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Money Smart Kids

A Book That Successfully Teaches Kids About Economics

A Q&A with Arthur Laffer and Michelle Balconi, authors of the children's book 'Let's Chat About Economics!'

Arthur Laffer is best known as the economist who invented the Laffer Curve, a diagram that shows how an optimal tax rate can maximize revenues without discouraging people from working. So I was intrigued when a picture book for children called Let’s Chat About Economics! (Gichigami Press, $17 hardcover), co-authored by Laffer and Michelle Balconi, arrived in the mail. Was it even possible to chat with kids about economics?

See Also: How to Teach Kids About Investing

I was pleasantly surprised. The authors manage to accomplish what they promise to do in the subtitle: introduce kids to basic economic principles -- everything from supply and demand to opportunity cost and diminishing returns. And they do it through everyday scenarios that are colorfully illustrated with pictures and non-threatening graphs.

The book has four easy-to-digest chapters -- “Grocery Store,” “Family Trip,” “Summertime” and “Yard Sale” -- based on Balconi’s own experiences with her two children (an anecdote about a young girl who wants to swim with the dolphins was inspired by her daughter). It is aimed at elementary-age children, but the clear explanations are just as appropriate for older kids, not to mention plenty of adults.

Connecting with kids. After hearing Laffer speak at an event in Detroit, Balconi, a writer who lives in Grosse Pointe, Mich., was so impressed with his down-to-earth presentation that she and her husband tried it out at the dinner table with their children, Jacob and Bridget, who were 12 and 10 at the time. “We connected with our kids in a new way, and I wanted to replicate our experience with families all over the country,” says Balconi.

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She proposed the book project to Laffer, who himself has six children, 11 grandchildren and two great-grandchildren. “She was a lady on a mission, and when you see someone as enthusiastic as that, how can you not say yes?” he says.

They agreed to collaborate on the concepts they wanted to include. Balconi then wrote the scenarios, and Laffer reviewed them. I interviewed them about their project.

How did you kick off the conversation with your kids?

Balconi: Economics is the study of choices. So if you have two children, that makes it kind of easy. If you’re buying this for Jacob, what are you not buying for Bridget? If we’re making chicken for dinner because Bridget loves chicken, then we’re not making steak for Jacob. When our kids make decisions about what to wear, what to eat or how to spend their time after school, they’re using economic principles.

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Does the Laffer Curve play a role in the book?

Laffer: The Laffer Curve is a basic principle of economics because it’s all about diminishing returns: The cost of increasing an activity becomes greater than the benefit you receive from that activity.

Can kids understand diminishing returns?

Balconi: We have a side door and a garage at the back of our house that we don’t use in winter. So when it snows, the kids think that shoveling snow past the side door is an example of diminishing returns. Same thing for raking leaves: Is there any benefit to raking leaves in the back? We think of it as finding your sweet spot.

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How does this fit in with learning about economics in school?

Balconi: The book is designed to provide starter conversations for families, but the feedback from educators has been overwhelmingly positive. Teachers are always looking for relatable examples.

Laffer: This puts economics in the context of the family. Some of this education is done at home and some at school. You want to get it from all sides so the kids really understand it.

Were you successful with your own kids?

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Laffer: I would lecture them all day and they’d just look at me! The credibility of someone you see 24/7 is probably not as high as it would be from reading a book by someone else.

What is the most important lesson that you would like to teach kids about economics?

Laffer: Trade-offs are the essence of economics. You can’t always have all the a you want and all the b you want. You know, a lot of PhD economists don’t get that.