Demographic Transition

Wealthier and more highly educated people tend to have fewer children than their poorer less educated conspecifics. More affluent countries have lower fertility than less affluent countries. Why this is so has been debated for at least a century, and models have tended to focus on a single factor, eg intergenerational wealth flows or heterogeneous capital investment requirements.

It seems to me that the phenomenon is explicable in terms of subjective value net of expected costs. People will reproduce when the value of the child equals or exceeds costs, and any number of things will have to be factored into the calculation. And the most important variable is the subjective value. One should not assume that this is the same for everyone.

What is the value of a child in a typical middle class household? The child is probably not going to generate any income thanks to the child labor laws and cultural expectations that children get to keep what piddling earnings that they can scrounge up. The child may get you a tax deduction worth not more than $3,000 every year. The child may perform household chores over its childhood and possibly liberate you from having to do them yourself, but these will mainly be geared toward making a dent in the extra work occasioned by the slovenliness and activities of the child. Over the course of the childhood, each child will cost you many multiples more than the total of value of its services, its income and tax benefits. Also, with Social Security, you don't rely on the children to care for you when you are old, and you can't rely on their doing so in any event. (If you could keep the college money and wedding money for your retirement, you might well be far better off.)

But the value of a child, some parents (not mine) remind us, is not merely services and earnings. The real value is intangible and consists of things like companionship, pride, sense of meaning and purpose, someone to love, and so on ad nauseam. I concede that there is real entertainment value in children and that parenting is a perfectly legitimate hobby which would provide amusement and delight to all kinds of people. However, like any other hobby or amusement, people ultimately put a value on it, and every household determines all the time whether to have children at all or to have an additional child. Accordingly, this value is subjective but not immeasurable or infinite. Economists should be able to analyze decisions about fertility just like any other decisions about consumption and tell us what impact various public policies may have on fertility.

Less affluent people may have more children because the subjective non-economic value of children is marginally greater than their much lower costs compared to middle class families. Poorer families have lower expectations about capital investments in children (no private school, no higher education savings, no figure skating lessons). They may receive tax credits or public benefits which are significant sources of income to their households based on having children. More significantly, the opportunity costs of fertility are much lower in terms of sacrifices of career and foreclosing of other options for amusement. A higher time preference may lead to early childbearing which in turn forecloses other opportunities and lowers the overall cost of subsequent children.

For my part, I find that my pit bull fulfills my need for companionship and amusement at a fraction of the cost of a child. And I get a more or less free ride as an uncle many times over. I have fun with the larvae and give them back when I tire of them. It would have to be free baby day at the ballpark to get me to reproduce today.