The Most Important Law that Students Should Be Taught

Good morning, everyone.
Before we begin the lesson, let me tell you about what I call the First Law of Economics.
This is it:
If you want someone to give you something, you have to give them something in return of a perceived equal value.
This Law applies to individuals, to businesses, and to entire countries.
So, if you go to the shop and you want to buy a T-shirt, they will give you a T-shirt, but they expect you to give them something in return: in this case, money. We can call the First Law of Economics the Law of Mutually Beneficial Exchange.
When, in the future, you get a job, what’s really happening is that you are going to give your time and your skills to the person you are working for and that person, in return, will pay you. Many of you will work for a boss, and so the exchange of skills (and time) for payment will be made through the business you work for. Some of you may start a business though, in which case you might be dealing directly with customers. When, for example, your tap is broken, you might call a plumber and the plumber comes and fixes it. In exchange for the plumber’s time and skill, you give the plumber money.
Basically business and individuals provide what are called “goods” (physical things like a chair or a light globe) and “services”. A service is something like the work that an accountant does when he or she prepares your tax return for you. Mechanics offer goods (like motor oil or spark plugs for your engine) and services (the actual work they do to fix or service your car). These goods and services are often referred to as “parts and labour”.
So, if in the future you want to work, it’s not really a matter of just saying you want to find a job (although there’s nothing wrong with that expression). It’s really a matter of mutually beneficial exchange. You will provide your skills or products or time or services to someone else and that someone else will give you payment in return.
Now, a lot of you may never have thought about it this way. Up until now, nearly everything you have has been provided for you. Your parents provide food and clothing and stuff and they don’t really ask for much in return. Love of course complicates things. (As a parent myself, the “payment” I receive from my own kids is the gratitude they express to me and, let’s face it, when they do well, I feel good! As I said, love complicates things.) In the real world of work, however, no-one is just going to give you stuff that you want if you don’t provide something in return that they want.
So, why are you at school? It’s because you need to learn the skills that you need to offer future bosses and future customers—for which you will receive your income.
If any of you have little brothers and sisters in primary school, you will know that there is no way they would be able to do most jobs. Most of them would struggle even to make, say, a coffee at a local café, or to stack shelves at the supermarket, both jobs that don’t require a huge amount of training and which don’t pay that well. However, most of you in this class could easily do these jobs because you’re a whole lot smarter than you were in primary school, and you’re bigger and stronger.
But this leads us to an important point. If the only skills you have are also possessed by millions of other people, then why would someone pay you top dollar when it’s easy for a business to find someone else to do the same work for a lower wage. We now get into the Second Law of Economics: Supply and Demand. Put simply, if it’s easy to find someone to do a particular job because it’s a low-skill job, then the payment will be low as well.
The people who are paid the most are the people who provide skills or services or products that few other people can provide. Lots of people can stack shelves at a supermarket, and though it’s a really important job and an honourable job, it’s a low-paying job.
So what skills do you have to offer now and what skills will you have to offer in the future? I want to encourage you all to work hard, to learn as much as you can at school, and to become as good as you can at reading, writing, and mathematics. In the world of work, no-one really owes you anything. To earn an income in the future, you will have to offer something in return. So make sure you gain the skills you need! And of course you’re all going to need the skills that I’ll be teaching you!!
Anyway, let’s begin the lesson.

Note to Teachers:

I often refer back to the First Law of Economics because of its pervasiveness. It doesn’t just apply to individuals but also to whole countries. For example, Shedding Light on Atoms Episode 3: The Discovery of Atoms describes how elements are extracted from mineral ores (for example, iron from iron ore which contains a high concentration of iron oxide). I often pause the video and talk about how Australia receives income from other countries by selling the iron ore and the steel that we produce to other countries.
I might say something like…
A large part of Australia’s wealth is generated from the fact that Australia as a country has things (in this case iron ore) that other countries want and which they are prepared to pay for. The international monetary system is pretty complicated but, at a really simple level, Australia gives iron ore to China and China gives Australia things that it produces (such as electronic equipment). It’s the First Law of Economics at work.
A country can only import things if it exports things as well.
And an individual person can only acquire something if that individual gives something in return. It’s the First Law of Economics: if you want someone to give you something, you have to give them something in return. And what do you have to give? Maybe not much at this stage because you’re young. But you’ll grow and continue to learn and by the time you finish your education you’ll have much much more to give than you do now!

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