Chapter 12: Gary Becker, vanity economics and modern population theory
The classical population theory developed by Malthus provides a good explanation for fertility behaviour throughout human history until about 200 years ago. However, this classical theory cannot be employed to explain fertility behaviour in modern societies for at least two reasons. First, most people today completely separate having sex from having children. In other words, children are no longer the by-products of 'the passion for sex'. For example, newspapers and magazines sometimes report the announcement of a celebrity couple who have cohabited for many years that they are getting married for the purpose of having children. Also, some couples arrive at pre-marriage agreements that they will not have children after marriage. Second, in contrast to the implication of the classical population theory, we have witnessed a clear negative correlation between the level of fertility and the level of income for the past century. This is in fact one of the most robust empirical findings in demography and economics. Fertility rates are low in rich countries and high in poor countries, and in a given country poorer households tend to have more children than richer households. Such a negative correlation between fertility and income sharply contradicts the implications of Malthus's population theory. This chapter focuses on Gary Becker's modern theories on child quantity and quality. Moreover, it shows that vanity economics can help us better understand the underlying assumptions of Becker's theories. The modern theory of fertility starts with Becker's contributions in the 1960s.
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