One night while we’re getting ready for bed, my child approached me her sister, in tow. “Dad, have we ever sold anything?” she asked.
It seemed to me like a good time for family discussion about economics or for that matter anything that wasn’t about web site updates. I answered with a question. “What do you mean by ‘sell’?”
“You know. To give someone something and get money,” they answered.
I thought it was a good start so I asked, “Does what you sell have to be a thing like a glass of lemonade or could you sell something that you do like wash the car?”
They agreed that if you washed someone’s car and got money in return, then you did sell something but they weren’t quite sure what. I explained that things like cars and lemonade are considered goods and acts like washing the car or mowing the lawn are called services. And we all agreed that the only things that can be sold are in fact goods & services. [Ok, so there are things like wheat futures and options but ...]
Next question. “Do you have to get money for the goods & services in order for it to be considered selling?”
“Yes,” she answered, “If you give away the goods and services, then that’s giving not selling.”
“Great point,” I replied. “Giving things away free doesn’t count as selling. But what if you received something other than money? If you got free ice cream for a week, then would that count as selling?”
They looked suspicious at first but ultimately agreed that it would still count as selling. I then continued by saying that selling is only half the picture. In order to actually sell, someone has to buy. But we already agreed the seller doesn’t have to get money for it to be a sale. Then I hit them with all the economic theory I acquired with one macro economics class. “So selling (and buying) are really just an exchange of value.”
“And yes,” I continued quickly before I bored them to sleep. “You have sold things before. Remember last fall when you collected the apples and sold them?”
“That’s right”, said my six year old. The idea of providing someone an apple for ten cents fits her idea of selling far better than my statements about exchanging value.
“OK. But what was the value that you provided?”
“The apples!” they exclaimed.
“Well, not exactly,” I replied. “Who did you sell them to?”
Uncle Jerry is our next door neighbor, but everyone calls him Uncle Jerry.
“Where did you get the apples?”
“From the back yard.”
“Whose back yard?”
“Uncle Jerry’s, I guess,” offers my nine year old.
“So you just took Uncle Jerry’s apples?” I ask incredulously, although I knew this not to be the case.
“No Dad. Uncle Jerry said it was OK for us to take the apples.”
“Did you gather up all the apples?”
“No. There were lots more on the ground. We only gathered a few of them.”
“Ok. So, with Uncle Jerry’s permission, you gathered a few apples from his back yard and put them in a wagon. Next you wheeled the apples around to Uncle Jerry’s front yard and asked him if he wanted to buy any apples for ten cents each. They were Uncle Jerry’s apples from the tree in his back yard. He knew where you got the apples and he knew that there were lots more apples under the tree. With all of that information what did Uncle Jerry do?”
“He bought the apples.”
“Not really,” I said. “The apples were already his. So what did he buy?”
“He wanted to make you guys happy,” my spouse chimes.
“Oh. I get it,” she said.
But to be sure, I posed the following. “Each year I buy life insurance but the insurance company only has to pay if I die. What’s the value? It’s not the insurance payment since I have to be dead for the insurance company to pay.”
My older child’s brow knits momentarily and then she says, “I know. You want to take care of us if you die!”
My younger one thinks for a moment and confidently gives her own answer, “Life!”
And there you have it. Next year, I’m doubling my policy. You can’t have too much life!