The Economic Behavior of 12 Year-Olds

Teens: are they thinking economically? (Photo: Comstock)

Do children behave like adults? Do they make economic decisions the same way we do?

That’s what German economist Martin Kocher has set out to determine. He’s collecting data to measure the utility curves of kids from 7-18 years old, in order to draw some conclusions about children’s attitudes toward risk, time and trust. Playing simple economic games, such as the ultimatum game and various public good games, he measured their risk and time preferences. The experiments were conducted with real money, because “incentivizing kids with money makes it a real decision for them” says Kocher.

In terms of risk, Kocher found that children are less risk averse, but not to the degree that we often imagine. In fact, by about 12 years old, kids have similar risk preferences as adults. He did find that there is a huge variation in preferences among younger children. However those preferences converge by around the age of 15 or so. Kocher also found that kids are not very trusting of other people, but that trust increased in a linear fashion with age.


Daniel

It is very interesting that "trust increased in a linear fashion with age" as it seems to me to have implications for the concept of altruism. This suggests people are not inherently altruistic but that altruism develops over time. In this sense, altruism appears as a social construct.

James

Or perhaps they're just learning that much of what is called altruism is simply taking a longer view of one's own self-interest?

Daniel

James, very interesting thought!

But say that a kid becoming more trusting is just him taking a longer view of his self interest. If every child in society follows such a path, then we may be able to see things symptomatic of altruism (such as high levels of trust), as a result of individual self interest.

In the sense that the sum of people's self interest results in what we may call altruism, then I maintain that altruism is a social construct, as opposed to inherent in human nature.

Just a thought!

Ryan

What does trust have to do with altruism. I'd say its the opposite. Trust is the belief that other people will treat you with altruism.

Robert P.

Would be interesting to see the differences between teens, young adults (18-25ish) and the other various stages of adulthood.

Although admittedly only anecdotal evidence, I have a long running case study that indicates an inverse relationship between my opinion and that of my 8 years my junior, 21 year old brother.

AaronS

Oddly enough, I asked my six-year-old son a "sci-fi economics" question last night (and told it to my classes today at school):

"What if, my boy, the world was getting ready to blow up, and they were loading people on to spaceships, but when they came to us, they wouldn't let Mommy and Daddy go with you--you had to go alone?"

"But why can't y'all come?"

"Well...maybe there's a weight or size limit--or maybe they just are trying to save the kids. What would you do?"

"Well, I would get on the ship," my son said somberly, not happy to have to leave his parents behind, but choosing to anyway.

"That is EXACTLY RIGHT, my son. The most important thing is that you survive. You have made the decision that your mother and I would have wanted you to make."

Out of the mouth of babes. Me? With my sentimentality, I'd have stayed with my parents, which probably would have made them extremely happy, all while breaking their heart that I, too, would perish with them. But my son--he surely got this from his Scarlett "I'll never go hungry again!" O'Hara mother--chose to survive.

I'm sad he chose to leave us behind...and overjoyed that he will survive.

He chose wisely.

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Aaron Hall

I think game theory, specifically cooperation games, and experience are the best way to explain the linear growth in trust. There are many situations where cooperation will be of the best benefit for all, but where some may choose not to cooperate and take advantage to the detriment of all. This behavior will lead to everyone immediately choosing not to cooperate, and all getting less than if they would all cooperate as a result. As youth learn to cooperate for everyone's advantage and learn to go for win/win situations, they will experience more of others choosing to cooperate. This good experience with cooperation will offset the bad experience in a linear fashion. If you think this comment is strong, please note that I'm interested in earning a top level PhD in economics or finance, and I can be contacted at aaronchall (at) yahoo (dot) com.

Shane

One thing I thought about recently was that I was very careful with my money as a child. With limited pocketmoney to spend, I pondered the available sweets and did careful maths to make sure I got maximum quantity and quality of sweets for my pennies.

I certainly was not moved by any kind of admiration for more expensive goods simply because they were expensive. I wasn't going to buy one expensive chocolate bar when I could buy two cheaper ones.

Bearing in mind the way some adults will buy expensive goods on the assumption that these are higher quality, I wondered if children were - in that sense - more cunning consumers? That may not be true for all kids, of course, but it was for me.

BSK

I did an activity with my 4- and 5-year-old students recently. Basically, they had the option of everyone receiving one turn with an item OR some kids receiving two turns and some receiving three. In the former, everyone got the same, but less. In the latter, everyone got more, but distribution was unequal. By a 12-to-1 margin, they decided for the latter. It was interesting.

Now, many of the kids presumed that they were going to assuredly be the ones who got three turns, even though I went to great pains to make clear to them that they likely would not be, since the majority would get two turns. As we progress through the turns with the items, there does seem to be a bit of grumbling, but no one has second guessed the decision. It was interesting. Not sure what to make of it. But interesting nonetheless.

Frank(ly)

alert("great post") I bought it up until the gibberish at the end "...but that trust increased in a linear fashion with age."