Vanity Economics
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Vanity Economics

An Economic Exploration of Sex, Marriage and Family

C. Simon Fan

This book presents an accessible and sometimes controversial economic exploration of numerous issues surrounding sex, marriage and family. It analyzes the role of ‘vanity’, defined as social status and self-esteem, in social and economic behaviors.
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Chapter 13: The cost of children in population theory

C. Simon Fan

Extract

Chapter 12 introduced and further extended the modern theory of fertility put forward by Becker. One of Becker's insights is to treat children as a 'durable consumption good' from their parents' perspective in the economic analysis of fertility. The chapter analysed people's changing fertility patterns as their incomes rise. In terms of microeconomic theory, the 'pure income effect' on fertility was examined in that chapter. To further understand people's decisions on fertility, we must consider another factor: the 'price effect', which is related to the 'cost of children'. Microeconomic theory posits that the demand for a commodity is determined by both household income and the price/cost of the commodity. Thus the demand for a certain number of children, like the demand for any durable good, should be determined by both the cost of children and the parents' income levels. Substantial evidence indicates that the cost of children tends to increase significantly with economic development. We can apply the 'law of demand' to explain fertility changes across space and time. The law of demand indicates that, holding other things constant, the quantity demanded of a certain commodity decreases when the price of the commodity increases. This is an established law in economic theory that has proved to hold in most circumstances. Thus, as children are usually more expensive in high-income countries than in poor countries, the application of the law of demand provides another explanation for the observed negative correlation between fertility and the level of economic development.

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