Bergstrom, Theodore. (1996) "Economics in a Family Way" Journal of Economic Literature (pp. 1910-1914)

Main point: In this article, Bergstrom begins by commenting briefly on the recent advances which economic work has made to an understanding of the economic relationships within the family. (He cites G. Beckers' Treatise on the Family.) He states that his paper is trying to make a case for economists to read more of the literature in biology and anthropology which has the potential to enrich understanding of economic relationships within the family. (In particular, he cites the explanatory potential of the theory of evolutionary biology.) The part which we are asked to read reviews:

I. sociological evidence concerning explanations for the demographic transition: fall in infant mortality in late 18th/early 19th centuries followed after a time by a decrease in family sizes in most European countries; and

II. insights from evolutionary biology on the direction of intergenerational wealth flows.

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In the first section of his paper (which we are not asked to read) Bergstrom reviews two concepts related to the hypothesis that "human preferences were shaped by natural selection, acting through differential effects of preferences on rates of production": (1) "a genetically based theory of the development of interpersonal sympathy among family members" and (2) "cultural evolution: natural selection of culturally transmitted preferences and attitudes operates according to a logic similar to that of natural selection of genetically transmitted traits".

Cultural Evolution and the Demographic Transition

Rational Actor Theories:

Pollack and Watkins review two rival economic theories which purport to explain the demographic transition:

1. Becker/Chicago school - changed reproductive behavior is a rational response of well-informed decision makers to changes in income and relative prices.

2. Easterlin - relative income hypothesis: well-informed utility maximizing actors with economically induced changes in tastes and aspirations which have lead to different reproductive goals (see Cherlin for discussion of Easterlin)

Pollack and Watkins argue for a synthesis of rational actor and cultural diffusion models

Cultural Evolution:

Theory of cultural evolution suggested that as infant mortality declined, people with "mutant" aspirations (plans to have fewer births and leave them more resources) would have more fertile offspring and thus more grandchildren BUT higher quality children has not lead to higher fertility.

This led to the finding that cultural norm of having small families could not prevail if reproductive decisions were vertically transmitted from parents to children. (Feldman & Cavelli-Sforza) "Vertical transmission" of reproductive preferences (directly from parents to children) predicts that fewer people will imitate the reproductive choices of parents with fewer children SO cultural trait desiring low birth rates would be subsumed by cultural trait of desiring high birth rates. "Horizontal or oblique transmission" is people imitating the reproductive decisions of their peers rather than their parents.

So, says Bergstrom, if a "small family strategy' succeeds, it must be due to the fact that the strategy practiced by peers is more attractive than that of their parents. This leads him to ask why a large family strategy propelled by a pro-natalist religion does not overcome the small-family norm. He hypothesizes to reasons why small families might prevail: (1) family wealth would dissipated after a few generations and no longer sustain a large family policy (2 parents may be unable to convince their offspring to adopt large family policies. He concludes that I may be that the currently low birth rates of Western nations do not represent a long-run equilibrium, since the three or four generations of their duration has been too short a time for vertical transmission of the large family norm.

The Direction of Intergenerational Wealth Flows

In this section, Bergstrom reviews the theory of demographer Caldwell that there are two types of society:

1. pre-transitional: high stable birth rates and net wealth flows from younger to older generation and

2. post-transitional: low fertility and net wealth flows from older to younger generations.

Bergstrom three objections to Caldwell's pre-transitional account of net wealth flows:

1. he states Kaplan's position of evolutionary biology that wealth flows will always be from the older to the younger generation as the organisms attempt to increase their survival chances by supporting their offspring.

2. Additionally, anthropologic research has found that wealth transfers in pre-transition hunter-gather societies has been from older to younger generations

3. Finally sociological arguments (Parrish et al) that findings of young to old wealth transfers in peasant-agricultural societies would not support Caldwell's thesis since for children to be an economic investment, the amount returned to elderly parents would have to equal the earlier parental investment in the children (in present value terms), however research indicates that in terms of economic returns, parents would always be better off to invest in the market