Travel and Trade in World History Jean Walker West Texas A&M University

1. Travel and Trade in World HistoryJean WalkerWest Texas A&M University

2. World History TEKS • (12)  Economics. The student understands the economic importance of, and issues related to, the location and management of key natural resources. The student is expected to: • (A)  compare global trade patterns at different periods of time and develop hypotheses to explain changes that have occurred in world trade and the implications of these changes; • (B)  analyze how the creation and distribution of resources affect the location and patterns of movement of products, capital, and people; and • (C)  evaluate the geographic and economic impact of policies related to the use of resources such as regulations for water use or policies related to the development of scarce natural resources.

3. The Wide World of Trade has activity-based lessons that can be adapted for high school or middle school. • Our initial focus is Lesson 6 : Trading Connections • Economic Concepts: • Exchange (trade) • Imports • Exports

4. Trading Simulation • Students learn how trade benefits them as individuals. • Students learn how trade benefits people in different regions and countries. • What do you need? • A paper lunch bag for each student • Small items such as candy for trade • Paper to write “satisfaction levels” on

5. Setting up the trade: Colored bags are more expensive and can be hard to find. White bags were $1.93 for 50 at Walmart. They have similarly-priced brown bags. If bags look alike, evenly number the bags. (I used 1 - 3.) The lesson suggests numbering 1 – 5.

6. Instructions: • Give everyone a bag with instructions to wait to open it. • Give everyone something to write on. • You can give them 3 separate cards. • You can give them a chart with 3 blanks.

7. Upon your directions, students open bags and rank quality of their satisfaction on a scale of 1 to 5 with 5 being best (or 1 to 10 if you want.) Round One

8. They can look to see what other people have before they write the ranking.

9. After satisfaction is evaluated, add and average totals. • Using separate pieces of paper facilitates this—use different colors for each round. • The grid can be used if you are going to add and average only after all three rounds are completed.

10. Round Two • Allow students to trade with only those with the same number on their bag.

11. Then students write down the level of satisfaction with what they have after Round Two. Add and average.

12. Round Three: Students can now trade with anyone in the room. Trades do not have to be one to one. They could trade 5 pieces of Laffy Taffy for one Snicker.

13. At the end of Round Three, students then evaluate satisfaction again.

14. Add and average Round Three.

15. The key to a good simulation: Debrief Debrief Debrief

16. What happened to the level of satisfaction? • It should have increased from one round to the next. • Why? • People were able to trade for an item that they wanted more than the item they had. • Trade allows us the opportunity to consume beyond what we can produce individually. • We can compare the first level of satisfaction (or happiness) to what you would produce on your own—not much variety.

17. Level of Satisfaction (continued) • The second round could be compared to trade occurring within a city or a state or even a country. • In the third round with no restrictions, this could be compared to worldwide trade. • Notice how the variety of goods available increases with a wider trading area, and satisfaction increases. • Specialization becomes less important and mass production begins to occur.

18. Were you required to make a trade? • No, trade is voluntary. • We trade by choice. • Trade does allow us to consume beyond what we can produce individually. • There is no way trade can reduce your overall wealth because you just wouldn’t trade if it would.

19. Question: Does anyone have a satisfaction level that went down? • So ask why they traded if they got worse candy. • “Wanted to meet someone.” • “Wanted to fit in.” • “I felt pressured to trade.” Do nations ever trade for reasons like this? Do nations ever refuse to trade because they don’t like another country—even if people like goods from that country?

20. Why did even the person with 5 Snickers or 5 Reeses trade? • Variety. • As you get more of exactly the same thing, the utility of the item falls. • What do we call this? Diminishing marginal utility. • Some people probably didn’t want to trade in Round Three because they liked what they had. This tells us that trade stops when marginal utility approaches zero.

21. Define: • Imports – goods and services purchased from sellers in other nations • Exports – goods and services sold to buyers in other nations • Do we trade more goods or more services? Why? Will technology change this?

22. Initial Endowment Affect • If you started with “good candy,” it made it easier to trade and you could get more from each piece. • The four factors of production are land, labor, capital, and entrepreneurship. • Each country has an initial endowment of each factor. Few countries start with large endowments of all four factors, but those with better endowments have more power in the trade because they can bargain. • Hong Kong has a large population but a small land area. • Japan has relatively few natural resources.

23. Is everyone happier after trade? • They should be—otherwise they should not have traded. • Is someone else “relatively happier” than you are—probably, but you are still better off than you were before trade. • Countries with less resent those with more because the wealthier countries dictate the terms of trade. But they still trade because they gain more than they lose.

24. Additional benefits of trade: • Trade also allows for related businesses to develop. • FedEx and UPS: their business is shipping products for trade • Railroads and trucking: deliver the products • As trade increases, jobs become available, people move to take the jobs, population has grown, and urbanization has taken place.

25. For what candy did no one want to trade? • This product would not be made anymore and the employees would be out of a job. • Competitive forces exist in trade relationships. • When government stays out of trade, competitive forces rule the market place and products no one wants die. Is this fair? What about people who were employed in those businesses?

26. How do we decide what to trade? • We specialize in what we do best and trade for the rest. What can we produce at a lower cost than another country? • We call this comparative advantage. For the U.S. it is nuclear machinery, electronic equipment, fine medical technologies, aircraft For Texas, it is computers and electronic equipment, chemical, machinery, transportation equipment, and petroleum products

27. How do we decide who to trade with? • We tend to trade with those countries that are more like us because they have similar goods but just with slightly different attributes. • Largest U.S. trading partners • Canada • Mexico • China • Largest Texas trading partners • Mexico • Canada • China