Children live in complex economic environments. They make choices about what to consume and they earn money. Children save, exchange goods, make decisions under uncertainty, and they share and bargain among themselves and with their parents and other adults. There are two main reasons why it is important to improve our understanding of these sorts of economic behavior in children. First, a better understanding of the development of children's economic behavior will lead to a better understanding of economic behavior in adults. Many economic norms, habits, and preferences are acquired in childhood and this study will improve our understanding of how these develop. Second, many of the decisions children make have consequences for the rest of their lives. We believe that an understanding of children's behavior based on economics will make it possible for society to help children make better decisions as children.
The first goal of our research is to determine whether economic models are applicable to children. If so, at what age does economics become useful for understanding which different aspects of children's behavior? Second, we will use computer based economic experiments to construct a panel data set that will provide basic information on how children's economic behaviors, such as rationality, altruism, risk behaviors, and bargaining, develop with age. Our third objective is to develop an understanding of how demographic variables and family policies influence children's preferences and economic skills. A very practical and important benefit of this research will be a better understanding of how parents, schools, and society can better prepare children for the complex economic environment they will face as adults. Currently there is almost no research on how children acquire economic skills. Parents rely on information from folklore, their own experience, and advice from unscientific studies and reports. Schools do not explicitly teach what we, as economists, would regard as some of the most important economic skills. Children are left to acquire basic economic decision making skills haphazardly. This research will provide some of the basic descriptive information needed to improve this situation.
