The Wizards cast a spell that makes all adults egotistical and ignore children, so Jacob and Maurizio have a city full of children to protect.
Good concept, but it's rather similar to another Michael Ende work- 'Momo'.
In case you're wondering, 'Momo' is the story of the eponymous little girl who fights against the Grey Men, mysterious figures who manipulate the people of a small town into overworking, fighting and ignoring children, using an hour-lily. Bubonic and Tyrannia play the part of the Grey Men, magically making adults ignore children and waste time on themselves.
There is no Momo figure in Megalopolis, though, and there is no hour-lily, although Maurizio's pocket watch is something close.
Like 'Terrible Toddlers' the episode shows that despite his stuffiness, Jacob rather likes children and doesn't hesitate to protect them, as shown in the scene where he saves a little boy and shows sympathy towards him when his mother has "gone to Hollywood".