Can a Two-Year-Old Grasp the Free Market?

ChildPhoto by Steven Stewart of his son.

The essence of a free market is exchange — you and I raise our utility voluntarily by exchanging things with which we are endowed. I wonder how early people learn this idea in a free-market economy.

My five-year-old grandson had a Mylar helium-filled balloon, and his two-year-old brother had another one. They were fighting over them and my wife asked the older boy how he got his.

His answer: “We traded for it.” (There had been no fighting before — that trade was voluntary.)

The two-year-old then said, “I want to trade.” I believe the older boy understood the nature of exchange but the two-year-old did not — he just expressed his wishes (his demand). Do kids in non-market economies learn the idea of exchange at this age? I wonder.

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  1. frankenduf says:

    I guess parents have enough trouble trying to teach their kids to share

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  2. Mike says:

    I believe that when one party is deemed to be prohibitively unable to understand the terms of the transaction, there is no consent and the transaction is invalid.

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  3. JaneUK says:

    12 month olds soon learn to trade kisses for chocolate buttons from their Granny.

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  4. vivek says:

    First of all , cute..
    Second of all , trade is instinctive. one can control it , by no matter which way, but not learn or unlearn.

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  5. RubyTues says:

    I’m sure it is as natural as a bribe. Oh come on what else do you call it when you tell a kid that if he behaves in the grocery store you’ll let him pick out something he wants.

    Odd that the little buggers never go for the grapes in these little deals.

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  6. Jeff S. says:

    “Can a 2 year old grasp the free market?” I would say no. But can a 2 year old understand trade? Yes, depending on how you define that. My 2 year old most definitely understands the desire to improve her current situation, bargaining, trading, greed, ruthless determination, wanton destruction of anything that stands in her way, revenge, and uninhibited selfish consumerism.

    Oh noes! I’m raising a capitalist!

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  7. Tzipporah says:

    Well, my son is 22 months old, so I can tell you what I observe in him:

    When the terms are clearly spelled out (you do/give me this, you get that) he can understand the proposal and follow through.

    But once he’s gotten what he wants, he’d like to go back and still do what he shouldn’t, or have back the item he traded for it.

    So he certainly doesn’t understand the idea of any transaction as “final.”

    What he understands is that there is a way to produce a result he wants by *temporarily* doing what is requested of him. Once he’s gotten that result, he sees no further reason to comply.

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    • Linch says:

      In essence, what you describe is the “crux” of the ideal-type free market. Sans government regulation, transaction costs and business ethics that make the cost of defection prohibitively high, homo economicus will have no reason to not deviate from a contract, once he got what he wanted out of the deal.

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  8. jim says:

    What he understands is that there is a way to produce a result he wants by *temporarily* doing what is requested of him. Once he’s gotten that result, he sees no further reason to comply.
    - Posted by Tzipporah

    I know many adults that work that way.
    -Jim

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