The Joy of Economics:  Making Sense out of Life
 Robert J. Stonebraker, Winthrop University
 

Empty Cradles

            Never have more children than you have car windows.

                                                                                                .....Erma Bombeck

            Baseball rules.  One evening last summer I was sitting in a section along the third-base line, penciling the game's starting line-ups on my score card, trusty oiled glove by my side, when a family with six children filed in and took their seats a few rows away.  Six children. Normally, nothing distracts my attention from the game.  I've been known even to ignore attractive women marching up the aisle beside me just to watch a curve ball nipping the outside corner of the plate. But the six children caught my eye that night.  In addition to souvenir hats and stuffed mascot replicas, they consumed impressive amounts of food: hot dogs, drinks, nachos, cotton candy, pizza, and ice cream. It was a veritable blur of commercial activity. And it was expensive.

            Now this was not Yankee Stadium sporting New York City prices.  It was a AAA minor league contest pitting the home-team Charlotte Knights against the visiting Toledo Mud Hens.¹  I made it through the entire evening for a total of $10: that was $2 for parking, another $8 for my lower-reserved seat, and a container of bottled water that I smuggled in for free.  But the parents of the six children had shelled out more than $100 for concessions alone before the seventh-inning stretch.  Kids are costly.  No wonder I stopped with two of my own.

            Of course, families with six children are an exception these days.  Large families were more common in the past, but even among those families with children, only about one in 20 now has more than three.²  In 2005 the average number of children per family in the U.S. was 1.81, down from 3.58 in 1970.³  U.S. families are small, and are getting smaller.

Children and income

            Wait.  This is strange.  For the most part, family incomes keep rising through time.  For most products, our demands rise as we become richer.  With more income we demand more automobiles and more shoes and more television sets and more vacations.  Why does this not happen with children as well?  Children are expensive, but with our increased incomes we can more easily afford them. Why is our demand for children falling over time rather than rising?⁴ 

             What we see over time in the U.S. also is apparent across countries.  Although there are exceptions, we find a strong negative correlation between birth rates and income.  The higher a country's per capita income, the lower is its birth rate.  The relationship is so pronounced that it once prompted Indian statesman Karan Singh to proclaim that economic "development is the best contraceptive."  Although population pressures continue to haunt many developing nations, fertility rates in every Western European countries have fallen below replacement levels.  While Chinese politicians have imposed draconian policies to limit population growth, those in countries such as France and Italy have begun subsidizing children in an attempt to halt population declines.⁵

            Improved contraception explains part of the trend.  Better contraception could allow more accurate family planning, but there is a second angle as well.  Remember that women bear most of the cost associated with birth and child-rearing.  Since they incur higher costs, women might reasonably opt for fewer children than their male counterparts. Prior to the advent of birth-control pills, condoms were the most common form of contraception.  But condom use was controlled primarily by men who had less interest in limiting births.  Birth-control pills, for the first time, gave those bearing the cost of children control over conception.

            While contraceptive technologies clearly matter, they cannot explain much of what we see.  Even where access to these technologies are equal, significant differences in birth rates occur across time and across countries.  How might economists explain these variations?  Take a wild guess.  That's right.  If different couples make different choices about family size, it must be because they perceive different benefits and costs.  If economic development affects fertility patterns, it must be because that development changes the fundamental benefits and costs of children.

Benefits and costs

            Kids just aren't worth what they used to be.  First, in the days of high infant mortality rates, additional children were needed to ensure that a reasonable number would survive. If half were likely to die, each family tried to produce twice as many as they wanted.  As medical advances raised survival rates, they also cut the number of wanted births.  Second, in the agrarian days of the past, children could serve as cheap farm labor --  a benefit lost in a modern urban society. 

            But there has been a more important and less obvious change afoot.  In poorer economies children act as a surrogate welfare system.  For modern U.S. families government-funded programs for unemployment compensation, Social Security, and medical/disability insurance provide a public safety net.  But these programs did not exist in the U.S. of the past nor do they exist in many poorer countries today.   With no government programs, your extended family provided this net. Your children were your unemployment compensation.  Your children were your Social Security system.  Your children were your medical insurance.  Of course when children provide economic security, the incentive is to breed like rabbits -- the more children, the greater the security.  But when couples go forth and multiply, women often stay home to feed and mind the kids.  As economies grow and develop, large families are less useful.  A social system that encourages women to stay at home makes less economic sense. 

            Not only are children today less useful, they also are more costly.  Children consume enormous amounts of time, especially for mothers.  In economist-speak, children are time-intensive commodities; commodities that require large amounts of time to appreciate appropriately.  If society offers women no significant career opportunities in the marketplace, the opportunity cost of staying at home and raising large families is small.   However, because economic development increases job opportunities for women, there is a related feedback impact on the cost of large families.⁶  As better career opportunities for women evolve, their opportunity cost of staying home and raising large families also increases.  The more developed the country, the more costly are the kids. 

            Evolutionary biology offers a final perspective.  Think fish.  How does a fish species perpetuate itself?  The strategy is simple.  Drop as many eggs as possible and run.  Most hatchlings will be eaten, but if there are enough of them, some will survive long enough to mate and renew the cycle. Fish parents do not nurture their young; they do not educate their young.  Since so many will die, investing time and energy in rearing any particular one becomes economically inefficient.  However, when mortality rates fall, the optimal strategy changes. If offspring are likely to live, genetic survival becomes less a matter of sheer numbers and more a matter of how well your offspring can compete with others.  The optimal strategy becomes having fewer children and investing in each more heavily. 

            That's what we are seeing today.  As survival rates rise we shift our emphasis from the quantity of children to the quality of children.  Alas, raising high-quality offspring is more costly both in terms of time and of money. It means spending increasingly scarce time with them.  It means teaching them to read and write; it means sending them off to college; and it means taking them to baseball games. Benefit-cost calculations affect the size of our families, just as they affect the size of our automobiles.

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Notes:

1.         Older readers may recall that Corporal Max Klinger donned a Mud Hens hat in numerous episodes of the classic television series M*A*S*H.

2.         In 2003, only 5.2% of families with children had four or more.  See http://www.census.gov/prod/2004pubs/p20-553.pdf.

3.         See http://www.census.gov/population/www/socdemo/hh-fam.html, Table FM-3. Average Number of Own Children Under 18 Per Family, By Type of Family: 1955 To Present.

4.         You may recall that demands and incomes move in the same direction for normal goods, but in opposite directions for inferior goods.  According to this terminology, surprisingly, children appear to be inferior goods.

5.         See, for example, "Persistent Drop in Fertility Reshapes Europe's Future" by Frank Bruni, New York Times, December 26, 2002.  The typical U.S. woman will bear about 2.1 children, almost exactly what is needed to maintain a stable population.  The fertility rate for native-born U.S. women is below that level,  but the rate for immigrant women is higher.

6.         See The Untied Knot: Marriage on the Skids for more on how economic growth creates job opportunities for women.

7.         "Why there is a perplexing shortage of rich kids," The Economist, February 22, 1997, pp. 89-90.

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Testing Yourself

To test your understanding of the major concepts in this reading, try answering the following:

1.        Describe the relationship between birth rates and economic growth and development.

2.        Explain why the benefits of additional children are lower in the U.S. now than in the distant past.

3.        Explain why the costs of additional children are higher in the U.S. now than in the distant past.

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