The decision to have children is an economic problem

A faded bluebook fell from the pages of a magazine as I was flipping through it last night. Dated 19 January 1997, it was for a long exam in Economics 191. What’s written on the first page caught my attention:

The decision to have children is an economic problem.

 

Childbearing can be viewed as an economic decision wherein children are considered like any other good subjected to income and substitution effects. Based on the microeconomic household theory of fertility, household demand for children is determined by the couple’s preference for a target number of surviving children.

The demand for children varies directly with income and prices of alternative goods and varies inversely with the price of and taste for children.  The higher the household income, the higher the demand for children; but the higher the net price (money, time, opportunity costs) of children, the lower the quantity demanded. If prices of alternative goods increase, couples will decide to have more children; but if they have a stronger preference for other goods compared to children, a lower demand for children will result. The combined effects of income, prices and tastes, therefore, determine the quantity of children demanded by a particular household.

Furthermore, couples choose the combination of goods and children that will give them maximum satisfaction and yield more benefits than costs.  It follows, therefore, that parents and would-be parents are influenced by the benefits and costs accompanying childrearing. Benefits can be either psychic, i.e. emotional aspects, or economic, i.e. expected income from child labor and financial support for elderly parents. Costs can also be classified as economic and psychic.  Economic costs include monetary costs like money spent on food and education as well as opportunity costs. One opportunity cost of raising children is the opportunity cost of parents’ time, especially that of mothers’, which can take the form of additional income they could have earned if not taking care of their children.

I can’t help but laugh at how sober I sounded then.  Did I really answer exams like this? What utter nonsense, I thought.  But as I continue to ponder on what I wrote fifteen years ago, I realize that it does make a lot of sense. Economic realities influence the decision to have children.