Parents, take note. If your child is getting proper education then it can enhance their economic decision-making quality, a new study has found.
The study found that those who took part in the education intervention had higher scores of economic rationality, suggesting that education is a tool for enhancing an individual's economic decision-making quality.
"While we know that schooling has been shown in previous work to have positive effects on a wide range of outcomes, such as income and health, our work provides evidence of potentially additional benefits coming from improvements in people's decision-making abilities," said lead author Hyuncheol Bryant Kim, assistant professor at Cornell University.
For the study, published in the journal Science, the research team examined this hypothesis through a controlled trial of education support in Malawi which provided financial support for education in a sample of nearly 3000 female ninth and 10th graders.
"Using a randomised controlled trial of education support and laboratory experiments that mimic real-life examples, we established casual evidence that an education intervention increases not only educational outcomes but also economic rationality in terms of measuring how consistently people make decisions to seek their economic goals," Kim said.
Traditional economic analysis assumes that humans make rational choices.
However, mounting evidence shows that people tend to make systematic errors in judgment and decision-making and that there is a high level of diversity in how rational individuals are.