to kill a mockingbird
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Initially, they believe them. They are children with imaginations. They enjoy the entertainment at the expense of Boo. Later Atticus is able to convey a sense of eppathy to them.
At first they buy into the whole nonsense and use the myth to show their own bravery: touching the house, looking into the windows, etc. Arthur is a subject of their curiosity (and boredom, in a time with few toys). Eventually, they want to send him a note asking him to come out so that they can buy him an ice cream; apparently they aren't so afraid any more.
The Arthur story is partially about courage. The kids think that it's brave to play a game re-enacting his life story, to walk through a haint, and to shoot a rabid dog. Atticus teaches them that courage is facing certain defeat with dignity, as Mrs. Dubose does and as Atticus himself will soon do in the courtroom.