The development of social cognition deals with how children's understanding of themselves, other people, and relationships between people changes with age. By the end of the second year, self-recognition is well established. The emergence of representational and language capacities permits toddlers to construct a categorical self as they classify themselves and others on the basis of salient characteristics. Early in the preschool years, children become aware of an inner self of private thoughts and imaginings. By age 4, they have formed a sophisticated theory of mind in which they understand the relationship of belief and desire to behavior.

Self-concept evolves from an appreciation of typical emotions, attitudes, and observable characteristics to an emphasis on personality traits. At the same time, self-esteem differentiates, becomes hierarchically organized, and declines in the early school years. From fourth grade on, it rises for the majority of young people. Adult communication patterns affect children's attributions for success and failure in achievement contexts and their willingness to persist at challenging tasks. Erikson first recognized identity-the construction of a solid self-definition consisting of self-chosen values and goals-as the major personality achievement of adolescence. Four identity statuses describe the degree of progress adolescents have made toward forming a mature identity. Around age 4, children move beyond a view of intention-in-action to appreciate intention as an internal mental state that guides but can be distinguished from action.

Like self-concept, person perception shifts in middle childhood from a focus on concrete activities and behaviors to an emphasis on personality traits. By the early school years, children absorb prevailing attitudes toward social groups and link physical characteristics with social status. During adolescence, inferences about others' psychological characteristics are drawn together into organized character sketches. Perspective taking begins with limited awareness of others' thoughts and feelings and evolves into advanced recursive and societal perspective-taking capacities.

Children's understanding of friendship evolves from a concrete relationship based on sharing activities and material goods to more abstract conceptions based on mutual trust and intimacy. With age, children become better at resolving conflict through social problem solving. Training in social problem solving leads to gains in psychological adjustment.