Economic Socialization

From bartering to bitcoin, humans navigate an increasingly complex social world. In modern society, economic knowledge and financial well-being are essential for individuals to survive and thrive. How do we become competent citizens in this economic world? This question has captured the attention of researchers, educators, and policymakers. My research investigates economic cognition at multiple levels, from mental state inferences to reasoning about social institutions. I approach this fundamental question through diverse perspectives, including social and developmental psychology, behavioral economics, computational modeling, marketing, philosophy, and education. My primary focus is on childhood, a critical period during which social cognition is highly flexible and rapidly developing.

Micro Level: Economic Reasoning about Mental States

Starting in infancy, humans demonstrate the ability to make sophisticated social inferences about abstract mental states, such as motives and desires. My first line of research examines children’s mental-state reasoning within an economic context. I found that children are sensitive to profit motives and even penalize profit-driven high performers starting at age 7 (Shao et al., 2023). In another project, I am investigating inferences about desires: Can children recognize that people’s choices do not necessarily reflect their intrinsic desires when they are economically constrained (e.g., lacking the budget to purchase what they truly want)? This question has significant real-life implications. Many people hold stereotypes that impoverished individuals are irresponsible decision-makers (e.g., consuming unhealthy fast food) because they fail to account for the economic constraints disadvantaged individuals face. I argue that recognizing the constraints behind these “choices” is fundamental to acknowledging and addressing structural inequality.

Meso Level: Inferences about Exchange Relationships and Interactions

Compared to our ancestors, whose social networks were largely centered around kinship, we live in a more complex society with extensive social networks. Social psychologists have identified social relationship schemas that adults apply when expecting, interpreting, and participating in social interactions. One critical distinction is between communal sharing and economic exchange relationships: in a communal sharing relationship, people primarily focus on others’ needs without tracking their own contributions, whereas in an economic exchange relationship, people calculate costs and benefits and adhere to the principle of equal exchange.

My ongoing project examines the development of social relationship schemas in the United States and China. Younger children expect people to pay their best friend (a type of communal relationship) but not a stranger (a type of exchange relationship) for doing a favor, whereas older children and adults show the reverse pattern. These developmental patterns of inferences about social relationships and behaviors are bidirectional and cross-culturally similar. In open-ended responses, younger participants reason that it is important to pay best friends because money is valuable and presumably signals that they value the friendship. In contrast, older children and adults infer that monetary reciprocity makes relationships feel more distant. These findings have important implications for understanding how norms and expectations about social relationships and behaviors evolve during development, especially in economic society.

Macro Level: Inferences about Incentives and Compensation Systems

In daily life, parents and educators across various cultures widely use incentives to encourage children to achieve specific goals, such as giving them money for doing chores or earning good grades. However, few empirical studies have examined how children make inferences about incentives. My research shows that children aged 4 to 11 can make rich inferences based on incentive structures. For example, I presented child participants with a story about a protagonist eating two novel types of food: one for which the protagonist had to pay to eat (disincentivized food) and the other for which the protagonist was paid to eat (incentivized food). Results showed that participants inferred the incentivized food was healthier, less tasty, and less sugary compared to the disincentivized food. Beyond inferences about novel items, children as young as 4 demonstrated awareness of real-world schemas, recognizing that they would be rewarded for eating vegetables but not sugary treats (Shao & Heyman, in prep).

In another study, I am examining the intuitive reasoning about compensation systems across development. Participants learned about an egalitarian organization where each employee was paid the same regardless of individual effort, and a merit-based organization where compensation was based on individual contributions. Participants perceived the merit-based company as more competitive and prone to interpersonal conflicts, despite both companies having the same level of productivity. Additionally, both male and female participants predicted that males, but not females, would favor a merit-based organization starting from 7 years old. This study highlights the early emergence of gender stereotypes even before individuals enter labor markets, potentially creating psychological barriers to career pursuit and development (Shao & Heyman, under review).