Little is done to prepare kids for an economic world that offers none of the old guarantees. Now, a few innovative teachers -- a very few -- are changing that

Both of my stepsons are smart and do well in school, but to hear them talk about business you would think that the law of supply and demand had been repealed. Why such ignorance? Is basic economics too complicated for students? Or are teachers just bad at teaching it? -- C.H.

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It was hard, listening to the rapid-fire discussion among the 26 assembled Delaware Valley retailers, not to be struck by just how savvy even the smallest small-business person can be, if given the chance.

They were a network of sole proprietors mostly, with a smattering of partnerships. All launched within the year, financed with pocket change or a small family investment, they'd been started with the same market surveys, cost graphs, and high hopes -- hopes that, for an unhappy few, had started to turn sour as days went by without any sales.

It was to those few chief executives in trouble that the rest now offered their expertise. Everyone in the network suggested a different solution. "You could lower your prices," Michael D'Amore of Michael's Magnets suggested."That makes demand go up." Meg Farrar proposed a premium, "like buy one, get one free" -- it had worked for her at Meg's Stashunary [sic]. "Or try advertising," a towheaded soprano, crayon in hand, called from the back. The discussion might have gone on all afternoon, with eager hands waving to catch the teacher's eye, if the school bell hadn't rung, signaling the end of the day.

Welcome to "Starville" -- known for most of the week as Mrs. Doris Stevenson's second-grade class at Brandywood School, in Wilmington, Del. -- proof that children can be taught how business and the economy work. Here, in a program called Mini-Society, children learn by creating a self-directed economic world that mirrors our own. Three times a week for 45 minutes, they become proprietors of small businesses, buying and selling refrigerator magnets or decorated cards, pencil holders or snacks. They create their own currency -- the "moonbeam" in Starville -- and make up their own rules for commerce. They rent desk space, keep a P&L, and set and pay taxes. Over the semester they see firsthand why people work, what happens in a store, and the difference between an owner and an employee. They learn what happens if you make a customer mad, how competition lowers prices and raises quality, and what makes you go bankrupt -- and how persistence and determination can help you start again. The children make the decisions, not the teacher, whose role is principally to "debrief" them on their experience; it is the students, after all, who live with the consequences, learning about cost-benefit analysis along the way.

Stevenson's students are lucky. Most American kids will go all the way through school without the vaguest clue as to what cost-benefit analysis is, let alone that it might have any possible importance in their lives. But at the end of the Mini-Society program, created by Marilyn Kourilsky, dean of teacher education at the UCLA Graduate School of Education and executive director of the California Council on Economic Education, elementary-school students test as well at recognizing economic terms and concepts as do college sophomores enrolled in Econ. 101. Their basic skills improve, too -- with moonbeams to keep track of, learning to add a column of figures takes on a new importance.

It's how the kids' attitudes are changed, however, that most impresses Stevenson, Delaware's 1986 teacher of the year. "Mini-Society ties children into the real world at an earlier age than ever before," she says. "By giving them real responsibility they learn to become good decision makers. And they learn that they can't have everything." At semester's end her students have more self-esteem and a stronger sense of autonomy, she adds; they're more creative and self-reliant, more courageous in the face of risk, and more aware of the trade-offs it involves.

Those are lessons that a growing number of their parents are learning from business as well -- lessons, sadly, that most American schoolchildren will never be taught. Not because they can't be, but because, except for a handful of innovators operating at the fringe, most educators are either unprepared or unwilling to teach them. Even the Mini-Society program, introduced in 1973, remains a tough sell, Kourilsky admits, its documented successes notwithstanding. It requires that teachers hand over classroom authority and the responsibility for learning to their students, a risk that few teachers will take; others dislike the program's clear market orientation or fear they themselves won't understand the economic terms involved.

No one expects Dick and Jane to read a balance sheet, of course -- or their teacher to, either. But without some effective economic education -- now sadly lacking -- our kids will be unable to compete in the world they'll inherit, a place where 1 in 5 will change jobs and 1 in 12 will change careers each year. Like it or not, this generation of students and the ones to come are going to have to take care of themselves economically -- and they're not being prepared to do it.

Instead, at our best, we are teaching them to be loyal employees and dutiful consumers, preparing them for a world that no longer exists. From the first day of kindergarten to commencement at the end of senior year, they'll be told where to report and what to do when they get there. They'll be graded on their ability to perform and conform within an institution -- while allowed few choices and fewer risks. There will be one right answer: the teacher's. Street smarts, determination, and creative problem solving will count less than analytical skills and the ability to learn on schedule. In kindergarten 25% of students show a natural need for high achievement and a willingness to take risks. By the time they get to high school, only 3% do. What happens in between is "education"; years in a planned society, with omnipotent, presumably benign authorities making the decisions. No wonder students seem so baffled once they're sent out into the world of market choices.

U.S. educators have been addressing the problem of economic illiteracy full bore since the early 1980s, spurred by demands from employers and parents appalled by the level of their children's ignorance. Today most states require at least one course in business or economics before graduation from high school, while courses in entrepreneurship, now accepted for credit in nearly all 50 states, are springing up like mushrooms. More than 700 have been launched since 1983, according to John Bebris, an entrepreneurship project director at the Center on Education Training for Employment.

But most of the programs and courses fall short, Bebris says. "They don't teach anything more than the language of business. I don't think you can do an effective program without an experiential element." What does a student gain, after all, from memorizing such terms as division of labor or opportunity cost? At best, they'll learn skills -- to value inventory, say -- but they'll have no way to see how that can matter in the real world, and no reason to care. Teaching students to conduct a market survey or write a business plan is not the same as showing them firsthand the manic exhilaration of a start-up's personal challenge; they no more taste the joys of entrepreneurship than a student in sex education experiences the joy of sex.

"To be effective, you have to let the kids take real risks -- and fail if necessary," Calvin A. Kent, director of the Center for Private Enterprise at the Hankamer School of Business at Baylor University, argues. "The usual incarceration approach to education, with a fixed curriculum, covering certain topics on certain days, with success measured on whether a predetermined outlook is achieved, just doesn't work." Entrepreneurship has "a completely different gestalt," he says, "but there is no one more resistant to entrepreneurship than an academician. When they try to teach it, it's like having a math illiterate teach calculus."

Even Junior Achievement, the oldest and best-known business-education program, fails to connect students with today's economy. True, toward the end of a semester studying Applied Economics, JA classes start their own small company -- selling stock, designing and marketing a product, then liquidating and dividing the proceeds. But all the decisions are made by the class, as a group, under the watchful direction of a teacher, with no individual risk, responsibility, or reward. JA students learn to be part of a product-development task force at a large public corporation, perhaps, but that hardly prepares them for the turbulence they'll discover in the real business world.

A handful of educational mavericks go further, actually throwing their students into the maelstrom, but the most successful teachers operate far from the middle-class mainstream, supported as much for their social agenda as their educational intent. In North Carolina, South Carolina, and Georgia, the REAL programs -- an acronym for Rural Entrepreneurship through Action Learning -- turn classrooms into small-business incubators for the community. They help students with actual business start-ups of their own and in the process create new employment opportunities in towns hurt by the double decline of farming and textiles. A dozen businesses have been launched so far -- construction companies, printing operations, day-care centers, a tourist railroad, a hog farm, and the celebrated Way Off Broadway Deli, a favorite stop of people driving to Florida on Interstate 95. Another half dozen are scheduled to start next year. Eventually owned and operated wholly by students, each REAL business is the fruit of classwork and fieldwork that can take three years to complete. Students conduct the needs assessment, write the business plan, and raise the capital themselves -- and share, they hope, in the profits.

The 85 businesses started by Steve Mariotti's students in and around New York City have all been much smaller. Mostly sole proprietorships, with combined sales of more than $100,000, they include video-copying services and a hot-dog stand, lingerie sales, housecleaning, and a tiny rap recording studio. But Mariotti, a former Ford Motor Co. financial analyst who has spent the past two and a half years taking his message of entrepreneurship to inner-city minority students in the South Bronx and Newark, N.J., measures his success more in attitudes changed than in dollars earned.

Mariotti's targets are the students whom educators euphemistically describe as "at risk" -- the children of the projects, drug dealers, dropouts, casualties of the crack epidemic. "These children are a potential gold mine, but they've been programmed for welfare," he argues. "Business gives them back what the system has destroyed: independence and a strong self-image."

Mariotti's program is a simple one, fueled by his own ebullient commitment, mixing entrepreneurial exhortation, drills in business reading and math, and classroom explanations of profit, loss, markup, and margin. He shows them the promise of self-employment, more attractive than minimum wage at McDonald's and more satisfying than life in the drug trade. He helps each student start a company, searching for something enjoyable that can be turned to even the most modest profit. For $10.98, the price of a set of business cards, he gives students a new identity: CEO. Then he takes them downtown to the wholesale markets and turns them into merchants, giving each of them $50 from the foundation.

"You see the kids change as they begin their business," marvels Barbara Wright-Bell, CEO of the Boys and Girls Clubs of Newark. "Kids don't want to do things that are illegal -- they want to feel good about themselves. Business awakens them; it gives them a sense of purpose."

"The chance to take care of themselves is particularly important," Alan Hoffman, executive assistant to the superintendent of the Manhattan High School District, agrees. "It gives them a new capability, a sense of well-being and self-esteem, and the opportunity to make money. It's a means of acquiring economic freedom, of touching the American dream."

Mariotti is bullish on his students. "Give me an equal number of kids and an equal amount of resources, and I'll produce more new businesses than the Harvard Business School," he promises. "These kids all have special, untapped abilities that make them naturals; they're mentally tough and terrifically motivated, and they have an astonishing natural sales ability." But Mariotti sees the limitations of his approach: by the time most inner-city kids reach high school, their attitudes, habits, and expectations have already been formed, and he can reach only a few of them.

Nor is Mariotti's program a plausible model for students who are not socially and economically disadvantaged, John Bebris insists. "Inner-city kids are more willing to start on a shoestring than middle-class kids; they're willing to get down and do all the hard work," he says. "Middle-class kids are only interested in glamour, starting the next Apple Computer maybe. The poorer kid knows the issue is survival."

The genius of Mini-Society, the experience-based economic-education program pioneered by UCLA's Kourilsky, is that it can work as well in Scarsdale as in the South Bronx. Like every successful educational model, it follows John Dewey's dictum, letting students learn the subject by living it. But it goes a step further, pushing the process down to younger children, trying to help shape attitudes as they are initially formed, not change them in adolescence.

Kourilsky, a Ph.D. in communications and economics, came across the inspiration for Mini-Society serendipitously. Reading an early draft of physicist Jacob Bronowski's The Ascent of Man, she was struck by the description of how primitive people evolved over time into an economic society. The pattern was always the same: faced with sudden scarcity, the group was forced to find ways to apportion abruptly limited resources. From their decisions, painfully made, came public or private ownership and the beginnings of trade, developed and refined over the generations by trial and error and necessity. Over time, currency developed to facilitate the exchange of goods, banking and capital markets emerged, and regulations and taxes developed, with governments shaped to enforce and levy them.

Mini-Societies evolve the same way. In Kourilsky's program, the teacher is the catalyst, introducing the initial scarcity into the classroom. After that, it is up to the students to find their own way out.

Tami Weiser, a second-grade teacher in Emelita Street Elementary School, in Encino, Calif., introduced scarcity by bringing in paint sets for an art project, 10 paint sets for a class of 31. Then she brought in 15 Hershey bars.

"How should we decide who gets something when there isn't enough?" she asked them each time. "You decide."

How about first come, first served, someone suggested, like winning a footrace on the playground? But that didn't seem fair to the slower kids in the class.

Share and share alike? That didn't seem smart if dividing the paint sets 31 ways didn't leave anyone with enough paint to make a picture.

How about a lottery -- we could draw straws. Or fights -- we could arm wrestle. Or work -- we could do classroom tasks to earn the paint sets.

Weiser's students surprised her. After long discussions, including role-playing each alternative, they decided that in "The Land of the Golden Eagle," at least, might would mean right.

The next day the classroom rang with marathon arm-wrestling matches, more wrestling each time they had to decide who would get to use what. But Weiser held her tongue -- and watched the faces get longer as the same few students won everything. Her class had realized that force didn't work; better, they decided, to have people do jobs in the classroom to earn the scarce supplies. It took our ancestors centuries to come to the same conclusion.

"If I learned anything from this program, it's that kids rise to your expectations," Weiser says. "But it doesn't work unless you're the kind of teacher who can be loose and let go -- and who can live with the noise."

"It doesn't require a gifted student," Kourilsky agrees. "But it does require a gifted teacher."

Given freedom, Mini-Societies develop predictably. Many groups, particularly the youngest, initially decide to share and share alike -- and usually move from socialism to private ownership after a few days of squabbling over who gets to use what, when. Currency arises with the same historical inevitability, when students realize just how impractical it is to try to barter paint sets for hoarded Hershey bars.

The first business is often a wallet company, Kourilsky says. In Mini-Society it's a real solution to a real need: with no place to keep their moonbeams, kids keep losing them or taking them home in pants pockets to go through the wash. So someone will get the bright idea to bring in envelopes with moonbeams penciled across the front.

Usually, after a few days of watching a classmate's success, a second wallet merchant will appear with product, perhaps colored with a crayon or offered for one moonbeam cheaper. "That's not fair," the first student will howl -- forcing the group to face the questions of competition and monopoly, the issues of the price/quality relationship, and the value of freedom of market entry.

Private versus public ownership, stealing versus working, competition, market saturation, and bankruptcy: over a semester Mini-Societies will have to wrestle with all of them, "all the things people learn in economics classes," Kourilsky says. It is an exercise in values clarification, with no grades or right and wrong answers, only choices the students have to live with.

"Children do fail," Kourilsky says. "They may fail three or four times. But they find out how to fail. And they don't say they failed. The day they go bankrupt, they go home looking totally dejected, but they'll come back in a day or two with another angle." Not surprisingly, the academically less successful often create the most successful businesses, just as they do in the real world, she says. Likewise, students from the wealthiest communities are the least likely to succeed as entrepreneurs. "They're wonderful at consumption, but very lazy when it comes to production."

The older the students, the more sophisticated their society can become. Businesses in the early grades mostly sell "stuff," jewelry or cookies, wallets or pencil holders; older students add services to the commercial mix, banks and tutoring services, venture capital funds, advertising agencies, and casinos. Not everyone decides to start a business: the math whiz may well feel more comfortable with a salary, for example, and sign on as a classmate's accountant. As a citizen of a Mini-Society the teacher, too, has opportunities; there is always a place for a smart consultant, Kourilsky points out, particularly one who will help you tie your shoes for free.

For an adult it can be eerie to visit Mini-Society classrooms. The choices the students face so closely echo our own. If Gigglesville consumers catch a business selling watered-down lemonade, they might decide to encourage another market entrant with a tax break, while Lollypop Land might decide to put a product inspector on the payroll. With government spending persistently exceeding revenues, Poohville might cut the bureaucracy, while The United Class of Fonzies might raise taxes. Most children will follow historical precedent, however, and just print more currency -- then learn for themselves what happens when too much money chases too few goods.

In Starville, Doris Stevenson's Mini-Society, this year's class even got a glimpse of international competition, when Toshisha Fujii, the son of a visiting Japanese professor, joined their class. Although he didn't speak a word of English when he started, within three days Toshisha had cornered the paper-airplane market, thanks to his training in origami; he had started to learn some new words, too, the English numbers from one through 20, plus his personal favorite, "profit!"

Mini-Society parallels our own gender patterns and prejudices, too, Kourilsky says. Boys start businesses first, "when they figure out they can get the girls to do all the work." But the arrangement rarely lasts; there'll be fights over fairness and equality, perhaps even tears -- "then the girls figure out they can go out and work for themselves." Once committed to business, however, the girls are just as likely to succeed as boys, although most usually work with the support of a friend for a partner, while boys usually operate alone.

"I'm a strong woman, and I don't like to see those differences," Kourilsky says. "But I do see them. I think they're social, definitely not inherent -- and I think they start young."

That bias against women in business not only starts early, Kourilsky knows, it lasts a lifetime. She's seen it personally, over 16 years trying to convince American educators that they could teach economics to children, any children, if they would only take the risk, loosen the reins of control, and trust the children to learn from experience.

"I was considered a monster when the program started," she remembers. "Mini-Society seemed too market oriented to people. They would ask me, 'Why's a nice girl like you interested in business?'

"Even today the program is just getting by. Entrepreneurship is still not a good word in academic circles; academics are the least entrepreneurial people in the world.

"You can't teach Mini-Society under the name of entrepreneurship; academics won't accept it. You have to teach it as empowerment and autonomy, all the things that entrepreneurship is, and work backward."

Over the past 16 years Kourilsky has expanded her program dramatically, developing Kinder-Economy for kindergarten through second grade, Max-Economy for junior and senior high, and an adult-education curriculum. It is a crusade of sorts, spread through weekend workshops, with Kourilsky hoping the teachers and economists she trains will go home and teach other teachers. She's thought about turning it into a business, using the market to spread her message; she's even been approached by several deep-pocket would-be investors. But she doesn't dare, as much as the idea tempts her.

"I believe in entrepreneurship with a passionate fervor," she explains. "But I know that if I ran this as a business it would make Mini-Society far too suspect. Most academics would never accept it."

Most academics, though, don't accept business itself yet or understand how it can teach the lessons of risk and reward.

But Kourilsky's Mini-Society graduates know better. Ask elementary-school students, before the program starts, to draw a picture of a successful entrepreneur, and they'll draw a caricature: a man, fat and bald, smoking a giant cigar.

Ask them again after the Mini-Society program is over, and the picture will be different. Then the businessperson is young, attractive, and confident -- and often strikingly similar to the little boy or little girl who drew it.