Why Children May Be Better Economists Than Economists

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.