How a central banker learnt lessons of finance while still a child…

A fascinating speech from Fed Governor Raskin on her childhood experience and finance lessons. It tells you a lot about how one can learn simple economics obsertving things at home:

I am pleased to see that my parents are in the audience. I credit my parents with a lot, especially with promoting a strong work ethic in our family that taught us the fundamentals of a market economy. From a tender age, my brother and I had a series of unusual jobs. For example, Kenneth gave French horn lessons. He was about 13 years old at the time, so our parents would not permit him to charge more than $1.25 per hour. Kenneth had four students. My mother permitted him to use the living room for lessons, as long as his students took off their muddy shoes at the door, so Kenneth had no overhead expenses and was both grossing and netting about $5.00 per week. Given the scarcity of French horn teachers in our neighborhood, Kenneth had a monopoly in the French horn market. So long as the local high school bands produced a steady stream of French horn players, Kenneth was assured that his services would be in demand.

I had an even less lucrative job that involved truly unskilled labor. I numbered pages. My father, who was in the publishing business, would, in the days before word processing, bring home book manuscripts that did not have page numbers on them. These manuscripts needed to be numbered, and that’s where I entered the market, so to speak. My father came up with the idea of paying me to number the manuscript pages. The rate he set for me was one cent–and that was not one cent per page, but one cent per two pages. Needless to say, this wage was really too low for me, and I wanted to go on strike, but I was only 10 years old. By the time I became a teenager, and it occurred to me that I couldĀ strike, I had been displaced by the progress of technology–specifically, word processors with automatic numbering options–which reduced my bargaining power to, well, nothing. I could talk more about this particular job–noting the fact that even at the age of 10 I found this job to qualify as one of the most tedious known to mankind.

I knew as a kid, however, that in order to buy a ticket to go to the movies with my friends, I was going to have to number around 400 pages, and if I did more pages than that and invested the money in a savings account at a bank at a compounded annual interest rate of 4-1/2 percent, I could eventually afford to buy some popcorn, too. Or take a brief vacation from numbering. But if I wanted to cut back the number of pages and still accumulate enough to go to the movies sometime, I would need to find an interest rate out there for my earnings of three or more times what the bank was offering–not likely for a very young investor with limited funds.

I share these stories to illustrate that I grew up with a keen sense of working and saving, subjects now central to my work at the Federal Reserve; I understood the importance of earning enough interest on my savings to pay for the things I wanted.

Amazing stuff.

Includes a lot of economics concepts/basics likeĀ comparative advantage, skill development, monopoly, unions and bargaining power, Technology and replacement and of course financial planning…


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