Why Children May Be Better Economists Than Economists
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Could children be the policy makers of today, today? Behavioral economists are praised for explaining some of the obvious causes of human behavior, and rightfully so. Although, most often it is the thing right under our nose that goes unnoticed. Children however seem immune to this lapse in judgement.
An investigation by Kenneth J. Arrow into the ‘Rationality of Self and Others in an Economic System’, he postulates “an acceptable and fundamental way to test economic theory is to test directly the economic rationality of individuals isolated from interactive experience in the social and economic institution.” Through infancy, a primitive mind bears little cognitive predisposition to selection bias, bigotry, or other adverse effects often observed in real world behavior. This is not to question the art of economics, rather, the science.
Born with the innate ability to process simple economic transactions, perhaps our ‘matured’ minds have come to over-complicate economic thought. For example, one day while driving through a suburb under the sweltering July sun, a young purveyor of lemonade set up shop on the front lawn of his family’s home, selling lemonade for 50 cents/glass. Directly next to his table was a boy of a similar age advertising ‘Joe’s Iced Tea’, and at only 40 cents/cup it was a steal. This is the greatest example of a competitive microeconomic pricing strategy I’ve ever seen, especially from an 8 year old. I propose it is I who misbehaves as a student of economics, and that the 40 cents I paid Joe isn’t nearly as valuable as the 2 cents he gave me.
In a 1958 inquisition into ‘Children’s earliest conceptions of economic relationships’, a research group from the University of Melbourne posed trivial questions pertaining to various economic processes to a group of children aged 5-8 years old (unfortunately, Joe hadn’t yet been born). They find an initial pre-categorical stage of development in which there is no realm of economic concepts differentiated from social concepts in general. The Kahneman’s and Tversky’s of the world rejoice.
Behavioral Science, Democratized
We make 35,000 decisions each day, often in environments that aren’t conducive to making sound choices.
At TDL, we work with organizations in the public and private sectors—from new startups, to governments, to established players like the Gates Foundation—to debias decision-making and create better outcomes for everyone.
A normative approach
While a standard economic approach bases rational reasoning on a fully-informed, unbiased agent, there are of course instances in which we misbehave, as Nobel-winning economist Richard Thaler would argue. This view of economics represents innocuous convention often unsatisfactory in describing human behavior. Through a normative lens it becomes evident why 35% of Canadians still don’t save enough for retirement and why there was an outstanding credit card debt of $94.2 billion in the fourth quarter of 2016. People clearly don’t always make the most rational choices.
Similarly, in the “kids vs cookies” YouTube video here, you’ll find a researcher presenting kids with the option of eating a cookie now or, if determined enough to wait, receive two later. You see the anticipation and their mouths undoubtedly salivate at the delicious baked good on the table. Their internal struggle is evident, and the majority of them give into a temptation which supersedes the prospect of future satiation. Do we not as adults face the same battle on a daily basis? Certainly the glass pane separating you and the donut display is not nearly as obtrusive as the mental barrier between you and the treadmill. What’s amazing, and perhaps disappointing is that we will jump physical hurdles to do a bad thing, but be reluctant to perform the simple good.
What are the implications?
While as adults, we often look back on our lives and wonder when our brains ceased operating as a child’s. While the stakes grow as we age and decisions become more complex, how could clear, unbiased, yet inexperienced insight be applied to solve today’s most vexing problems? Uri Gneezy, a frequent contributor to the ‘Freakonomics’ saga, signifies the importance of addressing bigotry early on. Gneezy suggests the best way of closing the gender-wage gap is through investment into education. While I can recall as a child questioning why my best friend had different coloured skin, I did so out of curiosity. Whether discriminatory against gender or race, animus is an unfortunate disease contracted through social-environmental contamination.
The point is; we have evolved from a primordial process of cognition and we retain a similar pattern of though throughout our lives. Clearly there is a disjoint in that we as adults cannot fathom the thought processes of a child. Since we often seek the advice of an impartial third party in our decision making process, how could involving children in developing policy be a bad thing? It’s an impudent strategy requiring little investment, besides time and patients necessarily, but a simple scheme nonetheless. Perhaps we could all benefit from policy makers honouring the ‘Take our Kids to Work Day’ tradition.
The AI Governance Challenge
To conclude, the studies mentioned provide a salient framework from which future academics may evaluate the extent of a child’s comprehension of real world problems and the underlying mechanics of potential policy measures. The great thing is, there will always be a readily available population of 5-8 year olds ranging across every demographic and socioeconomic background willing to weigh in.
Despite your intuition and academic prowess, sit at the kids table and listen. You just may learn something.
Danziger, K. 1958. “Childre’s Earliest Conceptions of Economics Relationships (Australia).” Journal Of Social Psychology 47, no. 2: 231. Complementary Index, EBSCOhost (accessed November 22, 2017).
Gneezy, Uri. Why axis: hidden motives and the undiscovered economics of everyday life. New York: Public Affairs, 2016.
Kahneman, Daniel. Thinking, fast and slow. New York: Farrar, Straus and Giroux, 2015.
Kenneth J. Arrow, author. 1986. “Rationality of Self and Others in an Economic System.” The Journal Of Business no. 4: S385. JSTOR Journals, EBSCOhost (accessed November 22, 2017).
News, CBC. “The savings habit: Census shows 2/3 of Canadians have it.” CBCnews. September 13, 2017. Accessed November 22, 2017. https://www.cbc.ca/news/business/census-canadian-saving-1.4287219.
News, CBC. “Average Canadian owed $21,912 at end of 2016, not including the mortgage.” CBCnews. March 08, 2017. Accessed November 22, 2017. https://www.cbc.ca/news/business/canada-credit-cards-transunion-1.4015250.
Thaler, Richard H. Misbehaving: the making of behavioral economics. Place of publication not identified: Instaread, 2016.
About the Author
Jacob graduated from Brock University with a BA in Economics, and is now studying for an MA in Economic Policy at McMaster University. His research interests are in the applications of behavioural economics and experimental psychology in public policy.