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Global Trade and You

A few weeks ago we found out something interesting about our son of 5 years old. At school he had apparently set up shop running a burgeoning trading business. His actions got me thinking about the functions of commerce in the modern world.  Specifically the concept of a global world where trade is free.

We have not formally trained my son in how to sell things or the art of trade. I doubt we have even mentioned the concept to him. But that doesn’t change that he discovered it on his own. What did he do?

Our Child the Trader

Well at the kindergarten where my son attends they give out tickets for good behavior. These tickets are utilizable for special things later, like erasers, snacks, etc. My son’s behavior is somewhere middle of the road, he is not the kid getting tickets daily but he is not going to be expelled either. So he is not the kid with all the tickets, but because of the special things he wants to be.

So what did he do? Well, each day my wife sends my son with his lunch, including a pack of Teddy Grahams. He begain telling my wife he was hungry at school so she increased his supply of the crackers. Then one day he came home with a bunch of tickets and a note for a bad behavior day. Some prompting revealed he had been trading the crackers for tickets. On the one hand I found it frustrating that he had abused the system, on the other I was quite impressed that he had figured it out.

My son had determined that his supply of crackers was plentiful and cost him nothing. He had determined meanwhile that to others the tickets were easier to come by. So, he traded his ample supply of crackers to those with an ample supply of tickets. He took advantage of his comparative advantage, the basis of all trade.

Comparative Advantage and You

All of modern society is based on the theory of comparative advantage in a way. The ability of each of us to specialize in an area where we have some advantage or relative advantage to some other area. This is why each of us has a specific job rather then everyone just having self contained economies within their home.

The Sharing Economy and Trade

The sharing economy is a great example of this. In essence it is not about cheap taxi like services or apartment rentals. The service itself does not provide these things. No it’s about removing the costs of finding those to trade with, the friction between each transaction. Finding the right people in a timely manner can be the difference between a sale or none. It can also be the difference between a profit and not.

I’ve spoken in the past about immigration being beneficial and the easier it is the better. In that post I highlighted that labor itself is a market and the free movement of that market does much the same as the trade of the sharing economy or my son trading for tickets. It allows cheap labor to move where labor Is more expensive and needed.

The Costs of Free Trade

Also In the same way free trade is exceedingly important but can have a cost. It allows capital and finished goods to move freely between regions, from areas where it is cheaper to areas of great expense. Collectively it raises the world’s wellbeing and is a great thing for society.

But.. And there is a big but, there are always losers. What is good for the collective is not always good for the individual or vice versa. In the case of the immigrants the area of labor they enter in their new country suffers from decreased labor costs, hurting those individuals who can not adapt from working in that field. In the sharing economy the taxi drivers and hotel earners are harmed by increased competition.  For my son, the overall view of the value of the tickets is disconnected from the goal of good behavior.

Example of Immigration and Trades Impact on Culture

As I wrote recently, I’ve spent some time in Barcelona recently. It’s not a wonder to me why I met one couple here that have not entirely integrated with the local culture. Their friends were all expats and they admitted they barely ever speak anything other than English. Counter that with talking to some folks that were here 17 years ago. When they came no one spoke English and they had to adapt to the local language or leave. More change due to immigration and trade. That’s that immigration I mentioned in effect. It’s a positive in allowing that couple to live there with little culture shock.

During my visit I spoken to some that have been in the area for a long time. I also spoke to a few people who came there in decades past. As is present in many places of the world the area is slowly losing it’s localness. I can find resturants open at an American Dinner time. Heck, I can find McDonald’s, Starbucks, and Burger King if I so desired.

That’s the other downside of low barrier immigration, capital, and trade. 20 years ago most of Barcelona was Tapas and restaurants that did not open before 8. These days the Turkish Kabab places are more present then Tapas. The Catalonian culture has suffered to some extent as a result. So have those local businesses that did not adapt to these changes.  That is what their independence movement is about ultimately, trying to protect their local culture.

Trade/Immigration is a Tradeoff

It’s a tradeoff, the benefits to society as a whole versus the cost to select individuals, but the movement forward is also likely to be inevitable. So long as people have free will those that can adapt to the new norm will. Those that attempt to maintain the status quo will eventually fail, though they may be able to hold on for some time due to rules and regulations.

What is the Solution?

Does that mean all is a mess and we should all give up in despair? Well no. First as an individual the key is to keep yourself adaptable. Modify your skills to allow you to adapt to changes in the labor force whether it be from immigration, trade, capital, or technology. Don’t follow the misguided belief that you can fight free trade or immigration with laws, as ultimately it will fail. Instead adapt.

In addition work to keep your culture alive whatever that may be. All culture is local after all. Apply your patronage to your local businesses from time to time. Practice aspects of your culture at home. Visit your local cultural sites. Globalization is inevitable and other cultures will seep in. But the culture you have today can also be preserved to some extent. Just look at the culture you have today.  Except where it was violently suppressed there are bits of every culture that has passed your area still present. That’s a testament that things can change and we not lose our heritage.


  1. Dan
    Dan March 28, 2018

    Some thoughts:

    1) was the trading of these good behavior tickets explicitly prohibited? If not, your son didn’t do anything wrong. One could argue the school established a system to encourage a secondary market. Why did they issue tickets to the students? Why didn’t they just mark the credit in a ledger and have the student’s balance debited when they redeemed their credit?

    2) the fact that your son lied to your wife about why he wanted more Golden Grahams indicates the trading was prohibited or at least frowned upon. He lied because he knew he was doing something wrong or the culture at the school made him think he was doing something wrong. Did he have the presence of mind to not continue asking for more & more Golden Grahams? Most kids would have just kept asking for more Golden Grahams to trade until it became suspicious to the mother.

    3) How did you leave it with your son? Did you discipline him?

    4) This seems more like an example of arbitrage. Golden Grahams were undervalued in your house and your son saw a market in Golden Grahams in the classroom. He exploited the spread.

    5) Off the top of my head, my solution would be to make a new arrangement with him. He can’t have any more Golden Grahams until he brings home a ticket. That would encourage the behavior that is seemingly being sought. To teach an extra lesson that trading is risky, you could make it 2 tickets per Golden Graham. Come to think of, I would ask your son what the classroom exchange rate was before setting setting the home exchange rate.

    • FullTimeFinance
      FullTimeFinance March 28, 2018

      Officially the school has no policy against trading, but I believe he knew it was sketchy. I’m not sure he fully understood why. We sat him down and explained things to him. It’s tough to tell with 5 year olds sometimes how much they understand. Ultimately we enrolled him in a sport to help him focus, that helped more then the tickets.

      • Dan
        Dan March 29, 2018

        If he were my son, the only part of the story which bothered me was that he lied to his mother about why he wanted to the extra Golden Grahams. That strongly indicates he knew it was wrong or would be frowned upon. Even that has an upside. There are the written rules and the unwritten rules of society. Somehow at a young age your son correctly interpreted the unwritten rule that trading would be punished. It’s problematic that your son decided to proceed with his trading plan despite sensing it would be frowned upon. That is the type of person who will push up against the boundaries of society and use the excuse “show me where it says you can’t do that.” A personality perhaps suited to the professions of law, politics or business.

        Actually based on what you have written, I would get him test for IQ. I have a suspicion he is well above average; perhaps genius level.

        • FullTimeFinance
          FullTimeFinance March 29, 2018

          It wouldn’t surprise me at all. On the one hand getting him to focus takes a lot. On the other even if he doesn’t appear to be paying attention, ask him something they just covered in class and he can rattle it off.

          The first thing my wife covered with him afterwards was being honest.

  2. Dan
    Dan March 28, 2018

    Follow up thought, your son’s example also reminds me of currency markets when a government is keeping the exchange rate artificially low while the traders are exploiting that through a market-based exchange rate.

  3. Matt
    Matt March 29, 2018

    That’s a great story! You need to save that note for his 1) application to Harvard Business School, 2) Interview with Goldman Sachs, and 3) Ice breaker slide for his PhD dissertation in Economics. As soon as he is freed from the Socialist tyranny of Kindergarten, he will have it made!

    I do think there is a great opportunity there for direct learning. He has demonstrated an aptitude and interest in this valuable skill. The question is, how to develop that in a positive context? Maybe it’s a summer lemonade stand. Maybe he could sell popcorn with a cub scout troop. Back in the day, I responded to several sales items marketed in the back of comic books. (yes, for real!) As a little kid, I sold greeting cards, seed packets, and many other things. Of course, the sales pitch is that a little kid is asking. Looking back at it, I never pitched it deceptively as fundraising, but I wonder if some neighbors may have mistaken that. Or, perhaps they just wanted to encourage entrepreneurial spirit.

    To comment on cultural preservation in the face of global trade: dairy farmers in the Swiss Alps are essentially subsistence farmers–mountains don’t make for the easiest pasture! But the government provides them a subsidy in order to encourage them to stay. This is more than just welfare: a big part of the economy in those communities is tourism, and tourists expect to see the farmers! (and eat very fresh cheese) Also, even natives look to preserve their heritage. So the public good there is more along the lines of culture and tourism, than their direct product. It’s not enough to attract an over-population of mountain dairy farmers, but it’s enough to keep some people who are inclined to learning and preserving traditions to pursue what they love. That seems like a good balance to me–a worthwhile thing, even if it does not add up to be economically self-sustaining.

    • FullTimeFinance
      FullTimeFinance March 29, 2018

      We’re still working on continuing to nurture the positive ramifications. I am cautiously optimistic great things are ahead for him.

      Interesting background on the Alps, I did not know the government supported it to some extent. There are definitely side benefits to a country in keeping unique aspects of their culture.

  4. Mr. 39 Months
    Mr. 39 Months March 30, 2018

    Good conversation. You talk about a lot of the pitfalls of immigration. Its a difficult topic, as many of the benefits and costs are not easily measured. A lot depends on how much “free stuff” the host country is willing to provide immigrants. Most want to work hard and provide for their families, but it is still an open question on whether low-skilled immigrants are a net-benefit.

    Love the story about your son.

    Mr. 39 Months

    • FullTimeFinance
      FullTimeFinance April 8, 2018

      It’s definitely a complicated discussion, perspective is important.

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