Media release

From: The Royal Society

Developmental Risk Sensitivity Theory: The effects of SES on children’s risky gain and loss decisions

Theories of risky decisions often assume that social environments do not matter. We outline a new theory of risk, Developmental Risk Sensitivity Theory, that predicts that risky decisions are shaped by one's socio-economic environment during childhood. We tested 4 to 10 year old children in a series of decision tasks and found predicted differences by SES for decisions involving gains. For losses, however, children tended to be more risk averse than predicted by the theory. 

Risk averse – Children from higher socio-economic status (SES) households may be more risk averse. Nearly 200 children, aged 4-10, were given a series of decision tasks. When faced with the possibility of a bigger reward (sweets or prize tokens), children from higher SES households took fewer risks than children from lower SES households. This provides the first experimental evidence that flexible responses in risk preferences occur - as predicted - based on children’s socio-economic environment, the authors said.