Lesson DescriptionTime Required: 2 or 3 class periods Materials: One valuable article that most students in the class will want. (Suggestions: a T-shirt or sweatshirt with school logo, a $5 gift certificate to a fast food restaurant.) Poster board or butcher paper and markers. Concepts:
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Procedures:
Day 1
- Hold up the T-shirt and explain to the class that there is a problem: there is only one T-shirt. Take this opportunity to review the definition of scarcity by asking how many students would like to have the shirt and pointing out that our wants are exceeded by our ability to satisfy them.
- Ask students to brainstorm a list of ways to decide who gets the shirt. Introduce the term "rationing" and emphasize that it is a necessary consequence of scarcity. Sort the items on the list into categories. For example, "running a race," "the highest grade on the next test," and "whoever gets to class first tomorrow," might all be denoted "contests." (Commonly used categories include: contests, need, auction, merit, first-come-first-served, lottery, money-price, arbitrary distinctions such as age.)
- Distribute the categories among the groups and instruct
each group to list the advantages and disadvantages of their
assigned method of rationing. As the groups report their
conclusions, generate 2 lists on the board: Criteria for
a good rationing system and Characteristics of a poor rationing
system.
Anticipate that students will begin to see the advantages of rationing by money price:
- it allows all to participate
- it allows people to match their willingness to pay and their desire for the product; thus it expands individuals' options and power
- it allows all individuals the opportunity to try to influence the outcome
- it provides incentives for both buyers and sellers to modify their behavior in such a way as to reduce the impact of scarcity
Anticipate further, that students will raise objections to money price rationing - the most common objection being that it is not "fair" because not everyone has the same amount of money. Counter by asking whether everyone has the same needs and wants, and whether everyone places the same value on the T-shirt. Defining "fair," and asking for comparisons to other forms of rationing will help to advance the conversation here. Note that the intent is not to convince students that a system of money-price rationing is perfect, but to establish that in most situations we encounter in everyday life, money-price rationing has clear advantages over the alternative methods of allocation.
- Ask the class to determine how the T-shirt will be rationed.
(If the students have not yet questioned the appropriateness
of money price rationing in all situations, they will probably
do so at this point. Do not be surprised if students choose
to award the T-shirt by lottery, saying that because they
didn't know that they would need money, they didn't bring
any. Mention that the lottery may only delay the money-price
rationing as whoever gets the T-shirt will own it and have
the right to sell it if someone offers him something he
values more.)
Note: It is important to actually award the T-shirt by whatever method the students choose.
Day 2
- Review the advantages of money-price rationing and emphasize that it is the basis for exchanges in market systems. Note, however, that other forms of rationing are present, if not prevalent, in our society. Ask students to generate a list of examples of non-money-price rationing. Some suggestions: standing in line for concert tickets (first-come-first-served), college admission (merit), entitlement funding (arbitrary distinction.)
- Hand out the goals worksheet. Define each of the goals
and provide examples. Choose a current events problem and
discuss the potential for accomplishing each of the goals
within the context of the problem. Help students to recognize
that trade-offs are always necessary, and that goals may
actually conflict with one another. Choosing from the list
below or from current events, ask students to rank the goals,
in order of their personal priorities, on two different
issues:
- welfare reform
- protecting endangered species
- reducing violence in American cities
- improving public education
- For the third issue, ask students to consider the problem of health care, an area in which relative scarcity is high and demand is growing. Ask them to think about a national policy regarding the provision of health care services. Once individuals have completed their own ranking, ask students to form pairs (or groups of 3) and to reach consensus with their partner(s) on their priorities in health care.
- Combine pairs (or 3s) to form groups of 4 (or 6). Give each group a set of 3x5 cards with the goals listed on them. Again, instruct groups to try to reach consensus. Encourage them to lay out the cards and move them around as they discuss their thoughts. (For groups of 8, repeat this process one more time.)
- Once groups have agreed to at least their top 3 priorities in terms of health care, assign them to design a system for rationing scarce transplant organs. Remind them of the earlier discussion of methods of rationing. Characterize the transplant problem as one of high relative scarcity, with growing demand and a small and uncertain supply of organs. Each group will be given 5 minutes to present their rationing plan and 5 minutes to answer questions and defend the plan. The plan will be judged on the basis of its effectiveness in dealing with the problem, and on how well it reflects the group's goal priorities.
Day 3
- Evaluate the group presentations on the following
criteria: rating 1-5, with 5 being the highest rating:
- how effectively does the plan deal with the issue of scarcity?
- what are the incentives embodied in the plan and do they produce unintended (good or bad) consequences?
- how well does the plan meet the goal priorities of the group?
- Debriefing or homework reaction paper questions: (you
may want to supplement these by reading aloud or giving
students a handout with reading excerpts about some of the
current issues involved in the transplant problem.)
- Should people be allowed to sell their own organs? (re: poor people from Middle Eastern countries selling their kidneys to hospitals in Europe to get money to support their families)
- Should people be allowed to donate the organs or body parts of their living children? (re: people who conceive a child in the hopes that it will be a bone marrow match with a living, ill child)
- Should people be allowed to bid for transplant organs? Should there be a market for transplant organs? (re: organ brokers)
- What are the strengths and weaknesses of the current transplant system? (re: the politics of transplant waiting lists)
- What kinds of incentives are built into first-come-first-served health care systems?
- How do we prioritize need? merit?
- How can we ethically increase the supply of transplant organs?
- Why do you suppose that we are willing to have food allocated by money-price rationing, but that many people are disturbed by the idea of rationing transplant organs in this way?
Follow-up suggestions:
Homework assignment - Have each student choose one of the non-money-price methods of rationing and write a description of how the everyday world would change as a result. One of my students described grocery shopping if we allocated goods and services to those who won wrestling matches. His scenario was hilarious, including a description of the Sumo wrestlers who would work in the checkout lanes, the fact that fathers would take over the grocery shopping from mothers, and the prediction that children would be classified as "disadvantaged" if their fathers could bench press less than 300 lbs.
GOALS OF ECONOMIC POLICY
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GOALS AND DEFINITIONS |
Issues: |
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| Efficiency Optimal use of scarce resources; preventing waste and ensuring most benefit for least cost |
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| Equity People within society are treated fairly and equally |
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| Freedom Individuals' economic freedom of choice is protected and fostered. Power of government and other interest groups is constrained |
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| Full Employment Resources, including workers, are being used to capacity. In practice, this means keeping unemployment levels around 5% |
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| Growth Increasing the productive capacity of the society |
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| Security Protecting individuals against such economic risks as unemployment, bank failure, poverty, business failure, etc. |
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| Stability Maintaining an economic environment characterized by little or no inflation and no rapid price fluctuation |
Copyright © 1999-2003 Foundation for Teaching Economics
Permission granted to copy for classroom use.