Private and social costs and fertility decisions

Private and social costs and fertility decisions.

This sort of analysis summarizes all the various situations listed previously and tells us how to think about others. Here are two examples that serve as extensions of the analysis.

First, all situations may not involve a divergence between social and private costs. There may be a divergence between social and private benefits as well. Suppose that prized jobs are available for a high pay, say, $1,000 per month, but that there is a queue for such jobs. Imagine that each family sends its grown-up children to look for such jobs and that, for each child, the probability of getting the job is simply the total number of such jobs available divided by the total number of job seekers. Now having an additional child is just like buying an additional lottery ticket—like having a second shot at the prize. To the family, the probability of getting at least one job offer doubles. However, we must be careful here: the number of job seekers goes up too. This effect is minuscule at the level of the family in question, but the combined effect of many families buying their two lottery tickets each on other families is significant and negative. In the end, each family has, say, two tickets each and nobody’s chances of getting the job are really increased. Worse still, that second ticket is costly: it is a child who has to be clothed and fed.

This kind of situation is easy enough to analyze in the general framework that we have set out. You can easily check that in this example there is no divergence between private and social costs, but there is a divergence between private and social benefits. The social benefit of an additional child is the private expected gain plus the losses inflicted on all other families by swelling the ranks of the job seekers by one. This is an externality.

Our second example is designed to show that externalities can occur within the family as well. This is especially true if there are family members in the household other than the couple making fertility decisions. Consider, for instance, a joint family: typically one in which two or more brothers pool resources to live under a common roof. I do not know if you have ever experienced the wonders of a joint family; I have friends who have. At first glance it is impossible to tell parent from aunt or uncle, because aunt and uncle participate significantly in the upbringing of children. The effect is two-way, of course: my cousins will likewise be looked after by my parents. Now this looks like a happy state of affairs (and often it is and often it isn’t), but the point I wish to focus on is the observation that joint families naturally create an intrafamily externality. Knowing that one’s brother and sister-in-law will bear part of the costs of child rearing lowers the private costs of having children and raises fertility!

Now something looks suspicious in this argument. There must be a “law of conservation of costs.” Everybody’s costs cannot be simultaneously lowered. For instance, the brother and sister-in-law are surely passing on some of the costs of child rearing to my parents, so why does it all not cancel out, leaving fertility decisions unaltered relative to those which would have been made in a nuclear family? The answer is simple. It is true that my parents are bearing part of the costs of rearing their nephews and nieces, but this is a cost that they cannot control, because the fertility decisions regarding nieces and nephews are being made by someone else. Thus these costs are fixed costs as far as my parents are concerned, whereas the costs of their own children that they in turn pass on are variable, because they make the decisions regarding their own offspring, and only the variable costs count in the fertility decision. This is what Figure 9.2 implicitly teaches us. The slopes of the private and social costs, and not




their levels, are the key determinants of fertility. This is not easily seen in that figure, so Figure 9.3 provides an appropriate variant. The thin line in Figure 9.3 represents the cost of one couple’s children to the entire (joint) family. Because part of this cost is passed on to the hapless brother and sister-in-law, the variable cost to the couple is given by the flatter thick line passing through the origin of the diagram. Now, as we said, the same kind of cost transfer is faced by the couple in question, which raises their total costs, but only shifts their cost line in a parallel way (see Figure 9.3). This shift of levels does nothing to affect their fertility choice, which is n**, above the level that is optimal for the joint family as a whole (or for the couple had they been nuclear), which is n*.

The same kind of argument holds if there are grandparents to look after children. If the grandparents’ costs are not fully internalized by the couple, they may have too many children relative to what is optimal for their family, leave alone society as a whole.

Figure 9.3. Fertility choices in joint families.

Thus family structure is very important in creating externalities that lead to excessive fertility. As such structure changes from joint or extended families to nuclear families, the costs of children are more directly borne by the couple, which leads to a decline in fertility.7

In all the preceding cases there are negative external effects of fertility decision, so that fertility choices are typically high relative to the social optimum. There are situations in which there might be positive externalities as well, especially if the optimum for that society includes the pursuit of pronatalist policies to gain economic or military power. Such concerns may also be felt in societies in which a long history of low population growth has shifted the age distribution uncomfortably in the direction of high age groups, which places immense burdens on social security systems. To the extent that an individual family does not internalize these goals, the state may actually reward child bearing in an attempt to provide appropriate incentives. As we have already seen, such pronatalist policies are the exception rather than the rule, although they do exist.8

Social norms Often, people do what other people do. The glue of conformism is what holds social relationships and societies together. Conformism assures stability and limits the need for law enforcement, and indeed it is the expression of a shared conformism that we know as culture. We have already seen a discussion of social norms in Chapter 5.

The very strength of such norms becomes a weakness when the environment of the society begins to change. Accepted, appropriate practice over many centuries may now become inappropriate, but once this happens, social practice is often slow to alter. It becomes necessary to coordinate on some new norm, but such coordination requires many people to move in unison. In Chapter 5, we saw how difficult this is when there are multiple equilibria




involving large numbers of people, such as in technology adoption. Here read “norm” for “technology.” Norms do ultimately change and chase what is appropriate, but it may be a long time coming. Consider a poor

society with high rates of infant mortality and intensive use of child labor in farming, as well as for old-age support. It is not surprising to find such a society celebrating the birth of many children (especially sons). Such societies develop certain attitudes toward the “appropriate” age of marriage, the role of women, the importance of contraception, the desirability of primary education, ancestor worship, and even practices such as breast-feeding. Now imagine that advances in sanitation and medicine dramatically bring down infant mortality rates. Suppose that dependence on agriculture is on the wane (or mechanization is increasing, so that child labor is less important). Suppose that institutional forms of old-age security are becoming available. Will fertility change overnight?

We have already seen that it will not, but an additional reason for this is that people still want to conform to the old practices of having and celebrating children, to early age at marriage, and so on, simply because everyone around them is doing the same.9

These conformist tendencies may be bolstered by social and religious practices such as ancestor worship, that require the continuation of every lineage, often through males. Polygyny might also keep fertility rates high, as might the social importance of community over family (which brings down the private costs of child bearing in a way that we have already described). Even property rights might play a role. For instance, if land is held communally, it might be difficult to internalize the consequent costs of fertility in terms of the fragmentation of land holdings.

Jolting such a society into a “new equilibrium” is not easy. It requires coordinated change. An example of such a change is one in which ancestor worship is permitted through adopted children. If everybody thinks this is acceptable, then it’s acceptable. It is in this sense that programs such as family-planning programs play a very important role. Quite apart from spreading important information regarding the cost, availability and effectiveness of different methods of contraception, these programs serve as a form of social legitimization. Consider the family- planning experiment known as the Matlab project in Bangladesh, in which seventy “treatment villages” were served by a birth control/family-planning program in 1977, while another seventy-nine “control villages” offered no such service. Contraceptive use in the treatment villages jumped from 7 to 33% in eighteen months. By 1980, the fertility rate in the treatment villages had declined to two-thirds that of the control villages.

What does the Matlab experiment teach us? One answer is that contraception was an unknown concept. People wanted to have two-thirds the number of children they were having, but could not do so. Perhaps, but at face value, this is unlikely. It is far more likely that the programs sent a strong signal that a lower desired fertility rate is actually a good thing: it is tolerated and indeed encouraged by society at large. People responded to this by adopting contraceptive devices to lower fertility. Thus it is possible that the program served two functions simultaneously: first, contraceptives were made widely available; second, and perhaps more important, the program signaled the advent of a new social norm in which lower fertility is actually a “good thing.” Thus Phillips et al. [1988] wrote of the Matlab experiment, “An intensive service program can compensate for weak or ambivalent reproductive motives and create demand for services, leading to contraceptive adoption where it might otherwise not occur.”

Social norms can be altered in other ways as well. The media is immensely powerful in this regard and can “transmit” norms from one community to another. The use of television and film to suggest that small families are successful can be of great value.

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