The fli ed

The Financial LiteracyInstitute

January 22

&

January 23, 2008

Top Ten Economist Valentines

10. “You raise my interest rate 30 basis points without a corresponding dropoff in consumer enthusiasm”

9. “Despite a decade of inflation, I still dig your supply curve”

8. “What do you say we remeasure our cross-elasticity?”

Top Ten Economist Valentines

7. “You bring the butter, I’ll bring the gun”

6. “We can make beautiful music – and reach equilibrium – together”

5. “Further stimulus could result in uncontrolled expansion”

4. “Tell me whether my expectations are rational”

Top Ten Economist Valentines

3. “Let’s assume that we have a ritzy hotel room and a bottle of wine”

2. “You stoke the animal spirits of my market”

1. “A loaf of bread, a jug of wine, and thou beside me watching the S&P 500”

Joke Set-Up:

A woman hears from her doctor that she has only half a year to live. Her doctor her tells here to marry an economist and move to Scranton, PA.

The woman asks: “Will this cure my illness?”

The punch line:

The doctor responds: “No, but the half year will seem pretty

long.”

The Set-up

Told by John Kenneth Galbraith about himself

As a boy he lived on a farm in Canada. On the farm next to his there lived a girl he was fond of. One day they sat together near a cattle pen and watched as a cow and a bull were…”getting together”

The Set-up (continued)

Galbraith turned to the girl and said (with a suggestive look)

“Gee, that looks like it would be fun”

The Punch line:

She replied: “Well…she’s your cow.”

The First Law of Economists

“For every economist, there exists an equal and opposite economist.”

The Second Law of Economists:

They’re both wrong

From the Hennie Youngman School:

Two economists are walking down the street. One sees a dollar bill lying on the sidewalk and says so.

The second responds: “No…if there were, someone would have

picked it up.”

And finally….

They say that Christopher Columbus was the first economist.

When he left to discover America, he didn’t know where we was going and when he got there he didn’t know where he was.

And it was all done on a government grant.

Background

Purpose – to increase the financial literacy of students & to develop a skilled workforce for a growing financial services sector in NEPA

Method – teacher training via use of proven materials and classroom/online instruction

Sponsors

Financial support –• Wall Street West/WIRED

• National Council on Economic Education

• Tom Hesser Chevrolet and BMW

Sponsor Institutions• Misericordia University & The University of

Scranton

Additional Instruction

On-line learning over a 4 month period Review of results from spring Stock

Market Game Final session – including evaluation

Financial Fitness for Life

Materials include• Teacher Guide (K-2, 3-5, 6-8, 9-12)

• Student Workouts

• Parents’ Guide

Financial Fitness for Life

Grades 9-12 22 lessons Grades 6-8 17 lessons 5 Themes – common to both

• 1: TNSTAAFL

• 2: Education Pays Off: Learn Something

• 3: Tomorrow’s Money: Getting to the End of the Rainbow

• 4: Spending and Credit are Serious Business

• 5: Get a Plan: Get a Grip on Life

Financial Fitness for Life

Foundation – learning to be a bricklayer The Economic Way of Thinking Decision Making

The Economic Way of Thinking

The Handy Dandy Guide 1. People Choose We always have choices Resources are scarce Economics: OR ? – Why do kids think that money grows

on trees?

The Economic Way of Thinking

2. All choices involve costs. Choices come with costs There is an opportunity cost for each

choice• Subjective

• May not be monetary

• Example – baseball in Chicago

The Economic Way of Thinking

3. People respond to incentives in predictable ways.

Incentive – benefit or cost that influences a decision. Example – money

Most decisions are made “at the margin” ? Is it rational to cheat?

The Economic Way of Thinking

4. People create economic systems that influence choice and incentives.

In the U.S. – we rely on markets, choices and incentives

Main alternative – command economy

Example

From the Cuban Constitution Article 5 – The Communist party is to

lead society in the construction of a socialist and eventually communist economy and political state

Article 14 – The government, not individuals, owns the means of production

Cuban Constitution (Continued)

Article 15 – The government, not individuals, owns the land and all enterprises.

Article 16 – The government, not individuals, makes basic economic decisions

Market Economy

1 Private ownership of resources 2 Free enterprise 3 Self-interest motives 4 Competition 5 Markets and prices

The Economic Way of Thinking

5. People gain when they trade voluntarily.

Trade is mutually beneficial – “not a zero sum game”

Digression – what about those lousy baseball deals?

The Economic Way of Thinking

6. People’s choices have consequences for the future.

Saving, investing and conserving – result in a higher standard of living in the future

No saving, investing = no growth

Decision Making

There is no such thing as a free lunch A wise decision weighs benefits and

costs Scarcity – results from limited resources,

unlimited wants Resources include – human, natural,

capital, entrepreneurial

See “Questions” from FFL p. 12

Personal Decision Making – similar to Exercise 3.2 p. 13

See the Decision making grid Step 1 – Define the problem Step 2 – List the alternatives Step 3 – Identify the Criteria (rules) Step 4 – Evaluate the alternatives (“+” or

“-” OR numerical scores) Step 5 – Make a decision