Inflation Auction

We got the idea for this inflation activity here. This one was SO FUN. And it did a good job showing how a minimum wage leads to higher prices. Here's a video talking about that, too. Also related: It seems like everyone asks the question at some point or other, "why can't we just print more money?" And it's surprisingly hard (for me) to explain! This video does it pretty well.

We had been using our family currency for awhile by the time we had this auction, so most of the children had earned some money. I was glad to have that because I think the activity was more effective when the money wasn't simply handed out at the beginning—it had been earned through doing actual work, and thus had more value to the children themselves. (We could also have used real money, but none of them really have very much.) There was some definite disparity, though: Abe had earned a TON of family money, because he's a hard worker and that's just the way he is—he loves to earn things and keep track of things and go the extra mile. The others had made proportionally less, and Goldie and Junie almost nothing.

I bought some special candy, things we hardly ever have and certainly the children never have all to themselves! And then I proceeded to auction them off. The first "year," two packages of Lindt truffles went for $3 and $2 respectively. The two children who won those items were very, very pleased with themselves.

Then I pointed out how sad it was that Goldie and Junie didn't even have enough money to buy ANYTHING. (They had $2 and $1 each, I think.) I instituted a $2 minimum wage for "Year 2" so that everyone would at least have enough to bid with! But in Year 2, the same kind of package of truffles was sold for $7! And a pack of Skittles went for a whopping $22.

Now our poorest citizens didn't have NEARLY enough to buy something! I raised the minimum wage to $4 for Year 3. The next package of Lindt truffles sold for $15! The Starbursts fetched $45 from Abe, for whom money was really no object. I auctioned off one more thing, a Ritter Sport bar, and Seb paid $49 for it! And the poor little girls still didn't get anything. All that had happened was that the prices had gotten even more out of their reach!

I must admit that I was very pleased that everything proceeded like such a textbook case. I didn't have to manipulate or encourage or anything—that's just what our prices did naturally as the amount of money in the system increased (and the value of it, necessarily, decreased). It was also interesting—I had given the children a big lecture on being good sports and not getting mad if they didn't get something, and so forth. And they were really good about it (and I did give Junie and Goldie some little candies of their own later, so they got something too) :), but there was some regret—especially for people that didn't bid aggressively during the first year, and later paid so much more for the same items. And Sebastian regretted it SO much that later he arranged a little side trade with Malachi, unauthorized by me and unregulated by the usual market forces. There, in the Black Market, where there was little competition, he paid $71 for one bag of Lindt Truffles! And that was a wonderfully apt object lesson as well.