Trading Fertility for Prosperity

Good news about trade from the dismal science


Historian Thomas Carlyle described economics as the dismal science, a pessimistic tag he came up with as he contemplated the predictions of 18th century economist Robert Thomas Malthus that population would always outstrip the food supply, leaving millions to starve. More recent research suggests that economics might better be called the cheery science. A new study finds that trade-induced economic growth leads to lower fertility and rising incomes—derailing Malthus' gloomy prognostications. 

The global average number of children that women had over the course of their lifetimes was about five in the early 1950s. Since then the average has dropped by half to 2.5 children per woman. As global fertility declined, the value of world merchandise exports [PDF] during the same period has soared by nearly 90 times. Coincidence? Bucknell University political scientist John Doces doesn't think so. in a new study, "Globalization and Population: International Trade and the Demographic Transition" published in the journal International Interactions, he argues that increasing international trade contributed to lowering fertility rates.

Doces' findings differs from that of other scholars, notably the analysis by Brown University economist Oded Galor and colleagues. Galor argues that the demographic transition, the shift from high birth and death rates to low birth and death rates chiefly occurred in the rich countries that comprise the Organization for Economic Cooperation and Development (OECD) and not in poor countries.

In his notorious "An Essay on the Principle of Population," Malthus suggested that people on average would produce as many children as they could feed, if not more. In modern econspeak, children are a normal good, i.e., as income increased demand for kids would also increase. But that isn't happening now.

Instead, researchers have noted that as incomes increased, the number of children per woman has decreased. One possible explanation for this phenomenon is that the opportunity cost of raising children has risen over time. Opportunity cost is a benefit that must be given up to acquire or achieve something else; in this case, a parent would be foregoing the extra income he or she would earn working and instead spend the time rearing a child. In this analysis the price of children measured in foregone income rises over time lowering demand for them. 

However, Galor points out [PDF] that in the initial stages of the industrial revolution as incomes were increasing in Western Europe, average fertility was increasing, just as Malthus predicted. (In contrast, U.S. fertility rates appear to have been falling throughout the 19th century from 7 children per white woman in 1800 to 3.5 in 1900.) Galor suggests that the opportunity cost argument for fertility decline is too simple. If income were the key determinant, one would find that fertility should fall as any country reaches a specific level of average per capita income. Instead, Galor notes that at the end of the 19th century, fertility rates begin to plummet simultaneously for a number of Western European countries at very different per capita income levels.

Galor argues that fertility began to fall as Western European economies developed increased demand for human capital during what he calls the second phase of the industrial revolution. In this analysis, initial increases to average incomes produced by technological progress resulted in parents increasing both the quantity and quality of their children. However, toward the end of the 19th century, Galor asserts, "further increases in the rate of technological progress induced a reduction in fertility, generating a decline in population growth and an increase in the average level of education." Parents began to invest in quality over quantity.

As economic growth was increasingly fueled by the development of ever more complicated technologies and management services, the premium to education began to increase. The result is that parents switched from having more children to investing in higher quality (more educated) children.

OECD economist Fabrice Murtin, using data from 71 countries from 1870 to 2000, recently estimated in his study, "On the Demographic Transition," [downloadable here] that "education, rather than income or health-related variables, is the most robust determinant of the birth rate, potentially explaining about 50 to 80 percent of its decrease when average schooling grows from 0 to 10 years." Galor cites data showing that the percent of British children ages 6-14 who were in school rose from about 10 percent in 1860 to more than 80 percent by 1895.

So far, so good. But Galor argues that at the turn of 20th century international trade encouraged fertility rates to fall further as rich countries began to specialize in the production of the sorts of goods that required a lot of human capital to make. On the other hand, poor countries increasingly specialized in goods that required a lot of manual labor to produce. The result was rising incomes for both rich and poor countries, but a fateful divergence in fertility trends.

During the 20th century, fertility rates basically continued to fall in rich countries as they invested in more human capital, especially in higher levels of education. In addition, as demand for human capital grew in rich countries, schooling expanded to include women who then entered the paid workforce. This further raised the opportunity costs of having children and encouraged further fertility reductions.

Meanwhile poor countries channeled a larger share of their gains from increased international trade into producing more children. As a consequence, "the demographic transition in these non-industrial economies has been significantly delayed," asserts Galor, "Increasing further their relative abundance of unskilled labor, enhancing their comparative disadvantage in the production of skill-intensive goods, and delaying their process of development."

In the second half of the 20th century many poor countries began to see rapid declines in their fertility rates. Doces looks at recent data from a large number of countries and finds that those that are most open to international trade are the ones experiencing the fastest decline in their fertility rates. Doces argues that the primary cost of having children is the time and money it takes to raise them which leaves parents less time to consume other goods. International trade expands the types and lowers the costs of the goods people can enjoy. The cost of rearing children does not decline substantially so they become more expensive relative to the new opportunities and goods afforded by increased international trade.

In addition, Doces cites research [PDF] that shows "increasing international exchange and communication create new opportunities for income-generating work and expose countries to norms that, in recent decades, have promoted equality for women." As a result, trade-induced demand for human capital expands to include women, further cutting fertility rates even in poor countries.

Recent research by University of Helsinki economists Ulla Lehmijoki and Tapio Palokangas bolsters the finding that in the short run trade liberalization boosts birth rates, but in the long run it cuts fertility. Again, largely because it encourages the development of women's human capital (education), which makes child-bearing relatively more costly.

In the mid-20th century, some economists promoted the autarkic import-substitution development fad that involved imposing high tariffs on imports and the creation of state-owned manufacturing enterprises. The Helsinki researchers suggest that import substitution may have "slowed down capital accumulation and thereby prolonged the period of high population growth" in countries that adopted such policies.

History shows that a world without trade is impoverished, ignorant, misogynistic, and overpopulated relative to available resources. That's the world that our ancestors lived in [PDF]. In the modern era, trade liberalization promotes a virtuous cycle that boosts incomes, raising the value of education, resulting in the protection of women's rights, and eventually inducing a fall in fertility rates. That's really good news from the science formerly known as "dismal."

Ronald Bailey is Reason magazine's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.

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  1. Sweet a single variate regression !
    That explains everything!

  2. As soon as they figure out how to bring babies to term extra-utero, those SUV’s and minivans will be filled to the brim with screamin’ brats.

    1. Well, we need a lot of warm bodies to work off that federal debt.

      1. Not to mention to keep the social security ponzi scheme alive.

        1. social security is for the children!

  3. “increasing international trade contributed to lowering fertility rates”
    increased trade allowed more women to work whic, in turn, delays/reduces total births. >correlation is not causation.

    1. Actually, the statement you object to and your explanation are not contradictory. By your logic, if there was no increase in international trade fewer women would have worked and total births would not have fallen as much.

      Since the original formulation did not state cause but contribution (which your response grants to be accurate), you are objecting to something other than what Ron Bailey wrote.

      1. I am worried that double asshole may be correct. The article explains the correlation, but not the causality. Granted good theories are plentiful, but plausible hypotheses are not proofs.

  4. “The global average number of children that women had over the course of their lifetimes was about five in the early 1950s. Since then the average has dropped by half to 2.5 children per woman.”

    I credit Internet porn.

  5. Once again class, let’s say it together: correlation does not infer causation.

    1. I think it infers but doesn’t deduce causation.

      1. Actually, the correct quote says: “Correlation does not imply causation.” However, since we have to infer from implications, I just skipped stating the implication step. Arguably: (a) neither implication nor inference require proof beyond a priori conjecture, while (b) authentic deduction requires empirical evidence in support of the theory.

      1. yonemoto & Realist: You both may enjoy this cartoon.

    2. Ron has one hell of a time understanding this. See his silly belief in AGW.

  6. Actually Thomas Carlyle described economics as the dismal science because he supported slavery. He saw economics and economists as being on the other side – in favor of abolishing slavery.

    See http://www.econlib.org/library…..ismal.html

    1. Hear, hear!

    2. DL: Thanks very much for the link. I did not know this information. Prompted by your link, I hunted around the Web and found that Carlyle did write of Malthus ten years earlier:

      The controversies on Malthus and the ‘Population Principle’, ‘Preventative check’ and so forth, with which the public ear has been deafened for a long while, are indeed sufficiently mournful. Dreary, stolid, dismal, without hope for this world or the next, is all that of the preventative check and the denial of the preventative check’.

      Again, thanks.

  7. Obviously modern agricultural society is antithetical to the creation of life.

    1. …and the Japanese…well they can turn a TV into a watch…..

    2. and every spring they carve radishes into penises…

  8. Malthus suggested that people on average would produce as many children as they could feed, if not more.

    It’s been awhile since I read Malthus, but I remember something different. I thought his central insight was that food increased linearly while unchecked population growth increased geometrically. It was how people responded to the economic incentive to check growth that interested him.

    Am I wrong?

    1. SF: But Malthus’ “checks” in the first edition are war, pestilence and famine. See long quotation in my post below.

      1. I don’t remember that being the only checks he mentioned. I’ll read more later. BTW, war is often an economically choice.

        1. economically rational

  9. predictions of 18th century economist Robert Thomas Malthus that population would always outstrip the food supply, leaving millions to starve.

    From Econlog’s profile:

    Malthus is arguably the most misunderstood and misrepresented economist of all time. The adjective “Malthusian” is used today to describe a pessimistic prediction of the lock-step demise of a humanity doomed to starvation via overpopulation. When his hypothesis was first stated in his best-selling An Essay on the Principle of Population (1798), the uproar it caused among noneconomists overshadowed the instant respect it inspired among his fellow economists. So irrefutable and simple was his illustrative side-by-side comparison of an arithmetic and a geometric series?food increases more slowly than population?that it was often taken out of context and highlighted as his main observation. The observation is, indeed, so stark that it is still easy to lose sight of Malthus’s actual conclusion: that because humans have not all starved, economic choices must be at work, and it is the job of an economist to study those choices.

    1. SF: From the first edition of the Essay:

      I think I may fairly make two postulata.

      First, That food is necessary to the existence of man.

      Secondly, That the passion between the sexes is necessary and will remain nearly in its present state. …

      I do not know that any writer has supposed that on this earth man will ultimately be able to live without food….

      Assuming then, my postulata as granted, I say, that the power of population is indefinitely greater than the power in the earth to produce subsistence for man.

      Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. A slight acquaintance with numbers will shew the immensity of the first power in comparison of the second.

      By that law of our nature which makes food necessary to the life of man, the effects of these two unequal powers must be kept equal.

      This implies a strong and constantly operating check on population from the difficulty of subsistence. This difficulty must fall somewhere; and must necessarily be severely felt by a large portion of mankind….

      The passion between the sexes has appeared in every age to be so nearly the same that it may always be considered, in algebraic language, as a given quantity. The great law of necessity which prevents population from increasing in any country beyond the food which it can either produce or acquire, is a law, so open to our view, so obvious and evident to our understandings, and so completely confirmed by the experience of every age, that we cannot for a moment doubt it. The different modes which nature takes to prevent or repress a redundant population, do not appear, indeed, to us so certain and regular; but though we cannot always predict the mode, we may with certainty predict the fact. If the proportion of births to deaths for a few years, indicate an increase of numbers much beyond the proportional increased or acquired produce of the country, we may be perfectly certain, that unless an emigration takes place, the deaths will shortly exceed the births; and that the increase that had taken place for a few years cannot be the real average increase of the population of the country. Were there no other depopulating causes, every country would, without doubt, be subject to periodical pestilences or famine….

      Famine seems to be the last, the most dreadful resource of nature. The power of population is so superior to the power in the earth to produce subsistence for man, that premature death must in some shape or other visit the human race. The vices of mankind are active and able ministers of depopulation. They are the precursors in the great army of destruction; and often finish the dreadful work themselves. But should they fail in this war of extermination, sickly seasons, epidemics, pestilence, and plague, advance in terrific array, and sweep off their thousands and ten thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear, and with one mighty blow levels the population with the food of the world.

      1. Were there no other depopulating causes, every country would, without doubt, be subject to periodical pestilences or famine….

        This seems to undermine your point.

        1. what is interesting is now that the East Coast has experienced power outages because of Irene, watch for the baby bump in nine months…
          ask any nurse or ob/gyn…
          so could it be said that TV is the great birth control device?
          or is it another “check”?

  10. Child labor laws?

    1. OO: Child labor laws are a following indicator.

      1. Ron,

        Are you the only staff member who actually comments on the comment section of reason.com?

        you rule!!

        1. IS: I am sure that some of my colleague respond on occasion.

          1. nah, they are too busy polishing their monicles.

            1. It’s cool that he tries to cover for them, though.

  11. With regards to education be a determining balancing factor, how does one explain the increase in education and the increase population in places like India, South East Asia?

    Anecdotally, from personal experience, it seems like they still value having many children and overall a big extended family even among middle class and wealthier families.

  12. np: Fertility rates are falling, e.g., India’s total fertility rate in 1950 was 6 per woman. It is now down to 2.7 children per woman. With regard to the analysis above, India is still in the process of transitioning toward a human capital intensive, low fertility society.

  13. actually sorry, I was thinking about total population growth, which has been steadily increasing for India and other places (while slowing down, being 1:1, or decreasing in others like russia–which would also be an interesting analysis I think), but mistook that for fertility rate in the correlation pointed out in the article

  14. Call me simple, but the invention and wide-spread use of contraceptives, particularly the pill, sounds like a much better explanation of the drop in birth rates from the fifties to present.

    1. I wish so badly I could find a print of a photo I remember seeing decades ago….
      Do gooders of some type…Peace Corps(?) Missionairies (?)…had gone to India and passed out zillions of condoms and explained their use. The photograph was of dozens of Indian women walking away from a river bank with long poles balanced on their shoulders. Tied to the poles in rows were condoms filled with water.

  15. Wayne: The pill was first marketed in 1960 — the demographic transition in the West began nearly 80 years earlier. It is (IMO) however likely that the demographic transition in poorer countries today will be speeded up by the availability of modern contraceptives.

    1. Ron,
      I’m not sure even how to research the issue (google fu didn’t work), but I remember reading a study that showed fertility falling pretty much universally when family income passed a UPP of some value (close to $5K at the time?; old fart memory).
      Ring a bell?

  16. “Historian Thomas Carlyle described economics as the dismal science…..”
    Well it is dismal, but not science….or anything like it!

    1. “Well it is dismal, but not science.”


      1. Well that settles that.

        1. “Well that settles that.”
          And your claim is better supported?

          1. If you think economics has any of the unique attributes of science, then you have a problem. Perhaps you should educate yourself….or not.

          2. Economics is the study of human reaction and interaction to fiscal and monetary situations. Psychology nothing more.
            Mr. Carlyle was probably using the word dismal in this context characterized by ineptness or lack of skill, competence, effectiveness, imagination, or interest; pitiful: in other words not a science at all!

  17. SF: But Malthus’ “checks” in the first edition are war, pestilence and famine. See long quotation in my post below.

    Ron, perhaps I’m dense, but I don’t see any support at all for that quote. I’ve been reading the 1st edition. Here’s a perfectly representative sample:

    The servants who live in gentlemen’s families, have restraints that are yet stronger to break through, in venturing upon marriage. They possess the necessaries, and even the comforts of life, almost in as great plenty as their masters. Their work is easy, and their food luxurious compared with the class of labourers. And their sense of dependence is weakened by the conscious power of changing their masters, if they feel themselves offended. Thus comfortably situated at present, what are their prospects in marrying? Without knowledge or capital, either for business, or farming, and unused, and therefore unable to earn a subsistence by daily labour, their only refuge seems to be a miserable alehouse, which certainly offers no very enchanting prospect of a happy evening to their lives. By much the greater part, therefore, deterred by this uninviting view of their future situation, content themselves with remaining single where they are.

    Does this sound like a man who predicted “that population would always outstrip the food supply, leaving millions to starve”?

  18. SF: Think of it this way — the gentlemen’s servants do not have sufficient income to feed a wife and family. Thus, they they never get a chance to play the reproductive lottery. Malthus clearly understood that some individuals would not starve, but at the margin the poorest would suffer more disease and hunger.

    Again with regard to the gentlemen’s servants recall that Malthus wrote:

    their only refuge seems to be a miserable alehouse, which certainly offers no very enchanting prospect of a happy evening to their lives.

    Miserable alehouse or reproductive loss? Again he wrote: The vices of mankind are active and able ministers of depopulation.

    It should be noted that in later editions, Malthus developed other “checks” to population, e.g., the moral restraint of sexual abstinence and late marriage.

    Finally, take a gander at this quotation from the 2nd edition:

    “A man who is born into a world already possessed, if he cannot get subsistence from his parents on whom he has a just demand, and if the society do not want his labour, has no claim of right to the smallest portion of food, and, in fact, has no business to be where he is. At nature’s mighty feast there is no vacant cover for him. She tells him to be gone, and will quickly execute her own orders, if he does not work upon the compassion of some of her guests. If these guests get up and make room for him, other intruders immediately appear demanding the same favour. The report of a provision for all that come, fills the hall with numerous claimants. The order and harmony of the feast is disturbed, the plenty that before reigned is changed into scarcity; and the happiness of the guests is destroyed by the spectacle of misery and dependence in every part of the hall, and by the clamorous importunity of those, who are justly enraged at not finding the provision which they had been taught to expect. The guests learn too late their error, in counter-acting those strict orders to all intruders, issued by the great mistress of the feast, who, wishing that all guests should have plenty, and knowing she could not provide for unlimited numbers, humanely refused to admit fresh comers when her table was already full.”

    So yes, it does sound to me like a man who predicted “that population would always outstrip the food supply, leaving millions to starve.”

    1. I don’t have access to that edition, so I can’t see the quote in full context. But here’s my general problem with your description: I read him as saying that some societies fuck up and overpopulate and Bad Things happen. In other societies, social and political customs preemptively check population growth … and here’s how that works.

      I see Malthus as a rather brilliant economist who was fundamentally correct about population and food in his time. Obviously he didn’t foresee geometric food growth, but he’s not the first to fail to account for future technology revolutions. Do you basically agree?

  19. More recent research suggests that economics might better be called the cheery science since it finds that trade-induced economic growth leads to lower fertility derailing Malthus’ gloomy prognostications.

    I fail to see why lower fertility rates is a good thing.

    Was it not the “population bomb” that lead to invention and establishment of liberal democracy across the globe, longer lives, lower infant mortality rates, the middle class, higher rates of literacy, vast discoveries in sciences and medicine, vast amounts of innovation, and general increases in abundance and prosperity world wide?

    The mistake of Malthus was not that he predicted that there would be more people….his mistake was that he thought more people would result in less not more access to resources for more people.

    1. “I fail to see why lower fertility rates is a good thing.”

      I have a hard time arguing, outside of the DATA that proves the claims of a population bomb was a fraud. There is satisfaction there.
      Other than that, there seems as yet to be no physical limits to population growth.

      1. Perhaps there are psychological ones.

        Rats, when overpopulating a confined space begin to behave irrationally, becoming either murderous or withdrawn. At some point ( I wont try to define where that is ) overcrowding becomes as much a psychological problem as any physical one. I suspect that may be the case for us as well.
        Personally, when xmas shopping or braving the gauntlet at a wal-mart, I find myself becoming markedly frustrated and angry and begin fantasizing about running people over with my shopping cart.
        Maybe thats just me.

    2. I find it interesting to compare China with South Korea. China has policies intended to reduce their population while South Korea has one of the lowest birth rates in the world. Both view the trends in their population growth as serious problems.

    3. The mistake of Malthus was not that he predicted that there would be more people….his mistake was that he thought more people would result in less not more access to resources for more people.

      For 200,000 years humans have really loved fucking. It’s not like one day we just stumbled upon how to make babies, and boom, the internet and 7 billion people.

    4. JC: One reason it’s a “good thing” is that people have greater power over how many children they choose to have.

  20. Just because fecundity rates are lowering, doesn’t mean that our population is getting smaller. If 100 people had 5 kids, and then 500 people had 2 kids, the difference is still an increase of 500. The world population is still expected to grow.

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  23. The 1800’s is a counterexample.

  24. I generally consider two terms associated with population growth and contraction to be misnomers.

    First, calling the number of children being born to any given demographic the “fertility rate” really suggests that various economic and environmental factors are somehow having a direct effect on the body chemistry of men and (especially) women to make them less fertile than they otherwise would be, as if prosperity were somehow lowering sperm counts and sending women into early menopause. What actually has changed (due to the distractions of modern living) is the number of births taking place, and not so much the body chemistry that makes these births possible (though there may well be a “use it or lose it” factor somewhere in there as well). Theoretically, any reasonably fertile woman in the prosperous West could still probably produce up to 25 live births in her time if she really threw herself into it; she’s just chosen not to exercise her full potential in this regard for various reasons. This statistic really ought to be called the “birth rate” instead.

    The other misnomer is the “Darwin Awards” given out every year for various incidents in which people with less admirable qualities (especially stupidity) manage to eliminate themselves from the gene pool through reckless behavior. This award really ought to be named after Malthus instead, since he’s the one who first gave his cousin Darwin that whole “survival of the fittest” idea along with the implied corollary that the “unfit” do not survive. Darwin was actually a bit horrified at the prospect of “nature red in tooth and claw” that he inferred from this, while Malthus tended to take it more in stride while he looked for explanations for why nature wasn’t more violent than it was.

  25. Maybe it’s because John Holdren is already putting fertility blockers into our water supply.

  26. In 100 years the combined population of Anabaptist and Hasidic Jews will be great the rest of the population.

    From that point on the population will grow rapidly.

  27. This article assumes that every woman throughout time and throughout the world has equal ability to control her fertility! That is absurd. Women don’t always get to choose whether or not to have children, making their opportunity cost, the amount they are willing to invest in children, and all the other points in this article completely irrelevant.

    There are a billion reasons why contraception is more or less available (religious objections, cultural pressures, cost, the availability of doctors, the health of the mother, education levels, the power of women in society, etc.). Not all of them are solely income based. Whatever this article is trying to say means nothing when it ignores this obvious fact.

    Also consider that until relatively recently in human history, the mechanism of conception was NOT understood. Yes, people understood that sex made babies, but without the more detailed scientific understanding of how and on what timetable that happened, even wealthy educated women were not able to control their fertility.

    I don’t think this article says anything when it ignores the numerous non-economic reasons why women cannot control their fertility. And it annoys me that the author didn’t see this incredibly obvious point!

  28. Bailey (and everyone else in the world) refers to:

    the predictions of 18th century economist Robert Thomas Malthus that population would always outstrip the food supply.

    But Malthus observed this pattern, he did not predict it.

    Try reading the essay. You’ll see Malthus presents data and everything. Nifty stuff.

    1. That famines and plagues are no longer commonplace means that Malthus’ points might not be directly applicable to current/future societies, but I hate when people act like Malthus was some doomsday prophet whose dire warnings have been forever looming on an uncertain horizon. Malthus was talking about his present, not the future; and he was quite right at the time he published.

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