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.