Tuesday, October 20, 2009

Why do people have babies? (Caution - baby photos)

Darn good question Joe, Peter...

I wrote about it a bit here in 2005 and here in 2007 after observing that children are very expensive:

"It might be a good thing that most of us don't do the financial calculations. We close our eyes and dive in. We manage by cutting our spending or by extending already impossibly large mortgages.

We sense that children bring benefits that can't be described in financial terms. They give us a sense of purpose - they believe in us, idolise us and depend on us.

It is almost financially impossible, but it's worth it."

Conventional wisdom is that our forebears used to have a lot of children to make money - they could put them to work early and hope that in later life their children supported them.

These days we are not allowed to put children to work, and these days we have pensions, unemployment benefits and super to support us. The conventional view is that change helps explain why we are having fewer children.

But as Bryan Caplan points out, that view is probably wrong:

The flaw in the story is the assumption that things used to be different. In an eye-opening 1996 JEL piece, Ted Bergstrom summarizes evidence showing that even in pre-modern societies, kids did not pay.

Kids did not pay in hunter-gatherer societies:
Among hunter- gatherers, resources flow from older to younger generations and not the other way around. These tribes all had very high average fertility (about eight births per woman), but in each case, children consumed more food than they caught, at all ages from birth until age 18. Grandparents continued to work hard to support their grandchildren and produced more than they ate. At almost no time in their adult lives, did adults produce less than they consumed. When people became too old and frail to work, death followed quickly. Suicide and euthanasia of the enfeebled were frequently reported.
Kids did not pay in agricultural societies:
Calculations by Mueller and by Goran Ohlin (1969) indicate that a parent who gave birth at age 20 and supported a child from age one to age 15 would receive a monetary rate of return of less than one percent on her investment if she retired at age 60 and was supported by the child until age 85 at the level of living that is normal for old people in peasant societies. When one accounts for the probability that either parent or child may die before the parent reaches 85 years of age, the expected rate of return becomes negative. In a peasant society, where land ownership is possible and where there are markets for borrowing and lending, such low rates of return are not likely to be acceptable on purely financial grounds.

An anti-natalist might take this as further proof that breeding is sheer idiocy. To me, though, it confirms that an intrinsic or "consumption" demand for kids is deeply rooted in human nature. It also shows that explaining the long-run decline in family size is harder than it looks. If parents in 1850 were willing to support five or six kids with a negative financial return, why aren't we?

Personally I've long thought of children as "consumption goods" and been ridiculed by non-economists for using the term.

But right now I'm consuming a lot - and loving every second.

Here are some photos:

Lavinia in intensive care, Day 1

Lavinia with Toni, Day 2

Lavinia with Oliver, Day 5

Lavinia at school, Day 9


Published October 18, 2009

Last Sunday's Canberra Times told us about something that had gone
wrong at Canberra Hospital.

While we don't dispute for a minute the enormity of that tragedy our
experience at the hospital the previous Sunday could not have been
more different.

Without quick thinking from our midwife Ros and dramatic intervention
from a team of six health professionals who burst into our room at the
birth centre our newborn girl would not have lived.

Their thoroughness, caution, commitment and good humor was a tribute
to the Canberra public health system.

We were in very good hands.

Related Posts

. Honey, we can't afford the kids

. Sunday dollars+sense: The dollar cost of having a child

. Australian Costs of Raising Children, by Dr Paul Henman