Sanji and the Baker

"This is illustrated by Korky Paul , who is quite well-known. I love Korky Paul, he’s my absolute favourite illustrator and I stumbled upon this book early on, before I even started the EconKids project. I was reading the book to my kids and I was struck by the illustrations but then as I read it I thought, ‘Wow this is all economics!’ It’s about a little boy in a fictional Middle Eastern country who lives above a bakery. He cannot afford to buy anything from the bakery, but he loves to smell the smells and he even designs a contraption to help him smell everything better. The baker is this grouchy old man who gets really annoyed and demands the boy meet him in court – he wants the judge to order the boy to pay for the smells. So the judge orders the boy to bring five coins the following day. The next day the baker and the boy come back to the judge, and the judge clinks each coin loudly into a metal bowl. He asks the baker, ‘Did you hear that?’ and the baker says ‘Yes!’ And the judge says, ‘Did you like the sound of that money?’ And the baker says, ‘Yes!’ And then the judge says, ‘Well, consider yourself compensated!’ And he gives the coins back to Sanji. That story is about what in economics we call an externality: when something that somebody produces has either a benefit or a cost for other people that is not included in the price. So in this case it’s the smell of the baked goods – other people can enjoy the smell, but they don’t have to pay for it. That’s a positive externality. A negative externality is pollution: when firms produce goods but they pollute the environment and nobody pays for it. It’s a very sophisticated concept, and yet here it is, in this picture book for young children. Mostly by coming to the website, and there’s also the papers that I co-authored with Shelby Hawthorne, who started the list. But I also volunteer: in schools, in classes where my children are. There’s also an international organisation called Junior Achievement – they do a lot of work teaching economic and financial literacy, and I’ve done some volunteering work with them as well. By the way, there is a children’s book that was a book of the month about a year ago, that I do also want to mention. It is more classic economics and it’s called Isabel’s Carwash. The author is Sheila Bair, who has been chairman of the United States FDIC for the last couple of years. So she’s one of the most important financial regulators in the world and she has written a couple of children’s books about saving, investing, and interest rates. Isabel’s Carwash is about a girl who wants to raise money, but she needs a loan, so she borrows from her friend. She promises them the loan back, plus some interest and she starts her own business which is a carwash. There’s risk involved – so it’s all the classic things – risk, interest, lending, investing. It’s a good book. Yes, and I use that as an example that you can get a picture book by a high-profile person, teaching traditional financial topics for a young child to understand."