Howard R. Gluff Northside Middle School Muncie, Indiana Howard Gluff teaches at Northside Middle School in Muncie, Indiana. He has served as a consultant for the Center for Economic Education at Ball State University, and he has organized and conducted several economics education workshops for K-12 teachers.

Objectives Through their participation in simulation activities, students learn economic concepts: producer, consumer, human capital, saver, taxpayer, and investor. By handling administrative details of the mini-economy, students learn responsibility. Students identify the effects of economic decisions on themselves and their community. Students increase their own human capital by acquiring new skills and knowledge. Time Required Two nine-week grading periods Materials Handout 1 — Sample Job Descriptions Handout 2 — Outline for Job Application Letter

Overview

Middle school social studies curriculum includes the study of the founding of our nation and its government. As the lead essay has noted, our system of private enterprise and our market economy were also founded in these early years. The middle school social studies classroom, therefore, is the perfect place to introduce economic concepts using the mini-economy. Dividing the mini-economy into two distinct phases — the command economy and the market economy — helps students learn how economic systems differ and how these differences affect people who experience them.

Phase I is organized as a command economy, with the teacher playing the role of the reigning dictator. Students are given little economic freedom. In Phase II, the mini-economy becomes market-oriented, with students making more decisions. Student role playing activity helps to teach a basic understanding of economies and economic terms. The mini-economy also becomes an excellent classroom management tool.

Teaching Activity

For the command and market phases, students assume the following roles, which vary in each phase.

Producers: students generate work through class assignments, group discussion, and classroom jobs.

Consumers: students consume supplies, food, utilities, room space, and teaching services.

Savers: students decide how much income to save for future purchases.

Taxpayers: students pay taxes for physical plant, supplies, and teaching services.

Investors: students invest in classroom business – mini-economy.

Phase I: A Command Economy

Send a letter to parents advising them of the mini-economy classroom project. In this phase, the teacher has absolute control over what is produced and how students will earn money. This allows the teacher to introduce the mini-economy at a comfortable pace. It also teaches students first-hand how a different economy operates. Examples from ancient civilizations and contemporary command economies can be introduced to the students.

How Students Earn Money
In the command economy, students work for the state. They may earn money in two ways: classroom performance and public service jobs.

Classroom Performance: Students are paid for completing assignments, doing extra credit, taking part in classroom discussions, excelling in schoolwork, etc. (I pay students for good grades on key assignments.) Students also receive pay based on their grades for the nine-week period.

Public Service Jobs: The teacher may assign public service jobs by group or by row. Examples include picking up trash, straightening books, cleaning boards and erasers, and other assigned work required by the dictator. Students are usually paid for this work, but oppressive dictators sometimes require citizens to work for the good of the state. Students perform their public service jobs on certain days of the week.

Costs Incurred by Students
The dictator can create any number of costs students must pay to survive in their mini-economy. For example:

Living Expenses: As consumers, students pay for utilities, rent, and services of the teacher. Whether or not students can own desks is the prerogative of the dictator.

Taxes: Students also pay taxes to cover the dictator’s salary. Taxes are assessed at a flat rate.

Fines: Students who violate classroom rules pay fines to be determined by the dictator.

What Can Students Purchase With Their Remaining Income?
NOT MUCH! In the command economy, students mainly earn grades and work for the good of the state. No decadent luxury purchases are permitted. Any necessary purchases must be made at the state store.

Phase II: A Market Economy

In this phase of the mini-economy, students are given more economic freedom and many more opportunities to participate in free enterprise. This phase teaches students about capitalism and its tremendous impact on contemporary world history. The teacher should take class time to present lessons on the market economies of the United States and other countries.

How Students Earn Money
Students still earn money for academic work and public service jobs. However, they are given much more freedom. They can apply for jobs they want and can also operate their own businesses.

Classroom Performance: Students can earn more money by excelling or improving their studies.

Jobs: Students can apply for jobs created by the teacher. HANDOUT 1, Sample Job Descriptions, describes duties, qualifications, and pay scales. Students must submit job applications; references and job interviews may be required. HANDOUT 2, Outline for Job Application Letter, provides guidelines for students to use in applying for jobs. Applying for a job is a competitive process.

Classroom Businesses: Students may open their own businesses and provide goods and services to their classmates. Ideas for goods include making cards, bookmarks, decorated pencils, cookies, and candy. Services may include tutoring, desk cleaning, homework reminders, postal delivery, face painting, manicures, or paperback book swap. Businesses operate at specific times.

Daily Attendance: A small reward is given for daily attendance.

Costs Incurred by Students
Students can still incur living expenses and taxes. They will also incur expenses in running a business. However, they have the freedom of owning their desks.

How Students Spend Income
My class holds a large auction where students can purchase class privileges or items donated by local businesses. At this point, the teacher could choose to have a flea market, illustrating a local market economy.

Students run the administrative details of the mini-economy, such as paying taxes and bills, handling banking transactions, and investments. One day a month is set for mini-economy administrative details. Students calculate and record all money transactions.

Conclusion

The mini-economy is a tool to motivate students and interest them in classroom activities. More importantly, it is a hands-on and creative way to teach economic concepts. In order for students to achieve the greatest benefit, give them responsibility. One of the benefits of the mini-economy for teachers is its adaptability to any classroom setting.

Note: An early version of Howard Gluff’s mini-economy lesson for middle school appeared in a publication by the Indiana Department of Education in October 1996.

Economic Concepts Consumer   A person who purchases or buys goods and services. Human capital   The health, education, experience, and skills of people. Investor   A person who commits money or capital in order to earn profit or interest. Producer   An individual or firm who makes goods or provides services. Saver   A person who sets aside money or goods for future use. Taxpayer   A person, group, or business that pays a contribution required for the support of a government.