I agree with you, SG. I do think it's important to teach kids decision-making abilities (of course caving in and buying both the dress and the trousers was nothing of the sort) but I think it matters what you give them a choice about.
For example, in my house the kids get to pick what they want for breakfast--but in reality, their choice is really only between the 2 or 3 standard breakfast items that we have, and I choose what gets purchased at the store, no exceptions. But in comparison, when my mother-in-law stayed with us last summer she made the same breakfast for everyone (and we're not talking about cooking or anything, she just put a bowl of cold cereal in front of everyone) but she made a big deal about letting the kids pick what color glass they wanted to drink out of. The kids took the breakfast thing in stride, because they knew she was there to help with the baby and it was a special situation, but after just a few days of choosing their glass color they started bickering fiercely over who would get which glass.
I see it as a spectrum: completely unimportant decisions, somewhat important decisions, and truly important decisions. Children shouldn't be allowed to make the truly important decisions for obvious reasons, and they shouldn't be given unimportant decisions like the color of their cup because all it does is teach them these things are important when they're not. Only the decisions that are comfortably in the middle are good learning tools.
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