Any parents who pay their children an allowance, or who worry if their kids are learning important lessons about saving money, might think that studying children's economic behavior is an obvious idea. But until recently the subject has never been systematically explored, according to William Harbaugh , an assistant professor of economics at the University of Oregon . When Harbaugh was in graduate school, he and classmate Kate Krause were the only students with young children. When colleagues told them the idea was a good one, Harbaugh and Krause took the encouragement to heart.
Every parent agrees that at least the last two parts of the definition apply to children.
Rationality, on the other hand, is an open question. So he and Krause, who teaches at the University of New Mexico, began studying rational behavior in children. It's sort of surprising. Sometime between the age of six and the age of twenty-six, the rate of return you need to pay people in order to get them to save for the future falls by 100 times. If there is an answer, I think it's to be found by studying children.