowledge to coordinate with others on the team.

b. In the orange team, decision-

access to the relevant knowledge which made coordination difficult.

c. The knowledge of the specific needs of people in society is spread out in tiny bits throughout an economy

ems all

central planners face is how to address the inescapable challenge of the knowledge problem.

3. This game was extremely simple and stable compared to the real world challenges of pencil production. The real

world is not only far more complex, but it is constantly changing. Do you think this makes the knowledge problem

better or worse for a central planner? If there was a central planner in full control of pencil production, what do you

think would be the result? Why?

a. Greater complexity would make the knowledge problem worse.

b. Each person has unique knowledge of his or her needs amidst constantly changing circumstances. It is

impossible for the central planner to access the special knowledge possessed by the millions of individuals in

mily tree. And it is even more impossible for the central planner to constantly update that

knowledge fast enough to keep up with constantly changing circumstances.

c. In this activity it was difficult for the central planner to organize the group, but in a complex economy it is

literally impossible for the central planner to access the special knowledge possessed by the millions of

pencil production it is not likely that a pencil would ever get produced as effectively and inexpensively as it

is today in the market.

4. The activity of the blue team might have seemed chaotic. Nobody was in charge. And yet it was actually very orderly,

cooperative, harmonious, and effective. It worked. When order arises (or emerges) out of the interactions of the many

without a central plan imposed by the few, that is called emergent order, or spontaneous order. Other examples of

spontaneous order include language, manners, morals, and fashion.

If you sense the audience is ready to, let them discuss how the above qualify as

spontaneous order.

F a c i l i t a t o r T i p : Le ad t h e gro up in a d i sc u ss io n of th e I , P e nci l s to ry . B e low e a ch qu es t io n

are a n sw ers t o he l p g ui de t h e d i s cu s s i on ar ou n d ke y c o nc e pt s an d l ear ni ng ob j ec t i ve s .


5. What do you think about the claim that not a single person on the face of the earth has the knowledge required to

make an ordinary pencil?

a. A countless number of people had a hand in making the pencil through the contributions of their work and

knowledge.

b. In this vast process, each person supplies only a small amount of the necessary knowledge it takes to make a

pencil. There isn't a single person in all these millions, including the president of the pencil company, who

contributes more than a tiny, infinitesimal bit of know-how to the process.

c. Where would one person even start? The wood comes from cedar trees in the Pacific Northwest. The metal

to make the ferule are mined from all different parts of the world. The ingredients for the rubber are sourced

from across the globe as well. The graphite is mined in China and Sri Lanka.

6. Even if you did have the knowledge to make a pencil, would you spend your time doing so? Why or why not?

a. It would take an incredible amount of time and money to get the necessary materials. Where would you even

begin if you had to produce the tools and equipment necessary to obtain and transport the materials?

b. Even if you knew exactly how to build a pencil it could take you an entire lifetime to build a pencil that you

can find at your local store. If you were to spend all of your time building a pencil from scratch, you would

not have time for any of the other things you enjoy doing.

onal responsibility? Or would

responsibility be better developed in a free market in which a person must make decisions about how to contribute to

society?

One must experience responsibility to learn to be responsible. There is far less responsibility involved in

merely following orders. And there is far more responsibility involved in economic freedom. A worker in the

free market is responsible not only for how to do his/her job, but for finding and choosing that job in the first

place. A business person is responsible for making decisions about hiring, purchasing, production methods,

new products, etc.

8. In the free market, we see large scale cooperation among strangers. Does that mean that a society with a free market

cannot have small scale cooperation among friends and neighbors?

In a free society, all kinds of voluntary associations are allowed. This includes both commercial and non-

-

for-profit organizations that provide it very cheaply or for free.


Key Concepts

economic behavior.

1. What is economics?

Economics is the study of human behavior when choice is involved.

They are not perfectly content with the present circumstances.

They can imagine a way to improve their situation.

They believe their action can succeed in reaching that desired state.

Note: Humans act intentionally, but this does not mean that people are perfectly wise and never

make mistakes!

All economic questions arise from the problem of scarcity. Scarcity exists because we live in a world of limited

resources that have alternative uses. Our wants and needs are virtually unlimited.

The existence of scarcity means that we have to make choices because not all of our desires can be satisfied

at the same time.

Note: Scarcity is an unavoidable part of life. Scarcity and poverty are not the same thing! Absence of

poverty implies some basic level of need has been met. We may someday eliminate poverty, but

scarcity will always be with us.

Because we are faced with the fundamental economic problem of scarcity, we have to make choices and every

choice involves a tradeoff.

Activity Recap

Emergent order (spontaneous order) occurs when an unplanned order emerges from individuals

following their own plans.

The knowledge problem exists because the special bits of knowledge for dealing with complex economic

challenges are spread out among the minds of many individuals.

Not a single person has the knowledge to make even a simple pencil. The products we enjoy are the result

of a symphony of human activity that spans the globe.


A C T I V I T Y 2 P R O D U C I N G P R O G R E S S

Description

The goal for this activity is to increase your well-being and happiness while increasing the well-being and happiness

of others in your society. You and your group will play a key role in producing progress to help realize the vision of a

better world for all people.

In this activity, we will simulate how an economy works. You will work to combine resources to produce pencils in

order to earn Certificates of Service. Remember, these Certificates of Service are yours to keep and will be

redeemable for real prizes during the Trading Game in the next activity. Not only are you producing pencils to

create value for yourself, the pencils your group produces will unlock the benefits of economic growth for your

society in this activity.

Time Required

60 120 min


R O U N D 1 ( T H E M A R K E T )

Video

Facilitators are recommended to show this brief video to the group to introduce the themes of Activity 2. Hans Rosling

makes the case that the washing machine was the greatest invention of the industrial revolution.

VIDEO: Hans Rosling: The magic washing machine (TED, 5:43 min)

[http://at.fee.org/1ZKOJR6]


1.

members than others) to facilitate exchanges. One will give land and capital and the other will give pencil

Note for different group sizes: You can assign

participants to play the game in pairs of two or create multiple teams depending on your group size. If you

only have 8 participants, assign 4 to play the Blue team and 4 to play the Orange team.

2. Distribute the Blue Activity Materials to the Blue team(s) and the Orange Activity Materials to the Orange

team(s). Each group should receive 4 blank Pencil Production sheets (in case the group can make more than

6 complete pencils). Each participant should receive 8 Labor Cards and one Activity 2 Rules Sheet with a

using Land, Labor, and

Capital. Certificates of Service will be earned by participants during the activity. Each participant will start

with 8 Labor, but will use the labor to acquire land and capital, which will be used to make pencil components.

Each participant and each team will have certain production abilities as indicated on their production card.

3. The Orange and Blue Teams have comparative advantages in producing certain pencil components. Also,

individual team members have comparative advantages in producing either Land or Capital. The teams can

trade produced pencil components, but not the Land, Labor, and Capital cards. Team members may

collaborate in the production of a pencil component, but cannot trade the Land, Labor, and Capital cards.

4. Read the following instructions to the group:

a. In the Producing Progress Activity, we will use resources to create pencils. The resources used to

produce the goods and services people want are called the factors of production. The three factors

of production are land, labor, and capital. Land is the natural occurring resources like water, air,

soil, minerals, plants, and animals used in the creation of products. Labor is the physical and mental

human effort used in production. Capital is the man-made goods like machinery and tools used in

the production of other goods. For example, land includes the mines out of which aluminum for

eraser-holders is drawn, labor includes the work of miners, and capital includes the picks and other

tools used by the miners.

b. The Producing Progress Activity consists of three rounds. Each round will have different rules that

you will receive at the beginning of each round.

c. Throughout this activity, you will be working to produce pencils. You will combine the factors of

production (land, labor, and capital) to create each of the four pencil components (graphite, wood,

F a c i l i t a t o r T i p : F ol lo w th e i n str uc t i o ns be low to l e ad A ct i v i ty 2 . On ly re ad th e

in s tru ct io n s a l oud w h en in dic a te d .

https://www.youtube.com/watch?v=BZoKfap4g4w


aluminum, and rubber). You make a pencil by combining the pictures of graphite, wood, aluminum,

and rubber to complete the set. The other team may have different strengths than your team, so

consider trading pencil components such that both teams benefit. For this imaginary society, pencils

are everything. Pencils are education, healthcare, food, and entertainment. Everything is a pencil.

Obviously, this activity is a highly simplified version of how an economy works in order to show the

essentials of the value creation process. It is not meant to be a precise representation of how a

complex economy operates.

d. You have been divided into teams. During this activity you have individual goals and team goals.

Your individual goal is to earn as many Certificates of Service as possible. These will be redeemable

for prizes in the next activity. The team goal is to generate enough economic growth to earn a Level

3 Modern Economy Badge. Individuals and groups earn additional benefits by creating enough

pencils to unlock economic and social achievements through Level-1, Level-2, and Level-3 Badges.

e. You may keep the Certificates of Service you earn, as well as full and partial pencils you have

produced from one round to the next. You can also save your Land, Labor, and Capital cards from

one round to the next.

5. Read the summary and benefits of the Level-1, Level-2, and Level-3 Badges.

a. Our starting point is bleak, but we will try to make a better world by creating wealth. In your society,

the average life expectancy is about 49 years. 28% of children are underweight and 1 out of every 20

children die before the age of 5. People in your society live on just a few dollars a day, and 2/3 of

your income is spent on food. Only 2% of your income goes toward education. Only about half the

people in your society can read. This has been the typical life experience for most people throughout

history.

b. But, we can produce prosperity. Your team can earn a Level-1 Energy Badge after you produce 2

1 bonus Certificate of Service. At this level,

you have become productive enough to harness modern energy and no longer rely on biofuel as

your main source of energy. Your workers are more productive and earn more. Most people in your

society are now above the poverty line, and on average people in your society live on $10/day. Life

expectancy is now at about 73 years. 66% of people in your society now complete primary education.

c. Your team earns a Level-2 Washing Machine Badge after you produce a total of 4 pencils. At this

level, most people in your society now consider themselves middle class and have washing machines,

refrigerators, and cars. On average people in your society live on $40/day. The average life

expectancy is about 78 years. People are now able to afford meat, toothpaste, and air conditioners.

Everyone on your team earns 1 bonus Certificate of Service for reaching Level 2.

d. Your team earns a Level-3 Modern Economy Badge after you produce a total of 6 pencils. At this

advanced stage, your society has created enough value to unlock the benefits of a wealthy, modern

economy. On average people in your society live on $80/day. Life expectancy has increased to about

84 years. The literacy rate is at about 90%. Most people in your country now have internet and

cellphones. There is not much disparity between male and females in terms of amount of schooling,

income, or life expectancy. Work weeks are shorter and most people even take vacations during the

year. Everyone on your team earns 1 bonus Certificate of Service for reaching Level 3.

6. We are now ready to start the activity! Begin by handing out the Round 1 Rules for the Orange team and the

Blue team. Read the rules as a group and start the activity when you are ready!

Round 1 Rules:


a. You will have 10 minutes in Round 1 to create pencils. Remember, the only consumer good in this

imaginary economy is the pencil. For this society, pencils are everything. Pencils are education,

healthcare, food, entertainment, etc.

b. You earn 2 Certificates of Service for contributing all of one factor necessary for a completed pencil

component (graphite, wood, aluminum, or rubber) your team places on the Pencil Production

Sheet. Partial contributions of a factor earn 1 Certificate of Service.

c. You start with 8 Labor, but will use the labor to acquire land and capital, which will then be used to

make pencil components. Each participant and each team will have certain production capabilities

as indicated on their production sheet.

d. To produce a finished pencil your team must combine one each of the four pencil components

(graphite, wood, aluminum, and rubber) and place them on the Pencil Production Sheet.

e. You may not trade the factors of production (Land, Labor, and Capital), but trading pencil

components between teams is allowed and recommended. Team members may work together to

make partial or whole contributions of the required factors to make a pencil component.

f. Your team goal for Round 1 is to earn a Level-1 Energy Badge by creating 2 complete pencils in

order to receive the team bonus for leveling up.

7. Allow the participants to do a 5-minute practice round. At the end of the practice round, make sure each

team returns any land, capital, or pencil components. Also make sure each participant has 8 Labor to begin

Round 1.

8.

produced. Ask one person to read the Level-1 Energy Badge accomplishments to the group.

9. Discuss the experience of Round 1 using the questions on the next page to guide your discussion.


Discussion for Round 1

Round 1:

1. Who was able to create value and improve the well-being of yourself and for people in your society?

a. Facilitator Tip: Ask for volunteers to share how they were able to create value. Participants should have

earned an individual profit and their society should have created enough pencils to earn a Level 1 Energy

Badge. Ask one team to read about the benefits they were able to unlock with economic growth.

2. Scarcity occurs when there are limited resources with alternative uses to satisfy our virtually unlimited wants and

needs. Scarcity is an inescapable fact of reality and a fundamental part of the human condition. All human action

involves coping with scarcity. The challenge of scarcity is why individuals must take care how they use the resources

available to them. Economics is thinking logically about the various ways of dealing with scarcity: production,

exchange, etc. If there were no scarcity, then there would be no economic problems and nothing for economics to

study. Name the scarce resources in this activity.

a. Scarce resources in this activity include: Your time, money (Certificates of Service), the factors of production

(land, labor, capital), the pencil components (graphite, wood, aluminum, rubber).

3. The unavoidable reality of scarcity forces us to make choices, and every choice involves a tradeoff. A tradeoff or

opportunity cost is the alternative we give up when we pursue a certain course of action. I

up to get what you want. Because every decision we make involves tradeoffs, the first question a good economist

What choices and tradeoffs did you have to consider during Round 1?

a. Participants had to decide which factors of production they wanted to purchase. Their resources were limited

so they had to make a choice. The labor they used on land could not be spent on capital.

b. Participants may have elected to trade. If they traded for one resource, they could not trade for another at the

same time.

4. Did you try to complete the production of a complete pencil yourself, or did you work together with your team to

get the pieces you needed? Why?

a. Ask the group if anyone tried to get all the factors of production themselves. Did anyone focus on buying one

factor of production and then trade for the others they need?

b. Ask the participants to share stories about how they decided what to produce and what to trade.

5. One reason we benefit so much from society is that we are all so different. We have different skills, talents, and

interests between individuals in society. Because of this, everyone is better off if they specialize and trade. Through

specialization, cooperation, trade, we can create greater wealth than we could hope to achieve working alone. Division

of labor is an arrangement in which workers perform one step or a few specialized steps in a larger production process.

In other words, exchange and specialization make the world more interconnected and harmonious. Did you trade

with anyone outside of your team? Did your team specialize in any part of the production process? Why or why not?

a. In the Blue society, graphite is relatively expensive and rubber is relatively cheap. In the Orange society,

graphite is relatively cheap and rubber is relatively expensive.

b. Both societies are better off if they produce goods they can create at relatively low costs and then trade for the

goods they need that are relatively expensive for them to make themselves. Both societies benefit through

trade!


6. Incentives are factors that motivate and influence human behavior. When a change in conditions increases the cost

of an activity, individuals will tend to do less of it, other things being equal. If instead the benefits increase, people will

tend to do more of the activity. What were the main incentives driving your behavior in Round 1?

a. Participants want to earn the things they desire (Certificates of Service that will be used to buy prizes for the

Trading Game). They earn Certificates of Service by producing things that people in society need (pencils).

b. Participants also want to earn admiration and respect for making society better by creating value.

7. The rules did not specify who should work to create what goods to produce the things your society wants and needs

(pencils). Yet, you still produced the pencils that society needs. How did this happen? How did you know what and

when to buy?

a. Market incentives such as profits and losses helped to direct resources to where they were needed.

b. In this activity, the profits include the Certificates of Service and Badges that can be earned by individuals

and the team for completing pencil components and whole pencils.

institutions, condition the incentives people face, and as a result,

the choices individuals make. Basic institutions like laws and cultural customs establish the fundamental incentive

structure of an economic system. A key benefit of sound economic thinking is that it enables us to better understand

which institutions promote or discourage beneficial exchanges. For example, societies with an institutional

environment that encourages entrepreneurship tend to see greater numbers of individuals involved in wealth creating

activities.

One of the most important institutions is property rights. A property right

exchange, and dispose of a certain good. It also gives the owner the right to exclude non-owners from using his or her

property. For example, having property rights in your car prohibits me from smashing your scarce resource for my

entertainment without your permission. A system of property rights can help diverse groups of individuals effectively

solve disagreements about how scarce resources should be used. It does this through clear rules according to which

individuals can come to own scarce resources, and by making such ownership secure. Unnecessary conflict is

introduced when property rights are not established and respected. In Round 1, your private property was respected.

All of the exchanges made during Round 1 were voluntary and there was no risk of anyone arbitrarily changing the

rules or confiscating your property. How did this impact your decision to create value and trade?

a. It provided incentive to create value for others and earn a profit for themselves.

b. Stable rules allowed participants to plan and make decisions. It also allowed them to learn from market

feedback and make adjustments during the activity.

9. How did participating in the market process of Round 1 build cooperation and community with your team?

a. By creating value through the market process you serve yourself by serving others well. In Round 1 we see

that everyone relies on an incredibly complex network of cooperation.

b. It takes the cooperation of an astounding number of people to produce the materials needed in society (in

this case pencils!).

c. The more we are connected to people through trade, the more civil and peaceful our society becomes.

Commerce promotes good character by encouraging people to be kind, respectful, and honest in order to

build good long-term professional relationships.

d. Competition on the market is a competition to serve people well. In Round 1, you may have competed with

other producers to create a specific pencil component, but everyone was attempting to best create value for

themselves by creating value for society.


e. Free market competition encourages people to practice peaceful interaction and increases social harmony

and cooperation.


Round 1 Summary

We depend on an incredibly complex network of cooperation. Each day we benefit from countless acts of

cooperation. Cooperation is an act of working together for mutual gain and has many advantages. Trade is a type of

cooperation where both parties expect to gain. This allows people to specialize and rely on the cooperation of

exchange with other people. It frees people to grow and improve their skills, increase knowledge, and utilize the

luxury of free time to engage in other meaningful activities. With more trade, people become wealthier as well as

more and more interdependent on the cooperation of others. The market is an interpersonal, complex, network of

cooperation and mutual gain. Not only can we accomplish more by freely trading with one another, we also make

available time to build our individual talents and pursue our dreams of a meaningful life.

F a c i l i t a t o r T i p : Re ad t he f o l l ow i ng sum m ary o f th e f i r s t ro u nd.


Key Concepts for Round 1

In economics, saying that value is subjective means that the value of something is based on individual tastes and

preference.

Different people desire (or like) things differently, and the same person can desire the same thing differently

at different times.

The value of a resource to an individual is determined by how well that resource can be used to satisfy our

goals and plans relative to the available alternatives. We all have our own plans for how we want to satisfy

our goals.

Trade, or voluntary exchange, is an act of freely and willingly exchanging goods or services when all parties involved

expect to gain.

Gains from trade is the value created from exchange. Trade creates wealth by directing resources from people who

value them less to people who value them more.

In an exchange, one party need -

People choose to trade because each believes the trade will make them better off.

Even when no new goods or services are produced, trade increases the wealth of individuals, societies, and

nations.

Through specialization and cooperation/trade, we can create greater wealth than we could hope to achieve

working in isolation.

Cooperation is the act of voluntarily working or acting together for mutual benefit. Each day we benefit from countless

acts of cooperation. Civilization and progress rely on our ability to cooperate.

Competition is a contest for some prize, resource, or advantage. Competition is everywhere. The fact that we live in

a world of scarcity means we have to choose. In a cooperative society, this gives rise to competition, because individuals

must choose between potential trading partners, and each candidate will naturally compete to be the one chosen. It

greed, or without businesses, where everyone cared

only about others, there would still be competition because limited resources would still have competing alternative

uses.

Many falsely believe that markets encourage a sort of competition that erodes our ability to cooperate. In reality,

markets are extensive networks of cooperation. Learning to cooperate essentially means you learn to trade well with

others. In an important sense, competition and cooperation are two sides of the same activity in the market. In the

market, people compete over ways to better serve others. Competition within a free market economy is actually a

competition over who can best cooperate.


R O U N D 2 ( M I X E D E C O N O M Y )

An economy characterized by central planning is called a planned economy. The allocation of resources in a planned

economy is determined by a small number of government officials. These central planners might be autocratic

dictators, elected representatives, or unelected bureaucrats. By contrast, when resource allocation is left to the

voluntary exchanges of people in the market, this is called a free market economy. In reality, most economies in the

world today involve both central planning and market activity. Some call this a mixed economy.

Government intervention in the economy takes many forms. Government can influence economic outcomes when it:

· Collects revenue and discourages behavior using taxes

· Encourages certain behaviors using subsidies

· Requires certain products or activities by mandate

· Prevents certain products and activities through prohibitions

· Attempts to control market activity through regulation


1. Now we are ready for Round 2. Hand out the Round 2 Rules for the Orange team and the Blue team. Read the rules

as a group and then begin Round 2. Distribute the new rules to each group, but each participant can keep his or her

first rules sheet that outlines their original production capabilities.

Round 2 Rules:

a. You will have 10 minutes in Round 2 to create pencils.

b. The requirements to produce a finished pencil are the same as Round 1. You will combine one each

of the four pencil components (graphite, wood, aluminum, and rubber) and place them on the Pencil

Production Sheet to create a pencil.

c. Also the same as Round 1, to create each pencil component, you must combine each of the three

factors of production (land, labor and capital) according to the amounts listed in the table on your

production sheet.

d. However, this round has some changes:

i. Your society desires wealth equality in hopes to promote fairness. Please count your

Certificates of Service and redistribute the wealth with others in your team until everyone

has the same amount. Note: We will also redistribute Certificates of Service at the end of

the round to ensure everyone on your team has the same amount.

ii. There is a new minimum wage law, so workers now earn a higher hourly rate, but at the

higher wage, employers are only willing to hire fewer workers or restrict working hours. As

a result, each participant will only receive 6 new Labor cards they can use to acquire Land,

Capital, and pencil components. (You can keep any factors you did not use in the last

round, and you can also keep your progress on pencils.)

iii. There are new environmental regulations that make Land a risky investment. To acquire

Land, you must flip a coin. If heads, you may acquire the land with the labor indicated on

your production sheet. If tails, you lose the labor indicated on your production sheet, but

you do not get any Land.


iv. Finally, there is a protectionist tariff on all imports. The local industries in your society did

not want to compete with cheaper foreign products, so they lobbied the government for a

tariff (tax on trade) to protect them. You must now pay a tax of 2 Certificates of Service on

each trade outside of your group.

e. Before the start of the round, everyone must pay a tax of 1 Certificate of Service to fund the cost of

administering these new government programs.

f. Your team goal for Round 2 is to earn a Level-2 Washing Machine Badge by creating 2 complete

pencils in order to receive the team bonus for leveling up.

2.

produced. Ask one person to read the Level-2 Washing Machine Badge accomplishments to the group, if anyone is

able to reach Level 2.


F a c i l i t a t o r T i p : Ab ou t ha l fw ay t hr oug h Ro un d 2 , th e f a c i l i ta t or s ho uld s t o p t he g a me an d

col le c t a 1 C er t i f i ca t e of Ser vi ce t ax to p ay for a regul a t i o n t o de s ign ed to pr ot ec t n a tur a l

res o ur c es ar ou nd t he la nd w h ere we ex tr ac t o ur raw ma t er i a l s .

Rem emb er t o h a ve t he i ndi v idu al s o n e ac h te a m red i s tr ib ut e t he we al t h to a cc ou n t f or a ny

in co me i ne qu al i ty th a t r es u l ted f r om Ro und 2 .



Politics interfered by causing a change in the rules of the game. Through the political and legal process, rules are

created to tell people how they must, must not, or may use scarce resources (including their own bodies). Politics and

law both seek to influence human behavior by changing incentives. Such rules often influence human behavior in ways

that were not intended or anticipated by the rule-makers. Economic insight can tell us why people might respond in

seemingly surprising ways.

the

seen mportant, impacts for all groups, especially over the long-term; these

the unseen -visible, narrow, and/or

short-term effects. The art of economic thinking is to give appropriate consideration to both the short-term and

specific consequences and the long-term and widespread consequences of an action or policy. Thinking more carefully

about, not just the seen, but the unseen consequences can help us make better decisions.

Unintended consequences are results of an action positive or negative other than those intended by the actor.

1. How did the incentives in Round 2 change from those we experienced in Round 1? What were the major changes

from Round 1?

a. In this round, there was less incentive for individuals to create value because they knew their earnings would

be taken through taxation, redistribution, and inflation. Also, the rules were unstable and they were not sure

what to expect. Private property rights could be violated at any moment.

it difficult to plan and make decisions. Stable rules and expectations are essential for economic growth. In

contrast to the rule of law, when rulers and lawmakers arbitrarily interfere with economic outcomes, it

discourages market participants from putting forth their resources and effort and create value. A system of

rules that is impartial and applied uniformly to everyone is the rule of law. Round 1 was characterized by the

rule of law. Round 2 was not.

2. Who was able to create value and improve the well-being of yourself and people in your society in Round 2? How

did this compare to Round 1?

a. Government interventions made coordination and cooperation much more difficult. Most participants will

still be able to create some value.

3. How did you feel during Round 2? Did political interference in the market make cooperation and building

community difficult?

a. Participants may feel frustrated after Round 2. It is difficult to trade and coordinate when property rights are

not respected.

b. When special interests compete over political privilege from government it introduces conflict into society

where conflict need not exist.

a. Whenever government power exists to control economic outcomes, special interest groups have strong

incentives to seek political privilege to influence outcomes for their benefit. Seeking economic favor through

government is what economists call rent seeking.


5. What happened when the cost of trade increased?

a. Taxes on trade increased the cost of trading with other teams so we saw less trade.

a.

7. In Round 2 we saw a decrease in economic freedom as political power was used to grant special favor to special

interest groups. This is similar to what happens in the Mixed Economies of most countries around the world today.

How might politics and law encourage or discourage wealth creating activities?

a. In Round 2 we had several new laws. Workers lobbied for higher minimum wage. Local industry lobbied for

higher taxes on trade. Each of these policies had an unseen cost of making wealth creation more difficult for

people in society.

b.

institutions, condition the incentives people face, and as a result, the choices they make. Basic institutions

like laws and cultural customs establish the fundamental incentive structure of an economic system. Law can

encourage economic growth when it has stable rules, protects private property, and is not corrupt and

oppressive.

c. Countries where doing business is very difficult due to excessive regulations and property rights violations

discourage wealth creating activities.

d. Restrictions on trade discourage wealth creating activities. Government should not restrict economic

freedom, including the freedom to trade with people in other countries around the globe.

7.

the character of market participants?

a. Human beings are self-interested. Government officials are no less self-interested than people in the private

sector. In fact, politicians face strong perverse incentives to do things that harm the public in order to win

elections or gain power.

b. If government takes on the role of picking winners and losers in the marketplace, business people and workers

will have the perverse incentive to spend more time and resources trying to influence the government to

advantage them and disadvantage their competition, and less time and resources trying to succeed by serving

others in society. The lure of political power and influence encourages greed and laziness in market

participants, and discourages them from being public minded and from pursuing an honest living.


Unintended consequences are results of an action positive or negative other than those intended by the actor.

call institutions, condition the incentives people face, and as a result, the

choices individuals make.

A system of rules that is impartial and applied uniformly to everyone is the rule of law.

Seeking economic favor through government is what economists call rent-seeking.


Government officials are no less self-interested than people in the private sector. In fact, politicians face strong

perverse incentives to do things that are not in the best interest of the public at large in order to win elections or gain

power.


R O U N D 3 ( E N T R E P R E N E U R S H I P )

An entrepreneur is someone who anticipates what people will want in the future, and adjusts production to provide

for those wants. Entrepreneurs who anticipate correctly earn profit for themselves as they create value for others.

Entrepreneurs are both problem solvers and wealth creators.

Entrepreneurs purchase the factors of production (land, labor, and capital) and recombine them to create something

new: a product. They do this hoping that the buying public will appreciate the new product. If sales of the product are

higher than the costs paid to produce it, the entrepreneur earns profit, which is a sign that the entrepreneur discovered

a way to improve human welfare.

But in a truly free market, profit is not guaranteed. There is always a chance that the entrepreneur anticipates future

wants incorrectly. Sales could end up being lower than costs, which means the entrepreneur would lose money. Losses

are a sign that the entrepreneur did not create value for the public, but reduced it. But losses are an important part of

they do want.

Since they put their own money on the line and always face the possibility of losses, entrepreneurs are also risk-takers.

Entrepreneurs take on the risks that are necessary to discover and blaze new paths toward improvement.

Entrepreneurship is an ongoing process that is essential for economic progress.

Entrepreneurship is the essential foundation for economic growth. Societies that encourage entrepreneurship through

economic freedom tend to see much faster economic growth than those that do not. Entrepreneurial discoveries and

insights build on one another to create new and better products and processes.


1. Now we are ready for Round 3. Distribute the new rules to each group, but each participant can keep his or her

first rules sheet that outlines their original production capabilities.

Round 3 Rules:

a. You will have 10 minutes in Round 3 to create pencils.

b. The rule changes from Round 2 no longer apply. We are returning to the market economy like

Round 1.

c. As in Round 1, you earn 2 Certificates of Service for contributing all of one factor necessary for a

completed pencil component (graphite, wood, aluminum, or rubber) your team places on the Pencil

Production Sheet. Partial contributions of a factor earn 1 Certificate of Service.

d. To create each pencil component, you must combine each of the three factors of production (land,

labor and capital) production sheet.

e. Entrepreneurs in your society have discovered opportunities to make certain pencil components

with fewer inputs. The Orange teams can now make graphite with 1 Labor, 1 Land, and 1 Capital,

and they can make aluminum with 1 Labor, 1 Capital, and 1 Land. The Blue teams can now make

erasers with 1 Labor, 1 Capital, and 1 Land, and they can make wood with 1 Labor, 1 Capital, and 1

Land. Teams may trade pencil components.

a. To produce a finished pencil your team must combine one each of the four pencil components

(graphite, wood, aluminum, and rubber) and place them on the Pencil Production Sheet.


b. Your team goal for Round 3 is to earn a Level-3 Modern Economy Badge by completing a grand

total of 6 complete pencils over the course of the 3 rounds of this activity to receive the team bonus.

2. duction Badges based on total pencils

produced. Ask one person to read the Level-2 Washing Machine Badge (if not read in Round 2) and ask one person

to read the Level-3 Modern Economy Badge to the group.




3:

1. Who was able to create value and improve the well-being of yourself and people in your society? How did Round 3

compare to Rounds 1 and 2?

a. In Round 3 we removed the policies that make doing business difficult. We also introduced entrepreneurial

innovations that increased economic growth. We were able to create more value in Round 3 than Round 1 or

Round 2.

2. Can you imagine what types of innovations or new processes that entrepreneurs may have created in order to make

wood and aluminum production more profitable in Round 3?

a. Entrepreneurship is about discovering an opportunity and innovating new solutions to solve problems.

Perhaps entrepreneurs found a better way to mine aluminum or developed better equipment to cut lumber.

Maybe they developed better ways to transport materials and reduced shipping costs. There are endless

opportunities to discover new ways of using resources to meet a need.

3. What is the relationship between economic freedom and entrepreneurship?

a. There is a direct relationship between freedom and entrepreneurship. Greater economic freedom tends to

promote more entrepreneurship. Entrepreneurs require economic freedom to create value for themselves

and for society.

b. According to the Economic Freedom of the World Index

undeniable. The most economically free countries offer the highest quality of life and personal freedoms while

the lowest ranked countries, are usually burdened by oppressive regimes that limit the freedom and

4. Do you think entrepreneurs are modern day heroes?

a. Entrepreneurs play a key role in value creation. They undertake risk in order to create value for themselves

and for others.

b. A society that embraces entrepreneurship creates more jobs, produces more wealth, and allows individuals

to exercise their creative talents.

c. Successful entrepreneurs have traits commonly associated with heroes including: Courage, Bravery, Strong

Leadership, Vision, Wisdom, Honesty, Persistence in the face of challenge, and Alertness to need.

5. Now that we have completed 3 rounds, how many people are better off than they were at the start of the activity?

a. Everyone should be proud they were able to create value and raise the living standards for their communities.

They should have also earned Certificates of Service that will be used in the Trading Game. Participants

should be proud they were able to create value and raise the living standards for their communities. They

should have also earned Certificates of Service that will be used in the Trading Game.

6.. A popular slogan among cri

serving people and earning profit. Is this idea mistaken? How so?

a. Profits are a sign that entrepreneurs have served people well. Profits result from sales being higher than costs.

-value resources and

recombining them into higher-value products.

http://www.freetheworld.com/release.html


7. Entrepreneurship involves noticing and seizing opportunities, perceiving what others want and value, taking

calculated risks, and innovating improvements. What are some ways you can be entrepreneurial in your daily life?

a. Look for good deals as a consumer

b. Buy really considerate birthday gifts for friends and loved ones

c. Try something outside of your comfort zone, like performing in a talent show

d. Find and download a new app that will help you be more organized and productive

e. Identify a need where you can provide a service or create value for people in your community



Entrepreneurship is:

· Serving yourself by serving others well

· Creating wealth by making higher-value products out of lower-value factors of production.

· Innovating new products or processes to replace old ones

· Discovering unnoticed opportunities to profit and acting on those opportunities

An entrepreneur is someone who anticipates the future wants of his fellow human beings, and reorganizes

production to provide for those wants. Entrepreneurs who anticipate correctly earn profit for themselves as they

create value for others. Entrepreneurs are both problem solvers and wealth creators.

Entrepreneurs who do not anticipate correctly suffer losses and learn from them. Since entrepreneurs face the

possibility of losing their own resources, they are risk-takers.

Entrepreneurs discover and blaze new paths toward improvement. Entrepreneurship is an ongoing process that is

essential for economic progress. There is a direct relationship between freedom and entrepreneurship. Greater

economic freedom tends to promote more entrepreneurship.

If we want economic progress, we should encourage more entrepreneurship by celebrating entrepreneurs and

promoting economic freedom.

Today you have all played the role of an entrepreneur.


Activity Recap

Each day we benefit from countless acts of cooperation. Free markets encourage cooperation, which

leads to social progress and prosperity in a civil society

institutions, influence the incentives people face, and

as a result, the choices individuals make. Basic institutions like laws and cultural customs establish the

foundational incentive structure of an economic system.

Private property makes economic planning possible. Lack of enforced property rights discourage people

from being innovative or producing more since they have no incentive to keep what they earn.

Government officials are no less self-interested than people in the private sector. Politicians face perverse

incentives to do things that are not in the best interest of their constituents or the public at large in order

to win elections or gain power.

Whenever government power exists to control economic outcomes, special interest groups have strong

incentives to seek political privilege to influence outcomes for their benefit. Seeking economic favor

through government is what economists call rent-seeking.

Political decision-making often results in outcomes that conflict with the preferences of the general

public.

All too often people focus merely on the highly-visible, short-term effects of economic policies. The art

of economic thinking is to give appropriate consideration to both the short-term specific consequences

and the long-term pervasive consequences of an action or policy. Thinking more carefully about, not just

the seen, but the unseen consequences can help us make better decisions.

An entrepreneur is someone who discovers and provides for an unmet need by producing value for

others in the community and for themselves.

Entrepreneurship is the essential foundation for economic growth. Societies that encourage

entrepreneurship through economic freedom tend to see much faster economic growth than those that

do not.


A C T I V I T Y 3 T H E T R A D I N G G A M E

Description

Through the Trading Game you will experience firsthand the power of markets. The Trading Game is one of the most

engaging and memorable activities used to learn about gains from trade. Voluntary exchanges occur when each

person involved believes he or she will be better off. Wealth, as measured by satisfaction levels in this activity, is created

through the magic of trade even when no new items are produced!

Time Required

45 min

Required Materials

A few small, inexpensive items for each participant use in the Trading Game. A variety of items such as toys,

candy, stickers, and school supplies works well. The more variety the better! Note: Some facilitators have also

had success asking participants to bring in a few small items they are willing to trade. Inexpensive items can

be purchased from Oriental Trading.

Brown paper lunch bags (one per participant).

Trading Game Spreadsheet, or tally sheets to count and display results [example below].

Stopwatch or way to keep time.

Required Pre-activity Preparation

1. Divide the total lunch bags (one for each participant) into four equal groups. Assign each group of bags a

color, and mark the bags in the group with the group color (red, green, blue, yellow).

2. Place items for trade in each of the brown paper bags. Introduce variety by placing different items and varying

quantities in each bag. The game seems to work well if you concentrate item types by color as well. For

example, the red team might have most of the bouncy balls and the green team might have most of the finger

traps to simulate comparative advantage.

3. Prepare a score sheet on the board, or prepare the Trading Game Spreadsheet to tally and display results.

4. Place bags of like color in each of the four corners of the room.


1. To begin the Trading Game, divide the participants into four equal groups by color and ask the participants

to select one bag from their assigned color. Tell your participants not to look into the bag.

2. Read the following rules of the Trading Game to your participants:

a. The Trading Game will have four rounds, each with different rules. I will explain the rules before

each round. Things might get loud and hectic, so I need everyone to pay attention to my instructions.

F a c i l i t a t o r T i p : Be sur e to c om pl et e th e pr e - a ct iv i t y pr ep ar a t i o n for th e Tr adi ng G am e

pr i or t o b eg i n ni ng wor k sh o p.

http://www.orientaltrading.com/toys-games-and-novelties-a1-550202.fltr

https://www.dropbox.com/sh/ixzhbpn6tot97l4/AAASsyVoMYykIcoL9rU3IExwa?dl=0


b. At the end of each round we are going to rate your individual satisfaction on a scale of 1 to 5. A score

of 1 means you are very unsatisfied and a score of 5 indicates you are very happy with the contents

of your bag.

2. Play the Trading Game in four rounds using the instruction below:

Round 1 No Trade

a. Explain the rules of Round 1 to your participants:

1. In Round 1, you have 2 minutes to open your bag to review the contents. Do not remove the items

from the bag and do not let anyone else see what you have you bag.

2. The items in your bag now belong to you. It is your property.

b. At the end of 2 minutes, ask participants to rate their satisfaction level on a scale of 1 5, and record the

number of participants at each individual satisfaction level. Place the totals on the board or in Trading Game

spreadsheet.

c. Calculate the total satisfaction level by adding the products of the level of satisfaction and the number of

participants (example below), and briefly share the results for Round 1 with the group.

Round 2 Limited Trade


1. In Round 2, you have 5 minutes to trade with anyone in your group (e.g. a member of the Green

group can only trade with other members of the Green group). All trades are voluntary. Only make

trades if you want to. You do not have to trade if you are satisfied with the contents of your bag.


number of participants at each individual satisfaction level and place the totals on the board or in the Trading

Game Spreadsheet.

c. Calculate the total satisfaction level, and briefly share the results for Round 2 with the group.

Round 3 Expanding Trade


1. In Round 3, you have 5 minutes to trade with anyone on your half of the room. Members of the

Green and Red groups can now trade with each other. Members of the Blue and Yellow groups can

now trade with each other.



Game Spreadsheet.


Round 4 Free Trade



1. You have 5 minutes to trade with anyone in the room. Free trade!



Game Spreadsheet.


Discussion Questions for the Trading Game

Compile the results from the four rounds and plot the results on a graph for the group. Discuss the results:

1. Why do people trade?

a. People trade when they expect the value of what they are getting from the trade to be higher than the value

of what they are giving up. The upward sloping graph can be described as gains from trade. Trade is not a

zero- ntarily and is made better off, it does not mean that someone

positive-

b. As the size of the trading pool increases and restrictions on trade decrease, we are able to realize greater gains

from trade. The more people there are with which we are able to trade, the greater the opportunity for

prosperity.

2. Does anyone have a success story they would like to share? (Facilitator Tip: You may try to touch on the points

below as participants share their stories.)

a. The value of each item is determined by the priority an individual gives it. This is what economists call

subjective value.

b. We learn that people value things differently. They can value the same items very differently, and individual

preferences for an item may change over time. Sometimes we even see satisfaction levels decrease between

Rounds 1 and 2 when participants learn what kinds of items other people have.

c. . They just hope someone else will

give them something they do want in exchange for it. This is called indirect exchange, and it is how money

arises in the market.

d. We observe that the more choices and freedom to trade people have, the easier it is for them to increase their

satisfaction in the marketplace. They increase their satisfaction while increasing the satisfaction of their

trading partner at the same time.

3. Besides people having different preferences, what other conditions do you think must be present for trade to

flourish?

a. Scarcity -scarce resources like the air in the room. If we were

playing the Trading Game while scuba diving, then air might be a very valuable scarce resource!

b. People cannot trade what they do not own. Ownership of property is a precondition for trade. How would

different incentives

to keep the contents of your bag, would you have tried as hard to trade for the things you wanted? What if

we had placed taxes on all trades and you had to give up half of your gains from trade?


4. How is this game different from the real world?

a. There was no production in the Trading Game. The amount of goods available for trade did not increase.

b. There was no time for significant innovation. We did not have time for entrepreneurs to discover new

processes or identify new ways to serve people. We did see people thinking with an entrepreneurial mindset

as they found creative ways to trade.

c. We had to rely on barter (the direct exchange of goods for other goods without using money).

5. What are the main challenges or obstacles that might make trade difficult?

a.

needed information.

b. Transportation costs due to geographic factors could result in high costs associated with trade.

c. Political barriers increase the cost of trade. Taxes, price controls, regulations, and trade quotas make trade

more expensive.

6. Do you think trade does more to create cooperation or conflict between people?

a. Trade encourages cooperation between people. Humans seem to intuitively understand the fact that trade

makes us better off. We thrive when we build strong economic and social relationships that leverage the

specialized abilities of our friends, family, communities, and other people in the marketplace. Some scholars

that we are better off with economic cooperation.


Sample Trading Game Tally Sheet

Round 1

Satisfaction Level # of Participants Total Satisfaction

1

2

3

4

5

Total:

Round 2


1

2

3

4

5

Total:

Round 3


1

2

3

4

5

Total:


Round 4


1

2

3

4

5

Total:

Example chart from the Trading Game Spreadsheet showing gain from trade:


Lesson Recap

Trade, or voluntary exchange, is an act of freely and willingly exchanging goods or services.

Even when no new goods or services are produced, the act of trading can create wealth. This is called

gains from trade.

Trade, or voluntary exchange, happens when all parties involved expect to gain.

Trade directs resources from people who value them less to people who value them more.

Trade increases the wealth of individuals, communities, and nations.

Policies and institutions that restrict trade make individuals and societies relatively poorer.


C L O S I N G D I S C U S S I O N

Time Required

30 min

Discussion Questions

1. Today did -

2. How can you use what you learned today to create value for yourself and your community?

3. What can you do to make the world a better place?

Optional Videos

Some facilitators may choose to show these brief videos to the group.

VIDEO: Most of the World is Better Off than You Think (Channel 4 News, 2:34min)

VIDEO: Economic Freedom & Quality of Life (EconFree, 2:26 min)

F a c i l i t a t o r T i p : A s k t h e q ue s t i o ns b e l ow t o be g in o ur c l o s i ng d i sc us s i on .

http://courses.fee.org/courses/take/economics-in-one-day-companion-guide/lessons/217602-most-of-the-world-is-better-off-than-you-think

https://www.youtube.com/watch?v=PwHvizPqpWI



C O N C L U D I N G E C O N O M I C S I N O N E D A Y

Remember, the big question of the workshop is whether the free market or central economic planning helps us achieve

y, how does the free

list of shared values, and their opposites:

Order vs. Chaos

The challenges of production for the needs of millions of individuals are so complicated that a central planner could

never have enough knowledge to handle them all. A centrally planned economy is chaotic because there is no way of

knowing whether any particular plan actually improves human well-being.

In the free market, the challenges of production are spread out among millions, even billions of people who each plan

on a manageable scale.

In a free society (or market economy), workers are free to plan their own careers. They are free to pursue their

specialized rol

story. Workers sign up for roles in projects planned and funded by entrepreneurs, who also specialize on a few

manageable roles.

Each entrepreneur knows whether a new plan improved customer satisfaction based on whether it made a profit or

loss. By chasing profits and avoiding losses, entrepreneurs make constant tiny improvements to how goods and

services are being produced.

The beauty of a free market economy is that everyone is free to plan for their own lives and property, and everyone is

encouraged by market incentives to coordinate their plans with the plans of everybody else. This coordination arises

out of the free choices of millions of individuals without a mastermind or a central plan.

Harmony vs. Conflict

How should people spend their days, in terms of both work and leisure? How should scarce resources the material

wealth of society be used, and for whose benefit? If these decisions are to be made by the government, then everyone

will have the incentive to influence the government to decide according to their own benefit, even if it is to the

detriment of others. This will make individuals in society preoccupied in political battles with each other. Central

planning encourages conflict.

person and property. So, instead of engaging in unnecessary political conflict in which there are winners and losers,

people are motivated to engage in voluntary exchange, in which both sides are winners.

Furthermore, the free market creates economic interdependence among the people of the world. This encourages

make good business sense to wage war on your trading partners. However, when central

planners create trade barriers, the only way to profit from other nations is to seize their resources. The free market

encourages peace and harmony, while central planning encourages conflict and war.

Optional Video


VIDEO: I, Pencil Extended Commentary: Connectivity (CEI, 3:26 min) [http://at.fee.org/1XnWfmh]



Cooperation vs. Isolation

Governments often try to centrally plan economic outcomes by restricting voluntary exchanges. Examples of this

include minimum wages, trade barriers, and sales prohibitions. By outlawing certain forms of cooperation, central

planning imposes greater isolation on people.

Some believe it is good to centrally plan help for people in need and security for people at risk through large

government programs. Examples of this in America include welfare, social security, and government health care.

Centrally planned programs like these can impact the bonds of civil society? Individuals are less likely to support

private charities and other organizations if they think that the government has it covered with tax-funded programs.

ty.

The free market is often accused of encouraging selfishness, but it actually encourages cooperation. It makes serving

others the most effective way to serve oneself. And the market makes it possible for millions of strangers to cooperate

in the production of a single product.

Optional Video


VIDEO: (Learn Liberty, 4:25 min)

[http://at.fee.org/24TVUNR]

Prosperity vs. Poverty

Economic chaos, isolation, conflict, and war all hamper production. So central planning leads to poverty and suffering.

Economic order, harmony, and cooperation all boost production. So the free market leads to prosperity and happiness.

Only the free market can coordinate the economic activity of billions of strangers. And only economic cooperation on

that scale is productive enough to provide the kind of living standards we enjoy today.

Economic freedom is also essential for good character, including humane values like integrity, responsibility,

benevolence, and charity. Virtuous behavior is about making good choices. Without the freedom to choose, there is

little room for virtue. Just like a muscle, one cannot develop moral judgment without the freedom to exercise it.

One of the best ways to make the world a better, more thriving place, is to support economic freedom and the free

market.

F a c i l i t a t o r T i p : I f t i m e a l l ow s, a sk t h e aud ie nc e w h et he r th e f r ee mar ke t or ce n tr a l

p l a nn i ng pro m ot es t he ot h er i te m s o n th e l i s t o f sh ar ed v a lu e s .

https://www.youtube.com/watch?v=6yqA6-ukmfg


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discussed today or dig a little deeper into the concepts you find most interesting. [http://at.fee.org/1OqydzE]

2. Experience the power of ideas at a FEE Seminar. Each year, FEE hosts student programs around the country

where participants can engage with life-changing presentations and discussions with professors and business

leaders. Visit FEE.org/seminars to see a schedule of upcoming programs.

3. -lesson course on the Economics of Entrepreneurship

at FEE.org/Courses.

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