The Sort of Thing That Drives Economists Up a Wall:

A comment related to my technology and birth rates post below says:

I cannot help but think that you are treating people like a commodity (reduce costs and increase demand).

I think a big barrier to childbirth is actually our culture, which cannot see why investing into another is more important than investing in one's self.

Child creation is like a commodity in that if you reduce the price, you'll increase demand. Cost matters. Culture matters, too, of course. But even if you hold constant — as a supposedly culturally dictated factor — the amount that a person is willing to invest in a child, as the per-child decreases, the number of children in which the person is willing to invest increases.

If a family feels that they can't spend more than $50,000/year on children without doing things that are too painful to them (e.g., getting a high-paying but misery-inducing job), and the cost of having a child rises from $15,000 to $25,000, they'll be likelier to have 2 children rather than 3. If the costs decline from $25,000 to $15,000, they'll be likelier to have 3 rather than 2. Likewise, if each extra child produces nine months worth of pretty serious discomfort and some amount of health problems stemming from the pregnancy, then on the margins some women will choose to have fewer children, even if you hold culture and willingness to invest in others constant.

Moreover, people's willingness to invest in others may change over time. Twentysomethings may want to play around and have fun; fortysomethings may be more willing to invest in having children; but by then, having children may be medically impossible or too difficult. If technology changes to allow people in their 40s to have all the kids they then want, then — again, keeping culture constant — they may end up having more kids.

Perhaps I'm mistaken, but my sense is that many people resist economic analysis because they find it distasteful: People shouldn't be treated like commodities (as if I'm suggesting that I be able to sell my wife on the open market). We should be paying attention to the grand plan of making people more unselfish rather than to technocratic matters such as cost and incentive (as if campaigns to make people unselfish have enjoyed notable success).

Yet these sorts of gut reactions, and the slogans attached to them, aren't going to change human nature. With very few exceptions, as tasks get less costly — or, if you prefer, get less painful and uncomfortable — people will undertake those tasks more. One can debate how important the cost savings that I describe are compared to all the other costs of having children. But it's a major mistake to just close one's eyes to costs and how people react to them.

Related Posts (on one page):

  1. The Sort of Thing That Drives Economists Up a Wall:
  2. Technology and Birth Rates:
Jerry (www):
Just a nitpick, but where you say "If the costs decline from $25,000 to $15,000, they'll be likelier to have 3 rather than 2" I think that you are either assuming that people want as many children as they can afford, or you meant to say "they'll be likelier to have 3 than they would have been before the cost reduction".

As long as there are *some* cost factors involved, a decline in price will probably result in an increase in the likelihood of having more children; but it does not necessarily mean that there can't be other influences which are stronger than cost, and which still make two children more likely than three.

That is, no matter how inexpensive it is you can't have everything. Where would you put it?

6.17.2005 6:53pm
David T (www):
A nitpick on your software - when there is exactly 1 comment on a post the software says that there is "1 comments [sic]" (emphasis added).

I don't know if it's out of your control, but it looks a bit funny.
6.17.2005 7:02pm
Brandon Berg (mail):
This reminds me of the time I used the term "opportunity cost" to explain to a girl why I wasn't interested in having children. While this did very little to diminish her interest in having children, it was surprisingly effective in diminishing her interest in having my children.
6.17.2005 7:22pm
Kai Jones (mail):
Another limiting factor is perceived potential length of relationship. I only have two kids (rather than the four I wanted) because once I became unhappy in my marriage, I didn't want to have more kids to handle by myself after the divorce.
6.17.2005 8:21pm
Perseus (mail):
Eugene Volokh writes:

Perhaps I'm mistaken, but my sense is that many people resist economic analysis because they find it distasteful: People shouldn't be treated like commodities (as if I'm suggesting that I be able to sell my wife on the open market).

It's interesting, if typical for those trained in economics, to characterize what is a moral reaction as merely distasteful. Now such "gut reactions" might be excessive, but the moral concern behind them, I think, is sound.

Prof. Volokh then rather flippantly dismisses "the grand plan of making people more unselfish" because in his estimation, such campaigns have not had notable success in changing (selfish) human nature. This reminds of an exchange during a conference when I was an undergraduate between the late Allan Bloom and James Buchanan &Viktor Vanberg. Bloom took the economists to task for not accurately depicting human nature: "I believe that it's not true that you begin the argument with human beings as they actually are...because our society is partly already a creation of that economics. In a way, you see, I'm accusing that economics of being a project of very intelligent men who made us the way we are. And then we say, 'Aha! Look! We're that way.'"
6.17.2005 8:35pm
lucia (mail) (www):
The quote suggests our culture can't "see why" I shouldn't invest in "me" rather than "others". In many cases, the issue is whether a person wants to divide the available resources among a few others or many, many others. A family with $30K/year to spend on 2 kids can spend $15K one each. A family with $30K to spend on 12 kids can only spend $2.5K on each.

Our culture doesn't "see why" I should bring kids into the world if there are insufficient resources to feed, house and cloth them properly! This is no different from my great grandparents cultural value.

But my great grandparents lived on a farm. The kids helped raise the crops!
6.17.2005 8:42pm
Steve R (mail):
I think Brandon has hit nail on the head for what is missing in most peoples understanding of applying economic cost calculations. Opportunity Cost. Most don't realize and understand that the dollar costs are only part of the equation one intuitively considers when one does a personal cost benefit analysis. Cultural items are included as economic and opportunity costs in the decision.
6.17.2005 9:03pm
Jonathan M (mail) (www):
I was the one that made the original comment and question. I hesitated to post it because I hadn't the time for anything more detailed.

Although I could debate many of your points contra an economic analysis, I think it would be interesting to see how you would defend this statement: "(as if campaigns to make people unselfish have enjoyed notable success)."

I tend to disagree. I think that one of the defining characteristics of Western Civilization is a concern for other people, unselfishness, and a concern for the victim. I think those who find Christianity repelling fail to see that Christianity's contribution in this area far outstrips the track record in other civilizations. A concern for the victim (the other) is notably missing in ancient myths and other founding stories throughout the history of the world. To say that "grand compaigns", which attempt to make people more unselfish, are a failure, is tantamount to denying the power of one's moral values.

Western society has begun to not merely globalize economically, but also universalize the idea of compassion. When catastrophe's occur like the Tsunamai at the end of 2004, nations that are well off feel obligated to aid the victims. The "grand plan for making people more unselfish" is not a failure - it is a success story as long as Western Civilization. Thus, to say that making people less selfish is a pipedream, think again. Changing values are quite possible; they are not outside of human nature. Why can't an economic analysis account for it? I agree to the fellow who commented that "It's interesting, if typical for those trained in economics, to characterize what is a moral reaction as merely distasteful."

So, when you say that, "these sorts of gut reactions, and the slogans attached to them, aren't going to change human nature", I have to disagree. People who have children do not simply rely on economics to decide on whether they will raise a child or not. Many people do so on the basis of their moral beliefs or their theology. Is it any wonder that religious families are the sole demographic which is sustaining the birth rate? Religious families have few abortions, many reject contraception, and are encouraged to have families.

Certain values diminish the economic analysis of childbirth substantially. Not only that, but my own experience leads me to believe that it is actually poorerfamilies which have more children than wealthier families. How can an economic analysis explain this difference?
6.17.2005 10:28pm
JK (mail):
Thought a relevant cost data point might be this company,

which does egg freezing and storing; its website is aimed towards women who seek to maintain the option of becoming mothers later while pursuing their career/education in the present.

The cost of the service listed is at least $10,000 (that price only includes the first year of storage).
6.17.2005 11:11pm
Dylan Alexander (mail) (www):

Certain values diminish the economic analysis of childbirth substantially. Not only that, but my own experience leads me to believe that it is actually poorerfamilies which have more children than wealthier families. How can an economic analysis explain this difference?

Values change the economic analysis; they do not diminish it. A value is simply a psychological cost or benefit for a given course of action that increases or reduces demand. You oppose the death penalty, say, because the psychological trauma (cost) it inflicts on you is greater than the vicarious satisfaction you get (benefit) from punishing the guilty. Someone whose values are different faces different costs and benefits and decides differently.

As for poorer families, they face much less in the way of opportunity costs than the wealthy when they have children. Stacking three kids in a small room in an apartment is relatively cheap, as are their handme down clothes. And what were you going to spend the money on, anyway? More beer? A nicer truck? More lottery tickets?

Wealthy parents face social pressures to spend far more on their children: separate rooms in a nice house with nice schools, new clothes, college, etc. They also have more to lose from the expenditure - they can't afford as many exotic vacations, and a wealthy mother faces much greater economic loss from childbearing and childcaring than a poor woman with few economic prospects who doesn't lose much by having to stay at home and supervise the rugrats.
6.17.2005 11:17pm
B D McCullough (mail):
While your overall thesis is correct, your sentence
"Child creation is like a commodity in that if you reduce costs, you'll increase demand." is what drives economists
up a wall.

If you reduce costs, then SUPPLY increases, not demand.
When supply increases (and demand remains constant)
then the equilibrium quantity of babies will increase.
6.17.2005 11:49pm
Jadagul (mail):
I suspect that part of the disconnect is between what people ought to do and what people will do. Professor Volokh argued that if raising children becomes cheaper, more people will do it. As Mr. McCullough argues, this is a supply issue: when it becomes cheaper to do something, more people do it.

Jonathan M, looking at the issue from a different perspective, argues that birthrates have declined because people have less desire to raise children (a demand-side explanation). He then claims that this reduced desire stems from a change in social morals, which he believes is a change for the worse. This may be true, and changing society's morals to place a greater emphasis on child-rearing would almost certainly increase the amount of child-rearing going on. But that doesn't conflict with Professor Volokh's point, which is that, holding desire to bear children constant, a lower cost-per-child will probably encourage more children.

As for Jonathan M's question about why poorer families have more children: they do, arguably, have to bear a higher cost-per-child; even if a poor family spends less per child, it has less money to start out with, so each dollar is worth more. However, many poor families also have the social and moral structures that emphasize child-bearing, so raising a child is worth much more to them. Despite the higher costs, they do so.
6.18.2005 12:04am
Patrick (mail):
In Australia, the simple gesture of giving 3000 AUD to every new mother lifted childbirth rates.
6.18.2005 2:57am
One theory for the wealth-linked differential in fertility rates might have to do with the desire by parents for their offspring to live at a level of wealth no less than their own.

If you have little or no assets, it makes little difference how many children you have. Divide zero by one or ten and you've still got zero, while government institutions like public schools and pre-reform AFDC generally spend the same amount per kid no matter how many there are per family.

On the other hand, assume you're an upper-middle class family, $500k in assets including your home. Split two ways, that's $250k a kid, which could pay for 4 years of Ivy League education, a down payment on a decent home, and some other nice things. Split ten ways, it's $50k a kid, which is no small change, but a lot less of a guarantee that it'll set any particular child into the bourgeoise firmament.

Of course, this is just off the top of my head, I have no clue how valid it is. If true, we might expect the ultra-rich to have more children than the merely rich, for example - I'm assuming there's not all that much difference in lifestyle if you start off with half a billion or merely a hundred million - but I have no clue how this matches with the data.

Of course, there's the obvious possibility that the institutions and practices that create the most wealth are those that select against people with children - it's obviously harder and rarer to complete college already having a dependent child, and it's not the executive that leaves early, or even at 5, to spend time with his family that's going to shoot up the ranks.

This is traditionally framed as a tragedy - o, look, our best and brightest are being outreproduced by the bottom of the heap, and thus the traits and practices that fueled their success will be lost beneath a wave of proletarian vulgarity. Another option would be to look at things from a memetic perspective, and consider the possibility that rich people are creating as many or more descendants as the poor, they're just not genetically related.

Let's be generous and say that the parental dyad accounts for 50% of a child's personality. So for each unit of child-expense, you get about a quarter of a new you.

So let's think about a hypothetical screenwriter. Using the time and monetary resources that it would take to raise a single child, this screenwriter could do enough reading, writing, schmoozing, whatever, to allow him to create one more script bought and produced.

This doesn't have to be a great blockbuster. Let's say that through theaters, DVDs, TV, etc, a total of ten million people in the world ever see this movie. And for one out of every thousand, something about this movie really resonates, and becomes responsible for a tenth of a percent of their personality. This man has thus created a sum total of 10 whole person-equivalents, a forty-fold greater return on investment than having a physical child.

Alternately, we could concieve of a law professor who uses a child's worth of time on research, writing, et. cetera, writing articles and blog posts about contract law for other professors. He's got a lot smaller audience, but one for which a relatively large share of their identity is based on what they think about the subject. Make up your own numbers here; I did. The point isn't statistical precision, but rather that you don't need to assume a very high degree of influence in order for the calculations to weigh against bearing more genetic offspring. In the post-industrial age, as more and more wealth comes from cultural production, it's not hard to conceive of the possibility that the wealthy might actually have an edge in this regard, and that the tendency of the wealthy towards lower fertility rates might ultimately contribute to a broader distribution of their culture.
6.18.2005 5:07am
Jonathan M (mail) (www):
Patrick: the birth rate also rose in Australia in 1995 without the incentive. After a 7 year slump, I think it is too early to tell whether or not the $3000 made a difference. Especially when the policy only covered babies born on and after July 1 of last year. It is too early to tell whether it is a statistically significant number or not.

Jadagal: Good comment. "But that doesn't conflict with Professor Volokh's point, which is that, holding desire to bear children constant, a lower cost-per-child will probably encourage more children." I think this comment may have some validity to it. However, I objected originally with Prof. Volokh treating humans like commodity because I believe that it does not explain human behaviour for having children the best. I think that values do. Prof. Volokh appears to believe that increased economic benefits may induce more people to have children. I think it has worked in the past: ie. people having many kids so that they can help work on the farm, in the business, etc.

But today with abortion, contraception, and more individualized lives, I think that the economic factor in having children has diminished (yes, diminished means the same thing as changing) because the benefit has decreased. If I hear the argument right, it is the Prof. Volokh argues the opposite: that people will have more children if the cost decreased ("as the per-child decreases")ie. with lower vertility procedure costs).

The Australian bursary might work because the economics is framed as a benefit; I am doubtful that cost decreases really will drive up the birth rate. Getting a lump sum of money back in tax breaks are a hell of a lot more noticable and positive then getting a 1% reduction in that same portion of taxes all year.

Alexander: I find your analysis of the wealthy-poor divide in birth rates interesting. Yet, what I hear you say is still a question of values, as you seem to recognize. What you spend your money on is a value statement. You seem to suggest that the wealthy would rather spend their money on themselves than others, while poor people would rather spend it on children. That appears to show that values still play a major factor in whether or not one has children. Thus, I do not know why you say that the economic factor changes, but does not diminish in this case. It would seem to me that the reasons you give to distinguish poor and wealthy are reasons of values, not Prof. Volokh's economics. If Prof. Volokh was right - that people will have more children if it was economically cost-effective - it would appear prima facie that wealthier people would have more children (since they well suited economically to do so). But the wealthy aren't. Thus, I do not think that an economic analysis can really account for this in se.
6.18.2005 5:30am
Tom West (mail):
I think the costs of raising a child are insignificant compared to the opportunity cost of the time spent raising a child. I have two children, but after spending 40-60 hours a week raising them for the first 2-3 years, 20+ hours a week for the next 5, and whatever time will be required after that, I'm ready to spend a little more time with my wife.

Raising children has been both the most rewarding and *by far* the hardest job I've ever done in my life. Compared to that effort, the actual dollar costs are trivial.

To be brutally honest, I suspect that the declining birth rate is not due to the fact that having children is so much harder, but that as we progress as a society, the opportunity costs have *greatly* increased. We enjoy a closer relationship with out spouses (which is why the divorce rate is much higher - we demand a higher standard of companionship), we have amazing amounts of leisure time and interesting ways to spend it. Much of this is lost when we have young children. People weigh the rewards against the costs, and choose to have fewer children.
6.18.2005 10:15am
Bill Harshaw (mail) (www):
Jonathan M's comments call to mind a recent book by David Sloan Wilson, "Darwin's Cathedral,Evolution, Religion, and the Nature of Society" which argues in part that religious values contribute to social success, as in the explosive growth of early Christianity.

Values obviously play a role; I believe Mormons in today's society tend to have larger families and so do the Amish. But over time the richer people have tended to have fewer people than the poor. Lots of concern before World War I over the effete WASP upper classes with small families being overwhelmed by the prolific East and South European immigrant lower classes. But the difference is rational. The world is riskier for the lower classes, so you multiply your odds of success--maybe one of your children will hit it big, be an athlete, make it into the middle class. The upper class knows its kids will start off as upper class, so invest to give them all the tools to stay there.
6.18.2005 10:17am
Goober (mail):
You're not mistaken, and you are.

Yes, most people who do resist econ-analysis, it has seemed to me, do so out of some feeling that the exercise is distasteful. "Just money to you?" and that sort of thing. Yet this does not entail that economic analysis cannot be misleading for other reasons.

On the instant topic, notice that while it might work in terms of theory on the lower end of the economic spectrum---it is conceivable for poor parents to have to budget and not have as many children---it's not particularly helpful as having children (vis a vis raising children in accordance with a certain standard of living) simply isn't as expensive as you assume; poor parents very often have large families without becoming destitute.

Further, it doesn't say anything at all about the high end of the spectrum. If the economic analysis were remotely useful as applies to an entire population, you would expect to see very rich families with substantially more children than poor families, just as the rich have more CDs, hardcover books, vacations overseas, and dinners out. But we don't; indeed the tendency is quite in the opposite direction.

It's often tempting---especially for the Law&Econ writer---to assume that, since many objections to L. &Econ. analysis is soft-headed, all such objections must be, or even that the L. &Econ. position is inevitably superior to its counterargument. This is not one of those cases.
6.18.2005 6:57pm
arbitraryaardvark (mail):
Peter Breggin, who had interesting thoughts about incentives to have children, had a useful lecture about learning to communicate policy ideas using liberal buzzwords to a liberal audience and conservative buzzwords for the same ideas to a conservative audience. (I am slightly mistating his thesis, which he referrred to as political cross-dressing.)
People who have been poisoned to economic analysis by indoctrination in government schools (which juan doesn't want me to call gulags) may be more receptive to the same ideas expressed in terms of anthopology or evolutionary biology. Adam Smith and Darwin were talking about the same stuff. Also the economist needs to be fluent in ethics.

Now, on to the underlying question: The birthrate could go up if A) there is an increase in the number of decisionmakers who can choose to have children, B) if technology increases the number of children they can have and C) if the perceived costs to the decisionmaker decrease or perceived benefits increase.
Changes in the legal structure and changes in scientific capabilities are some of the factors involved.
If my cat can have human children, if a general can order up a clone army, if bill gates can raise his own spawn of coders, that changes the numbers. Optimism about the future is a factor - if I had kids, would they let me on their starship?
6.18.2005 11:36pm
Bill Harshaw (mail) (www):
Seeing this piece in the Washington Post Magazine on sperm donors reminds that technology has already increased the birth rate for some groups of the population: gay couples, infertiles, etc. That's in addition to the time-shifting possibilities from storing eggs. So Professor Volokh is correct(considering that technology reduced the price from infinity to something practicable for some people). I retain my doubts of whether the sort of changes he outlined would have major impacts.
6.19.2005 12:43pm
Eduardo S:

Optimism about the future is a factor

arbitraryaardvark brings up a point I'd expected to see earlier: there is some reason to believe that future quality of life may decrease from the present. Although it's literally Darwinian suicide, some people prefer to spend their resources making this a slightly better world for the children of others.

Self-awareness also plays a part: reproducing is merely a biological imperative. Humans have brains that can analyze and reason and examine ourselves, our motivations. We can evaluate our choice to reproduce, and decide whether it's truly a wise choice or if it's simply our genes affecting our brain chemistry. We override our biological urges every day; this is simply another (albeit a pretty strong one).

Speaking of self-awareness... while writing this I find myself asking if laziness doesn't play a part? This is just a big long camping trip, and when I leave I'd like to leave the Earth slightly cleaner and better than when I found it. But if I had children, "slightly" wouldn't be good enough. It would not be morally excusable to say "That's an important issue, but I'll be dead in thirty years so tough". (It may not be morally excusable now - but we all pick our battles).
6.19.2005 5:54pm
Timothy (mail) (www):
In a world where my current girlfriend was unable to even accept the existence of opportunity costs during her intro micro class (only taken because the Journalism school at U of Oregon requires it), it's pretty easy to see why folks don't find economic analysis appealing. 1) It is extremely dispassionate about every subject, even those about which many people feel passionately, 2) it often leads to conclusions that seem morally perverse to those who are uptight about such things, and 3) many of those conclusions are fairly counter-intuitive.

The other issue, which Arnold Kling and others have explored extensively, is that most introductory economics education is extremely poor. I've often said that the problem with economics isn't that it's hard (other disciplines that are also difficult tend to inspire awe and hero-worship), it's that it's boring. Really, though, the problem is that economics is often taught in an extremely boring way. Examples that don't make any sort of sense in the real world; a failure to explain that learning obviously too-simple models at the outset is vital to understanding more complicated models later; a heavy mathematical bias that often seems unneeded, even at the undergraduate level; and a lack of historical context all contribute to this. There was only one course on economic history offered at my university, for instance. People would be more interested if the instruction was more engaging, bottom line.
6.20.2005 2:03pm
Paul Gowder (mail):
Perhaps economists need to be driven mad a little more often.

Seriously, though: can't the comment that you mention be expressed in economic terms? Social norms modify the demand for children by increasing their perceived relative value, non?
6.20.2005 3:26pm