The clearest example of supply and demand economics that I ever encountered was among a group of third graders in an elementary school cafeteria. Every parent who packs lunch for his or her child knows that a certain amount of food trading is likely to occur. What I don’t think any of us realized is how sophisticated and organized the system is.
My moment of clarity came one afternoon when my daughter made a specific request. “Mommy,” she said, “next time you go to the store, could you get me some mini-Oreos?”
“The little ones are really cute, aren’t they?” I responded, in an attempt to forge another bond of understanding and goodwill. Besides, I have a weakness for tiny things and I was not immune to the cute factor.
“Better things? What do you mean?” I asked, puzzled. “What kind of better things?”
“Well, Stephanie’s mom always gives her chips for lunch. Today she traded me 3 chips for one of my cookies. But she gave 10 chips to Mary yesterday because Mary had the little Oreos and she likes those better. If I have the little Oreos I can trade 3 of them for 10 chips and I’ll still have some Oreos to eat. Or I can trade more of them and get the whole bag.”
Fascinated, I asked for more detail. It turned out that the system of trades and values was much more complex than just Oreos and chips. The hierarchy encompassed different flavors of cookies, taking into account the relative merits of home-baked versus store-bought.