WEBVTT

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Prof: Now I have--to--I
must tell you that I have very

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bad news for you.

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It has nothing to do with the
exams.

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It's that I've been talking
with my economist friends and

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what they tell me is that you
are inferior goods.

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They even tell me that Yale
students are probably among the

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most inferior of all goods.

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'What are you talking about?'

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and this is what I learned.

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You take--I hope I've learned
to bring my--This is a standard

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economics kind of diagram.

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What it shows is the amount of
clothing that an individual

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buys.

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If they're very poor,
they buy at the Salvation Army

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Store and they spend a very
little bit or they buy very few

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clothing.

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When they get rich they go to
Brooks Brothers and buy suits

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for $1,000 and that's probably
an underestimate of what they

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actually spend.

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As their income increases,
the amount that they spend,

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or the number of things that
they buy, increases.

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All a very standard kind of
thing.

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The ratio, there's an extra
little fillip to this,

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not wildly important for this
course.

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How much this line increases
for a particular change in

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income is called the elasticity,
how big a change there is.

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In clothing,
you really don't need an awful

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lot of clothing to put on,
but you can spend a lot on it.

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I know myself that when I was a
graduate student,

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I used to buy all my clothing
at the Goodwill Store and now

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that I'm a professor I have a
little more income and I don't

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buy so much at the Goodwill
Store,

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but it's still a great place to
buy things and I see the other

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graduate--
the graduate students know

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exactly what I'm talking about.

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Really, clothing has a big
elasticity, but food down here,

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you know you really can't eat
that much more food.

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We try, of course,
but we don't succeed.

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So no matter what your income
is, if you--certainly if you

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measure the food in pounds you
don't eat an awful lot more.

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If you measure it in dollars
you can buy caviar and live on

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caviar, but basically there can
be a high elasticity or a low

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elasticity.

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That's one of the clear and
simple ideas of economics and

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I'm sure it's nothing new to
you.

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Now can you think of a counter
example to this?

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Something that as people get
richer they buy less of.

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Student:  Spam.

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Prof: What?

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Student:  Spam.

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Prof: Spam. Good.

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Cheap food.

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What's--that's a generation
ago, so how many of you have

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ever eaten Spam?

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You went to prep school or
something, right?

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I have never eaten Spam,
but McDonald's hamburgers are

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one of those kinds of things.

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For people in a poor country,
like rice.

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What do they go from--brown
rice, unpolished rice is what

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the poor people eat or in India
millet and then when they get

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more money they go to polished
rice or they go to wheat.

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In all countries food is one of
the important things that you

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eat up higher on the food chain.

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You change what you want to eat
depending on your income and you

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can eat less of what you
previously did.

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Public transportation is
another example of goods that

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you buy less of as you get
richer.

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If you get richer,
you take a taxi or you have

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your own limousine and a
chauffeur and so forth if you're

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really wealthy.

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All of these things do the
opposite thing to that.

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Economists have a word for that
kind of a good and it is?

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Student:  Inferior.

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Prof: Inferior, good.

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Now what's another example of
that?

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You guys.

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One of the most robust
phenomenon in the world is this

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fact.

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Poor people have a lot of kids,
rich people have very few kids.

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This works no matter how you
spin it.

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You can compare a poor country,
so take any Sub-Saharan Africa

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country that you want,
to a rich country take any

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European,
American, Japanese country that

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you like;
if this is income across

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countries, as they say
cross-sectional,

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this is very,
very true.

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If you look within a country
like--pick any country,

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the rich people tend to have
fewer children than the poor

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people.

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Also you can spin it a third
way with time,

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if you look at when a country
was poor,

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they'll be having a lot of
children and then,

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as they develop economically,
they get rich,

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they have fewer children.

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This is an absolutely robust
kind of data.

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One of the--yeah--
Student:  What if you

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measured value of children by
investment per child?

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Prof: We're going to get
to that later.

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That's at the end of a lot of
intermediate stuff.

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This is the number of children
that you get,

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it's not how much you're
spending on them but the number

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of children that you have.

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You have these three different
ways, you can have a high slope,

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a low slope,
and the slope can even turn

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down.

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This is some real data
for--this is the total fertility

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rate and going from one,
or even less,

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up to eight children and this
is the gross domestic product

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per adult,
and this is the log of it

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because it goes over six orders
of magnitude.

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That's--some places earn an
awful lot more so there's not a

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linear scale but a log scale.

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Over that whole range you can
see some very good correlation.

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Those countries which have poor
income, have a lot of children,

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and those that have a lot of
income have few children.

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This is two different periods
in time,

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1960 which is really before the
third world fertility transition

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and 2000 when you're in the
middle of the third world

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fertility transition and you
have these points for the 1960--

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the circles,
the pluses are for 2000 and you

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see there's--
what's happened is they've slid

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down this line,
the countries have slid down

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this line.

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They're still pretty much the
same relationship but the

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countries progress and their
income goes up.

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This is the regression line for
1960;

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this is the regression line for
2000, a small difference.

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It's not--it hasn't changed
very much, so again this is

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really a very robust kind of
thing.

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If you compare countries a 10%
increase in per capita income

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equates to a 13% decrease in
fertility.

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It's a very interesting thing;
you have big culture

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differences between countries.

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Within a country where you're
under,

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more or less,
if you have a homogeneous

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country,
more or less the same culture,

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the freedom of people to change
their fertility--

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to control--to choose their
fertility is much more limited

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within a culture.

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Now if you look only within a
country you get a much smaller

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change, a 10% increase in income
correlates with only a 1% change

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in fertility.

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So it depends exactly how you
run your statistics,

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how big an effect this is but
it's absolutely robust,

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we always find it.

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Here's a great term paper for
you, or even a research paper

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for the summer or something.

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It's usually--this is with
respect to the Yale students.

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It's usually presumed that the
families of Yale students

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generally have a very good
income.

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Probably even within--I mean
Yale tries to get a distribution

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of incomes but within each class
we probably do very well so

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we're a high-income group.

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It's probably also true that we
generally have very few

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children, that your families
probably each have very few

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children.

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You can take a ratio of family
income to number of children and

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that ratio for different groups
is probably a measure of how

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inferior you are.

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The higher the ratio income to
number of children tells you how

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much parents don't want children
because they have a lot of

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income.

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Guess who has this data?

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Where have you filled in this
data?

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Admissions office;
if you applied for a

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scholarship which I think at
least three-quarters of you

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apparently do,
some sort of financial aid,

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they have income data on your
family and they also have the

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number of siblings in your
family,

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all that is data that they have.

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If you can get it out of
admissions you could really do

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some very interesting study of
what is that ratio for Yale

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students.

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Then once it's published from
Yale, every other school in the

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country is going to try to do it
and it'll do for different

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works.

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I haven't seen these kind of
things published,

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that this ratio for various
special socioeconomic groups.

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This is kind of a surprising
phenomenon that rich people

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buy--have fewer children.

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One year I taught this course
and there was a guy in it,

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a somewhat older guy who was
actually already a professor in

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Kenya,
but he had come to Yale for

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more education and he took this
course.

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After the course he told me
that he was just blown away,

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that he had never realized,
coming from Kenya,

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that poor people had more
children then rich people.

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Actually he put it the other
way, he had no idea that one of

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the aspects of being rich was
that you have fewer children,

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and he was a college professor
or a university professor in

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Kenya.

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This is quite,
actually quite shocking.

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You heard, I mean our whole
cultural story is that parent's

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love children,
parents want children,

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well they want them,
maybe they love them--well not

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when they're teenagers of
course.

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You would expect that more
income would be an enabling

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factor, a very big enabling
factor, that you'd,

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in general, have more children.

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But it isn't the case.

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Well this is--anomalous things
are of great interest to

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scientists,
including social scientists,

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and so economists of course
have paid a good amount of

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attention to this.

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The way they talk about
children is that they try to

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generalize,
just the way scientists try to

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generalize things,
make Newton's Laws apply to

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everything,
whereas before they were a lot

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of different things,
so they try to do use the same

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words they use for suits or food
for children.

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The kinds of things they say
are that children are "a

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time intensive commodity";
they take a lot of time to

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either enjoy or bring up
properly.

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Women's value of time is a key
component in "the price of

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children",
that children have a price like

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any other good.

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The time--this is all quotes
out of various recent articles.

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The "time cost of children
and other household

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production",
children are one of the things

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that households produce.

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Then they talk about the
opportunity costs for households

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to "produce and consume a
child".

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I love the idea of what parents
are doing is consuming you.

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I will put on the web an
article by Jonathan Swift,

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the same guy who did
Gulliver's Travels,

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you know this article?

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A Modest Proposal,
exactly;

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this is tongue in cheek on his
part but at that time,

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much earlier and much later,
the English were concerned

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about the Irish problem.

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The Irish were very poor,
they had tons of kids,

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and they didn't like to be
ruled by England,

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so the Irish problem had to be
solved.

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What Swift suggested was that
the Irish eat their children.

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This would provide good food
for them, a lot of protein and

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everything.

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So, it would solve their
starvation problem and it would

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reduce the population problem
there.

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Of course this was tongue in
cheek but it makes really

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interesting reading and
especially his--

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notice his use of--if you
bother to read it,

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it's not required,
his use of numbers.

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It's full of numbers;
it's a real takeoff on what

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fairly contemporaneous people,
like people starting to write

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economics, were writing.

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This idea that economics deals
with children just as they do

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with any other commodity,
it's the genius of economics to

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be able to do that,
just as it's the genius of

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science to be able to make
generalizations.

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But it's also one of the
reasons people reject the

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approach.

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They just--people generally
don't want to consider

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themselves commodities.

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Why should people want fewer
children as they get richer?

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Well the basis of essentially
all modern economics is rational

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actor theory,
that people act to maximize

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their happiness,
-- or utility,

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or preferences,
there's a lot of different

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jargon words with slightly
different meanings,

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-- and they don't act against
their self interests.

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Now there's new psychological
economics, or neural economics,

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which finds out this isn't
really true, but that doesn't

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matter.

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Most theory depends on rational
actor theory.

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So economists believe that
people decide what to do,

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based on a calculation.

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It doesn't necessarily have to
be a conscious calculation,

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which is a little problem
there, of what's good for them

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and they act that way.

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Somehow economists have to
figure out why is it good for

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people who have money to have
fewer children?

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Why is it in their self
interest?

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Actually a guy wrote a paper,
Gary Becker in 1960,

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and then he got a Nobel Prize
for this,

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for bringing family--what they
call family economics into the

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mainstream of economics and
treating children like any other

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good.

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Some of what I'm going to tell
you really comes from Becker's

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theory.

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As I mentioned,
one of the fundamental ideas is

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that it costs money to rear
children,

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and so they can be considered
an item to be purchased,

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and so they call them a good,
anything that you purchase is

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called a good.

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There are different kinds of
goods and children are--all of

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them or at least most of them.

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They're a production good like
a machine.

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A production good is something
you buy, like a machine for a

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factory to do work.

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And children,
of course, especially in poor

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settings, do various kinds of
work.

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We'll come back to each of
these things.

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They are also a consumption
good, a consumption good is

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something that you buy and maybe
eventually use up but you enjoy

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it.

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You buy it because you get
pleasure in some sense out of

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having that, not because it does
work for you.

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The third thing is,
they can be an investment good.

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You put money into a child when
they're young,

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and then when they're older you
get something back for it;

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a return just like putting
money in a bond,

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you put it in and then you wait
some time and you get,

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presumably, more back.

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First consider children as a
production good,

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which is very largely the case
in poor countries.

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One thing that's pretty obvious
is a child does not cost much to

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make;
it's pretty cheap.

16:24.798 --> 16:29.538
In a peasant family children do
a lot of work for the family.

16:29.538 --> 16:31.958
They can run errands,
they collect firewood,

16:31.960 --> 16:34.510
they can fetch water,
they take care of younger

16:34.513 --> 16:36.513
children,
they weed the fields,

16:36.514 --> 16:40.014
there's a whole bunch of things
that children will do.

16:40.009 --> 16:44.269
You have some readings on that
in today's readings.

16:44.269 --> 16:48.059
They actually do a lot of work.

16:48.058 --> 16:52.118
Here's an example,
"little Baz,"

16:52.120 --> 16:55.570
the name of a kid,
"can run all over,

16:55.572 --> 16:57.962
fetch up cows out of the stock
fields,

16:57.960 --> 17:01.950
or oxen, carry in stove wood
and climb in the corn crib and

17:01.950 --> 17:04.640
feed the hogs,
and go on errands down at his

17:04.638 --> 17:05.528
grandma's."

17:05.528 --> 17:08.728
Guess where that description
comes from?

17:08.730 --> 17:12.340
Could be anywhere in the world,
it happens to be a Kansas

17:12.343 --> 17:14.153
settler in the late 1800s.

17:14.150 --> 17:18.790
In America, like other places,
in the farm economy kids do an

17:18.791 --> 17:20.341
awful lot of work.

17:20.338 --> 17:24.108
There's a saying from Indonesia
that, by age seven,

17:24.112 --> 17:28.792
a child does more work for the
family than the family has to do

17:28.789 --> 17:29.619
for it.

17:29.618 --> 17:32.188
To study that,
sociologists,

17:32.190 --> 17:36.470
anthropologists,
economists actually go out in

17:36.474 --> 17:40.954
the field and observe in peasant
societies.

17:40.950 --> 17:44.190
The professor or graduate
student stays with the family or

17:44.192 --> 17:46.242
stays very--
in the same village with the

17:46.236 --> 17:48.326
family and always carries around
a clipboard,

17:48.329 --> 17:49.609
one of these clipboards.

17:49.608 --> 17:52.018
What they do is,
they write down everything that

17:52.016 --> 17:55.236
the parents do for the children
and everything that the children

17:55.241 --> 17:56.421
do for the parents.

17:56.420 --> 18:01.570
Mom is cooking,
sister is washing vegetables,

18:01.568 --> 18:05.058
little brother is sent to the
neighbors for a bit of cooking

18:05.056 --> 18:07.796
oil,
baby just defecated,

18:07.801 --> 18:12.931
mom stops cooking to clean up
the baby, etc.,

18:12.932 --> 18:13.752
etc.

18:13.750 --> 18:15.830
You can imagine all this down
on a clipboard.

18:15.829 --> 18:20.879
That's when a child is young;
the family puts a lot of work

18:20.881 --> 18:21.981
into the child.

18:21.980 --> 18:25.760
As the child gets older they
require less and less from the

18:25.757 --> 18:29.337
family and they start doing more
work for the family.

18:29.338 --> 18:32.398
So economists--you can
calculate, or anthropologists,

18:32.396 --> 18:34.746
anybody can calculate a
crossover age.

18:34.750 --> 18:39.020
What is the age at which
children do more work for the

18:39.021 --> 18:43.781
family, measured say in hours,
than the family does work for

18:43.779 --> 18:45.149
the children?

18:45.150 --> 18:49.250
It's no longer quite as young
as the 7 that the Indonesians

18:49.249 --> 18:52.009
talked about,
but modern calculations show

18:52.007 --> 18:55.487
it's something like at age 13
children are doing more work in

18:55.493 --> 18:58.753
an agrarian society,
children are doing more work

18:58.753 --> 19:01.953
for the family than the family
puts in to them.

19:01.950 --> 19:08.340
In your reading packet is a
story about Tanamani,

19:08.338 --> 19:11.488
from Malaysia,
and every year students ask--

19:11.490 --> 19:13.480
it's a wonderful story,
you'll love it,

19:13.480 --> 19:17.190
why do I put that in?,
and of course it's child labor.

19:17.190 --> 19:20.090
It shows you what--how
exactly--a little bit unusual

19:20.086 --> 19:22.356
instance but how children are
viewed,

19:22.358 --> 19:24.498
it is not romantic at all,
it's a straight economic

19:24.498 --> 19:27.338
calculation,
you maximize the amount of work

19:27.335 --> 19:29.385
that you get out of a child.

19:29.390 --> 19:33.480
Jonathan Swift I think mentions
age 6 as the age when children

19:33.480 --> 19:36.630
can begin earning money as
pickpockets and David

19:36.632 --> 19:40.792
Copperfield was sent to work
apparently at the age of 10,

19:40.788 --> 19:44.358
and Charles Dickens himself
went to work at the age of 12.

19:44.358 --> 19:48.568
Currently calculations from the
United Nations International

19:48.567 --> 19:52.487
Labor Organization shows that
there's something like 250

19:52.491 --> 19:56.631
million children aged 5 to 14
that are employed and half of

19:56.628 --> 19:59.838
these children are employed full
time,

19:59.838 --> 20:02.568
not as casual laborers but as
full time.

20:02.568 --> 20:05.868
This estimate,
this is not a decreasing

20:05.865 --> 20:10.805
phenomenon but this estimate is
up from earlier ones of 73

20:10.810 --> 20:15.500
million children,
so from 73 to 250 million,

20:15.499 --> 20:21.379
child labor is apparently
increasing quite significantly

20:21.378 --> 20:23.088
in the world.

20:23.088 --> 20:26.578
Agrarian societies,
just from the work that

20:26.575 --> 20:29.395
children do,
children can be an economic

20:29.404 --> 20:33.284
benefit and so people want a lot
of them to work around the farm.

20:33.279 --> 20:37.749
Even in the early stages of
industrialization children are

20:37.750 --> 20:42.460
often sent into earning work
where they earn cash and in real

20:42.457 --> 20:45.877
poverty situations,
in industrially developing

20:45.878 --> 20:48.248
countries,
even the small wages of

20:48.248 --> 20:52.498
children can make a sort of life
and death difference in the

20:52.503 --> 20:54.383
survival of the family.

20:54.380 --> 20:59.310
Notice that this all changes
now when modernization comes in.

20:59.308 --> 21:03.038
One of the things that happens
is children go to school,

21:03.037 --> 21:06.697
and if they go to school,
they have fewer hours to work

21:06.695 --> 21:09.335
at home so--their benefits go
down.

21:09.338 --> 21:12.268
Money has to be provided for
tuition, for books,

21:12.269 --> 21:14.639
for clothing or uniforms,
for shoes.

21:14.640 --> 21:17.190
Children on the farm often
don't have shoes but when they

21:17.189 --> 21:19.149
go into the city,
to be proper,

21:19.153 --> 21:21.913
they usually have to have
shoes,

21:21.910 --> 21:24.670
so their costs go up,
their benefit goes down,

21:24.670 --> 21:26.400
and their cost goes up.

21:26.400 --> 21:28.630
Another aspect of
modernization:

21:28.625 --> 21:30.705
medicine becomes available.

21:30.710 --> 21:34.650
Now if a child gets sick,
the parents have to spend money

21:34.645 --> 21:38.645
on doctors or on medicine,
or they perceive that they have

21:38.653 --> 21:40.273
to do such a thing.

21:40.269 --> 21:44.609
If the family is in the city
and previously--

21:44.608 --> 21:46.718
and there get to be a lot of
children working,

21:46.720 --> 21:49.250
but there are also a lot of
adults out of work,

21:49.250 --> 21:52.770
the government eventually puts
in child labor laws and says

21:52.765 --> 21:56.395
children can't work and it makes
it illegal and therefore you

21:56.403 --> 21:59.453
can't--
children can't work at all,

21:59.452 --> 22:01.662
their benefit goes down.

22:01.660 --> 22:07.800
All of these things act to
reduce the value of children as

22:07.795 --> 22:11.535
production goods;
they're just not as good a

22:11.541 --> 22:13.901
production good as they used to
be.

22:13.900 --> 22:17.430
Now consider children as a
consumption good,

22:17.432 --> 22:22.362
again that's the pleasure or
fulfillment that parents get out

22:22.359 --> 22:24.249
of having children.

22:24.250 --> 22:29.050
One article I read talks about
children as a consumer durable,

22:29.048 --> 22:31.728
that's because they last a long
time,

22:31.730 --> 22:34.950
and they're like refrigerators
they last a long time,

22:34.950 --> 22:38.390
they're a durable good and you
see the reports every month of

22:38.391 --> 22:40.941
what--
of how many more or less

22:40.944 --> 22:43.744
durable goods are being bought.

22:43.740 --> 22:47.470
It's very interesting because
the purchase of durable goods,

22:47.468 --> 22:49.868
you don't usually pay cash for
that.

22:49.868 --> 22:54.128
They go on a credit card and an
easy payment plan for later

22:54.134 --> 22:57.154
payment and it's the same for
children.

22:57.150 --> 23:00.400
They don't cost anything--they
don't cost much to make and the

23:00.397 --> 23:01.407
costs come later.

23:01.410 --> 23:04.610
I'm thinking the child is kind
of a like a house.

23:04.608 --> 23:07.728
If you're poor,
you can or could until the

23:07.730 --> 23:11.460
recent debacle,
buy a house with no money down.

23:11.460 --> 23:14.360
So you don't have money and you
get a mortgage.

23:14.358 --> 23:16.278
It's later on,
after you have the house,

23:16.276 --> 23:18.236
that you have to,
every year, pay off the

23:18.240 --> 23:18.880
mortgage.

23:18.880 --> 23:21.920
You've got to maintain the
house, insurance for the house,

23:21.916 --> 23:23.086
taxes for the house.

23:23.088 --> 23:27.988
The upfront cost is very small,
later costs are high.

23:27.990 --> 23:31.230
As you know,
a lot of people enjoy shopping

23:31.234 --> 23:34.254
very much and then once they
choose,

23:34.250 --> 23:37.410
they say this is what I want,
and they get a big bang out of

23:37.411 --> 23:38.591
the actual purchase.

23:38.588 --> 23:42.278
Making children is very
similar, people enjoy the

23:42.277 --> 23:45.347
foreplay and then they get a big
bang.

23:45.349 --> 23:49.329
Well that didn't work very well.

23:49.329 --> 23:52.019
Ok.

23:52.019 --> 23:58.069
So, another aspect--finally got
it--another aspect of this is

23:58.065 --> 24:03.405
children as consumption goods,
and this has to do with

24:03.405 --> 24:05.215
modernization.

24:05.220 --> 24:09.340
You can't consider goods
separately, one from the other.

24:09.338 --> 24:13.048
People have a certain amount of
money and what they buy will

24:13.047 --> 24:16.627
depend not only on the cost of
each individual good but on

24:16.628 --> 24:18.198
their relative costs.

24:18.200 --> 24:21.410
What happens when a country
modernizes with respect to

24:21.411 --> 24:25.231
children is that the cost of
children is perceived to go up,

24:25.230 --> 24:29.250
education, health,
all these--clothing--

24:29.250 --> 24:33.080
all these costs go up
inexorably, but at the same time

24:33.075 --> 24:36.175
the cost of manufactured items
goes down.

24:36.180 --> 24:39.740
Radio player,
television, any of the goodies

24:39.743 --> 24:43.313
that you spend an awful lot of
time with.

24:43.308 --> 24:45.638
As time goes on,
technology improves,

24:45.644 --> 24:47.594
the cost of those goes down.

24:47.588 --> 24:51.788
So modernization increases not
only the absolute cost of

24:51.794 --> 24:54.794
children but more,
even more intensely,

24:54.788 --> 24:58.258
the relative costs because as
their costs go up,

24:58.259 --> 25:01.409
the costs of other things that
people want go down.

25:01.410 --> 25:09.030
That's another cause why people
might want fewer children as

25:09.031 --> 25:10.971
time goes on.

25:10.970 --> 25:16.900
Another aspect is the time cost
of children.

25:16.900 --> 25:20.070
An important idea is that
people have not only limited

25:20.070 --> 25:22.820
income,
which they can spend as they

25:22.818 --> 25:24.918
choose,
but also a limited amount of

25:24.923 --> 25:27.733
time and we all use the phrase,
spend their time,

25:27.727 --> 25:31.537
and economists take that as a
serious issue and they think

25:31.541 --> 25:34.421
that time is spent in a rational
manner.

25:34.420 --> 25:38.990
Time can be used for leisure,
time can be used for parenting,

25:38.990 --> 25:41.090
or if the person works time can
be money,

25:41.088 --> 25:43.418
it can be used to work and earn
money,

25:43.420 --> 25:46.380
and each person has to balance,
or each family has to balance,

25:46.380 --> 25:48.070
these things.

25:48.068 --> 25:51.348
Most of the time,
and I'll show you some data on

25:51.349 --> 25:55.329
this, required for childrearing
is spent by the mother.

25:55.328 --> 25:57.558
In fact, almost exclusively in
most societies,

25:57.555 --> 25:59.825
the mother does all--basically
all the work.

25:59.828 --> 26:04.698
In the peasant society the
mother does all the housework,

26:04.698 --> 26:10.178
everything at home is generally
done by the mother and this time

26:10.175 --> 26:12.345
is not valued at all.

26:12.348 --> 26:16.168
Mostly in peasant cultures,
women's work at home doesn't

26:16.173 --> 26:17.943
count,
she may do the--she and the

26:17.940 --> 26:20.350
children may go out into the
fields and do an awful lot of

26:20.347 --> 26:23.267
work weeding and everything,
and also again culturally,

26:23.272 --> 26:25.272
this usually just doesn't
count.

26:25.269 --> 26:29.339
Women's time is not
particularly valued in

26:29.337 --> 26:31.717
traditional societies.

26:31.720 --> 26:34.570
In traditional times,
she can't get a job,

26:34.566 --> 26:38.656
so she's not going to be able
to get--there are just no jobs

26:38.662 --> 26:40.192
available for her.

26:40.190 --> 26:44.090
Then modernization comes in and
jobs become available in the

26:44.093 --> 26:47.073
cash economy and cash is what
people value.

26:47.068 --> 26:51.538
Cash in an agrarian society is
so rare, so difficult to come by

26:51.536 --> 26:54.126
that that's what is really
valued.

26:54.130 --> 26:59.130
Jobs become available and in
many industrializing situations,

26:59.130 --> 27:01.240
and especially in the third
world now,

27:01.240 --> 27:04.280
the first jobs that become
available are low skilled jobs

27:04.278 --> 27:05.038
like sewing.

27:05.038 --> 27:09.098
Almost every country that
enters into the modern world has

27:09.097 --> 27:12.227
started its "industrial
revolution"

27:12.230 --> 27:15.900
by sewing jobs in factories;
Bangladesh, Indonesia,

27:15.896 --> 27:19.676
all over the world sewing is
the first kind of thing and this

27:19.682 --> 27:21.452
is largely a women's job.

27:21.450 --> 27:24.130
You see this in China,
all over the world,

27:24.134 --> 27:27.934
that some of the earliest jobs
in the modern sector are for

27:27.933 --> 27:28.593
women.

27:28.588 --> 27:30.838
Assembly--you look at
assembly--pictures of assembly

27:30.843 --> 27:33.763
lines and almost any electronic
goods, who's doing the assembly?

27:33.759 --> 27:38.049
Very largely women are doing it.

27:38.048 --> 27:43.538
Once job opportunities become
available then you start--you

27:43.538 --> 27:48.838
set up a competition between
childbearing and working;

27:48.838 --> 27:50.698
when childbearing the woman is
at home,

27:50.700 --> 27:53.720
she can't be out in the city
working,

27:53.720 --> 27:56.140
and her time is spent taking
care of the children,

27:56.140 --> 27:58.490
and therefore she doesn't earn
an income,

27:58.490 --> 28:02.310
or she can have fewer children
or no children and go to work

28:02.313 --> 28:03.483
and earn income.

28:03.480 --> 28:07.230
Modern--what happens is the
opportunity cost to women,

28:07.230 --> 28:10.080
which was considered
essentially zero in traditional

28:10.076 --> 28:12.246
times,
starts rising as jobs become

28:12.253 --> 28:16.823
available for women,
the opportunity cost of having

28:16.824 --> 28:18.564
children rises.

28:18.558 --> 28:24.018
That's another thing that as
modernization precedes you might

28:24.018 --> 28:27.928
expect that families want fewer
children.

28:27.930 --> 28:31.450
As modernization proceeds
people get richer and all of

28:31.450 --> 28:35.370
these effects might really not
be due to the income but just

28:35.369 --> 28:39.289
time going on in the way that
I've been talking about,

28:39.288 --> 28:42.008
the changes that modernization
brings.

28:42.009 --> 28:46.759
Now the third kind of thing
that we have to consider for

28:46.760 --> 28:51.340
children is to consider them as
an investment good.

28:51.338 --> 28:54.878
That means you pay now you,
get a return later.

28:54.880 --> 28:57.490
Of course the value of children
doesn't stop,

28:57.490 --> 29:00.200
but once they grow up,
if the culture has strong

29:00.198 --> 29:02.748
families,
and that's a very important

29:02.753 --> 29:05.763
'if,' then the children,
when they grow up,

29:05.758 --> 29:09.448
will perceive that they have a
responsibility toward the

29:09.449 --> 29:13.279
parents and that they have
responsibilities to support the

29:13.275 --> 29:16.425
parents in old age or even
before old age.

29:16.430 --> 29:21.310
It's interesting to note that,
if there's no stock market in a

29:21.308 --> 29:23.388
country,
or banks, and poor people

29:23.385 --> 29:26.105
really don't have access to
these things in most places at

29:26.114 --> 29:28.224
the earliest stage of
industrialization,

29:28.220 --> 29:29.940
there's nothing else for people
to invest in.

29:29.940 --> 29:33.050
There's just no market for
things, there's no market for

29:33.048 --> 29:36.128
their savings,
because rats and insects eat up

29:36.134 --> 29:40.184
an awful lot of food,
you can't really store the

29:40.178 --> 29:45.678
food, so basically almost the
only mode of investment is in

29:45.684 --> 29:49.114
children,
so children are indeed,

29:49.112 --> 29:54.372
in pre-modern societies,
very much an investment good.

29:54.368 --> 29:58.018
This is brought home--I mean I
read a lot about this but the

29:58.020 --> 30:01.050
experience of it in the
developing country is very

30:01.054 --> 30:02.544
interesting to hear.

30:02.538 --> 30:05.068
We had a graduate student,
he was from India,

30:05.068 --> 30:09.718
and he was from an upper class
family and his family had only a

30:09.720 --> 30:12.570
few children and all his
relatives,

30:12.568 --> 30:15.138
his whole class,
the people he really knew had

30:15.136 --> 30:17.586
already done their fertility
transition,

30:17.589 --> 30:19.239
had very few children.

30:19.240 --> 30:27.480
He was a good hearted soul and
wanted to help poor people,

30:27.480 --> 30:32.300
so he worked--before he came to
Yale--

30:32.298 --> 30:34.428
he worked in an adult literacy
program,

30:34.430 --> 30:37.650
that's really one of the best
things that you can do,

30:37.650 --> 30:40.890
and this particular program was
aimed at the very poorest people

30:40.890 --> 30:42.330
who were still illiterate.

30:42.328 --> 30:45.648
In the course they discussed
everything, because you need

30:45.651 --> 30:48.851
vocabulary, you need to discuss
it, so there's a lot of

30:48.853 --> 30:50.873
discussion as well as reading.

30:50.868 --> 30:54.258
One of the things they
discussed was family planning;

30:54.259 --> 30:56.939
in fact, a nun had been
speaking in the class strongly

30:56.941 --> 30:59.721
in favor of family planning
trying to convince them that

30:59.723 --> 31:01.853
they shouldn't have so many
children,

31:01.848 --> 31:03.828
that they would be better off
with fewer children,

31:03.828 --> 31:06.278
which was the experience of his
social class.

31:06.278 --> 31:09.208
One day one of the adults took
Anand, this guy,

31:09.205 --> 31:12.005
aside, and said,
"you know you are wrong

31:12.005 --> 31:13.655
about family planning.

31:13.660 --> 31:16.850
I have no money to save for
retirement,

31:16.848 --> 31:20.328
there's no social security,
the government won't care for

31:20.332 --> 31:23.522
me in old age,
and I need a son to care for me

31:23.522 --> 31:24.352
in old age.

31:24.348 --> 31:27.628
I have ten children,
if even one of them survives

31:27.625 --> 31:31.305
and becomes successful,
then I will be lucky and have a

31:31.311 --> 31:33.361
comfortable old age."

31:33.358 --> 31:37.498
That was very nicely put what
the man said to Anand,

31:37.502 --> 31:41.242
But there's also Anand's
reaction was also very

31:41.240 --> 31:42.540
interesting.

31:42.538 --> 31:45.278
That even though he grew up
in--and he had never thought

31:45.281 --> 31:47.001
about that before,
he never heard about it,

31:47.000 --> 31:49.490
he'd never thought about it,
he never perceived it form the

31:49.490 --> 31:52.680
point of view of a poor person
and he was very impressed.

31:52.680 --> 31:58.180
When he told me this story,
he said he was just amazed at

31:58.184 --> 32:03.594
how compelling the argument was
and he couldn't think of

32:03.590 --> 32:08.610
anything to say back to the
person in support of his

32:08.605 --> 32:10.665
previous views.

32:10.670 --> 32:15.220
Again, for the very poorest
people about the only strategy

32:15.221 --> 32:20.171
they have for old age is to have
children who will take care of

32:20.171 --> 32:22.781
them,
and in most cultures that means

32:22.778 --> 32:24.528
a son will take care of them.

32:24.528 --> 32:29.378
Kids cost very little in a
poverty stricken culture,

32:29.380 --> 32:35.550
they wear hand-me-down clothes,
they don't have toys or lots of

32:35.549 --> 32:39.539
anything like that,
they get basically no school or

32:39.538 --> 32:42.478
medical care,
the kind of food that poor

32:42.483 --> 32:47.433
people eat is fairly cheap and
interesting in terms of time,

32:47.430 --> 32:51.030
beyond the first child,
the first and second child,

32:51.029 --> 32:52.489
as soon as they get up to be
five, six,

32:52.490 --> 32:54.880
seven, they start taking care
of the younger children,

32:54.880 --> 32:57.340
so the time burden on the
mother sort of goes away once

32:57.338 --> 32:58.978
you have somewhat older
children,

32:58.980 --> 33:01.690
and older means like five,
and they can start strapping

33:01.691 --> 33:04.701
the baby on their back and going
around with the baby so that

33:04.703 --> 33:08.213
extra children are not--
don't even cost much time for

33:08.207 --> 33:10.187
the parents,
they cost very little money,

33:10.190 --> 33:11.820
you already have all the
hand-me-down things,

33:11.818 --> 33:15.568
so it's just a subsistence
amount of cheap food that the

33:15.574 --> 33:16.534
child needs.

33:16.528 --> 33:22.168
It's--children are a very small
cost and they're a benefit as

33:22.173 --> 33:27.633
old age insurance is perceived
to be quite, quite great.

33:27.630 --> 33:34.550
What happens as
modernization--so parents are

33:34.548 --> 33:39.488
basically willing--
poor parents are willing to

33:39.486 --> 33:43.056
invest the little bit that they
have and a little bit that's

33:43.060 --> 33:44.940
needed in a lot of children.

33:44.940 --> 33:47.750
How does modernization affect
this investment?

33:47.750 --> 33:51.310
If jobs start to be available
in the cities and/or

33:51.307 --> 33:55.227
possibilities open up for
migration abroad to jobs,

33:55.230 --> 33:56.940
all the people from India and
Pakistan,

33:56.940 --> 34:00.050
they go to the Middle East to
work in oil related jobs,

34:00.049 --> 34:03.619
to the rich economies;
people come to America to find

34:03.623 --> 34:04.193
jobs.

34:04.190 --> 34:08.610
They all send back remittances;
at least the first generation

34:08.605 --> 34:11.785
is very, very good about sending
back remittances,

34:11.789 --> 34:15.169
which is a huge fraction of
poor people's income.

34:15.170 --> 34:18.180
Even though the remittances may
not be a huge fraction or what

34:18.181 --> 34:20.601
they're earning in America or in
Saudi Arabia,

34:20.599 --> 34:24.129
in terms of the income that
their parents are living on,

34:24.130 --> 34:26.230
and poverty stricken,
it can be a very,

34:26.230 --> 34:30.390
very big increment to their
income.

34:30.389 --> 34:35.139
Children can be a really good
investment, if they can get a

34:35.144 --> 34:38.104
job in the city,
or get a job abroad,

34:38.096 --> 34:41.126
they're a really good
investment.

34:41.130 --> 34:43.980
Modernization increases,
everything else it

34:43.981 --> 34:47.381
decreases--the value of
children, but modernization

34:47.375 --> 34:51.175
increases their value;
this aspect of their value as

34:51.182 --> 34:52.242
an investment.

34:52.239 --> 34:56.259
Several other things happen
during modernization that

34:56.255 --> 34:58.955
increase the value as
investment.

34:58.960 --> 35:01.790
First of all child mortality,
the first thing in a

35:01.788 --> 35:05.298
demographic transition,
or usually the first thing that

35:05.295 --> 35:08.655
happens is a quite severe drop
in infant mortality.

35:08.659 --> 35:11.389
What that means is children now
are likely to grow up.

35:11.389 --> 35:17.189
Previously children died very
young or died at various times

35:17.188 --> 35:20.968
in their young ages,
and if something is going to

35:20.969 --> 35:22.879
disappear,
like if something is going to

35:22.882 --> 35:25.242
get stolen from you,
you don't try to buy a really

35:25.235 --> 35:28.075
fancy car if you're pretty sure
it's going to get stolen and

35:28.077 --> 35:29.857
it's the same thing with
children.

35:29.860 --> 35:32.840
If the odds are very high that
your children are going to die

35:32.836 --> 35:35.356
it's really not--
and if modern medicine isn't

35:35.364 --> 35:38.384
available --
it's not really a good idea to

35:38.384 --> 35:42.804
put a lot of investment into a
child that's going to die.

35:42.800 --> 35:45.530
As modernization--some ideas of
sanitation,

35:45.530 --> 35:49.410
public health come into play,
and the expectation that

35:49.414 --> 35:53.664
children will live increases,
and then there is a longer

35:53.657 --> 35:57.887
period for them to live and
return income to the parents.

35:57.889 --> 36:01.089
The other side of the coin is
pretty much the same;

36:01.090 --> 36:02.770
the parents are living longer.

36:02.768 --> 36:08.408
In the old style of fertility,
married people just kept having

36:08.407 --> 36:13.677
children until they became
sterile at 45 or something like

36:13.675 --> 36:15.825
that,
and then at the old life

36:15.831 --> 36:18.911
expectancy they didn't have much
longer to live and they were

36:18.911 --> 36:23.161
still capable of working at 40,
45 and then they die.

36:23.159 --> 36:26.919
Even if they have children that
stay alive, there's not a long

36:26.918 --> 36:30.308
period of dependency where
they'll get income from their

36:30.307 --> 36:31.107
children.

36:31.110 --> 36:37.240
If you have your last child at
say 40 or 45 then they're going

36:37.242 --> 36:42.172
to reach maturity when you're 60
or something,

36:42.170 --> 36:47.200
almost 60 and that's at or
above the life expectancy in

36:47.199 --> 36:49.249
very poor countries.

36:49.250 --> 36:55.330
The increased longevity of both
children and parents make it a

36:55.329 --> 37:01.209
much better deal to have
children as an investment good,

37:01.210 --> 37:04.890
because there's a longer time
they can pay you and you're

37:04.889 --> 37:08.239
going to be around for a longer
time to get this.

37:08.239 --> 37:13.009
As opposed to the other ways
that children are looked at

37:13.010 --> 37:15.940
economically,
as an investment good

37:15.940 --> 37:20.340
modernization can massively
increase the value of children.

37:20.340 --> 37:22.890
That would be--we have
counterbalancing--

37:22.889 --> 37:26.269
if people have more money as
modernization goes on,

37:26.268 --> 37:28.108
you think they could afford
more children,

37:28.110 --> 37:31.340
but they become less good as
consumption goods,

37:31.340 --> 37:33.770
they become less good as
production goods,

37:33.768 --> 37:36.958
but they come much better as
investment goods.

37:36.960 --> 37:40.010
Of course as people have more
money, they have more money that

37:40.014 --> 37:42.174
they can save,
and one of the ways they save

37:42.166 --> 37:44.266
it is by investing it in the
children.

37:44.268 --> 37:48.758
One of the issues then is if
the value of children is now

37:48.762 --> 37:53.022
mostly as an investment good,
how do you maximize this

37:53.016 --> 37:54.216
investment?

37:54.219 --> 37:58.699
In agrarian societies there are
really no opportunities outside

37:58.702 --> 38:02.972
farming, that's what the society
does, period we're done.

38:02.969 --> 38:06.429
If, indeed, the agriculture is
traditional,

38:06.429 --> 38:08.899
you're doing it exactly the way
your grandfather did it,

38:08.900 --> 38:13.250
and his grandfather did it,
and that's a very safe way to

38:13.253 --> 38:16.833
farm because you're on the edge
of survival.

38:16.829 --> 38:19.899
If your crop doesn't grow
you're in big trouble,

38:19.902 --> 38:23.702
so if you try something new
there's always a danger that it

38:23.697 --> 38:24.937
might not work.

38:24.940 --> 38:27.870
If you do something the way
it's been done for hundreds of

38:27.871 --> 38:30.851
years or thousands of years or
you perceive as thousands of

38:30.853 --> 38:32.863
years in your family on your
land,

38:32.860 --> 38:34.650
you're pretty sure that it's
going to work.

38:34.650 --> 38:37.820
You may not get an awful lot
out of it but you're sure it's

38:37.815 --> 38:38.685
going to work.

38:38.690 --> 38:43.310
Peasants are very conservative,
not only about their

38:43.311 --> 38:46.331
production,
their agricultural production

38:46.331 --> 38:49.721
but everything else in their
life because they don't have

38:49.715 --> 38:53.855
anything extra to gamble with,
so they're not going to take on

38:53.856 --> 38:54.796
anything new.

38:54.800 --> 38:57.260
The old way of doing it,
the father passes it onto the

38:57.262 --> 38:59.032
son exactly as he has been doing
it.

38:59.030 --> 39:03.090
You don't need an education to
do farming in a traditional kind

39:03.090 --> 39:05.770
of way;
you learn it while doing it

39:05.768 --> 39:07.158
with your father.

39:07.159 --> 39:13.979
When education gets
modernized--when agriculture

39:13.981 --> 39:17.861
gets modernized,
there's fertilizers,

39:17.860 --> 39:20.970
there's new varieties of seeds,
you have to pay attention to

39:20.967 --> 39:23.617
money and when you enter into
the market economy you have to

39:23.617 --> 39:26.177
have some mathematical abilities
to know about money,

39:26.179 --> 39:28.049
you may have to borrow money,
there's interest rates,

39:28.050 --> 39:31.080
there's payback schedules,
there's all kinds of things so

39:31.076 --> 39:33.666
that education starts becoming
very valuable,

39:33.670 --> 39:35.920
even in agriculture.

39:35.920 --> 39:42.120
Early on, the combination of
not needing education and the

39:42.115 --> 39:46.895
probability that the kids will
die young,

39:46.900 --> 39:51.400
there's really not much benefit
in investing in education in an

39:51.402 --> 39:53.512
early agricultural society.

39:53.510 --> 39:58.630
The best strategy at that time
is to have a lot of children and

39:58.634 --> 40:03.684
put a minimal investment in each
of them and hope that some of

40:03.675 --> 40:07.545
them don't die,
and that's in fact empirically

40:07.550 --> 40:10.370
true,
that the investment before the

40:10.371 --> 40:14.551
demographic transition,
the investment that people put

40:14.552 --> 40:18.782
into their children was indeed
very small and subsistence

40:18.775 --> 40:21.485
carried on the way it always
was.

40:21.489 --> 40:26.169
Now population increases
because foreign foods come in,

40:26.170 --> 40:30.330
all kinds of things happen,
and population starts

40:30.329 --> 40:33.449
increasing, land becomes scarce.

40:33.449 --> 40:37.459
Now imagine you have a small
farm and you yourself are living

40:37.456 --> 40:40.616
as a subsistence farmer,
and you've got a whole bunch of

40:40.621 --> 40:42.871
kids,
and now you're faced with

40:42.873 --> 40:45.833
dividing up your land among the
kids.

40:45.829 --> 40:48.129
Well you know the kids aren't
going to be able to do it,

40:48.130 --> 40:51.080
you can barely do it on your
size farm as you divide it up

40:51.077 --> 40:52.817
among two,
three or so sons,

40:52.822 --> 40:56.172
and it just isn't going to work
so you're in crisis.

40:56.170 --> 40:59.860
When the kids inherit such a
little bit of land not only are

40:59.862 --> 41:03.192
they going to have big trouble,
but they're not going to have

41:03.188 --> 41:05.208
any excess to provide for you,
so children,

41:05.210 --> 41:08.600
stop becoming children if they
stay in the farm economy,

41:08.599 --> 41:13.729
stop becoming any kind of a
decent investment to keep you

41:13.728 --> 41:18.678
going when you're getting a
little old so you've got to

41:18.675 --> 41:24.965
figure out what to do,
you're facing a crisis.

41:24.969 --> 41:28.829
The outside economy is
modernizing,

41:28.829 --> 41:31.299
you may not be modernizing but
the outside economy is

41:31.297 --> 41:33.987
modernizing,
and jobs become available,

41:33.994 --> 41:37.814
largely jobs that require some
sort of education;

41:37.809 --> 41:39.899
white collar jobs,
the government jobs.

41:39.900 --> 41:42.700
Big, huge bureaucracies spring
up, that--

41:42.699 --> 41:45.089
I'll mention that in a little
bit --

41:45.090 --> 41:50.990
and parents rather rapidly
realize that the only option is

41:50.992 --> 41:55.862
for the kids to go to the city
and get a job.

41:55.860 --> 41:58.740
But, all the parents,
everybody reaches that state

41:58.744 --> 42:02.244
pretty much at the same time,
so the cities are just flooded

42:02.242 --> 42:05.312
with people coming in looking
for the still scarce jobs.

42:05.309 --> 42:07.209
How do you have an edge up?

42:07.210 --> 42:09.890
It has to be education,
that is the only way you can

42:09.887 --> 42:12.507
get these white collar jobs,
you absolutely need an

42:12.514 --> 42:13.254
education.

42:13.250 --> 42:16.180
In manufacturing jobs you do
better, you have to deal with

42:16.181 --> 42:18.121
machinery;
you have to know things about

42:18.119 --> 42:18.619
machinery.

42:18.619 --> 42:24.319
I was in Peru quite a ways back
and they took peasants off the

42:24.324 --> 42:26.874
Altiplano,
this high dry plain where

42:26.869 --> 42:29.289
there's no water,
the land is terrible,

42:29.291 --> 42:31.511
and they live on about $1 a
day.

42:31.510 --> 42:33.650
In order to get a job in the
mines,

42:33.650 --> 42:36.370
the first job is you take a
shovel and you--

42:36.369 --> 42:40.489
there's big machines that eat
away at the rock face but a lot

42:40.494 --> 42:43.294
of it drops down,
and they need people with

42:43.286 --> 42:46.686
shovels to get the rest of it
and dump it into the trucks,

42:46.690 --> 42:49.750
so this is really a minimum
skill labor job.

42:49.750 --> 42:52.530
They needed to have two things,
which not everyone had,

42:52.530 --> 42:55.220
1) to know that machines can be
dangerous,

42:55.219 --> 42:57.489
that they can get hot from
spinning around,

42:57.489 --> 42:59.979
that they can be electrified,
that you don't just touch

42:59.980 --> 43:02.010
something unless you know what's
going on.

43:02.010 --> 43:05.450
The second thing) you have to
know enough about time to get to

43:05.449 --> 43:07.939
the job on time every day;
the shift comes on,

43:07.940 --> 43:09.090
you've got to be there.

43:09.090 --> 43:14.640
The peasants don't come knowing
those sorts of things and those

43:14.643 --> 43:20.113
that do know those things can
double their income to $2 a day,

43:20.110 --> 43:22.350
if they can get jobs.

43:22.349 --> 43:28.579
That's even the most basic kind
of job requires a kind of

43:28.583 --> 43:35.263
mindset and educational thing
that you don't get generally on

43:35.264 --> 43:36.494
a farm.

43:36.489 --> 43:46.359
Education becomes an extremely
valuable commodity.

43:46.360 --> 43:52.200
But, in order to get the job
and to stay alive,

43:52.199 --> 43:55.979
kids have to be healthy,
so you have to put money into

43:55.978 --> 44:00.188
education and you also have to
put money into health for the

44:00.186 --> 44:02.536
kids that's the prerequisite.

44:02.539 --> 44:05.879
If you have a bond,
like a kid, you've got to have

44:05.882 --> 44:09.652
a safe-deposit box for it,
that's like health insurance or

44:09.646 --> 44:13.406
healthcare for it,
otherwise it's going to

44:13.407 --> 44:15.447
disappear on you.

44:15.449 --> 44:19.659
This investment in children,
which in education and

44:19.663 --> 44:22.953
healthcare, becomes a very good
deal;

44:22.949 --> 44:25.609
that if you can manage to
invest that much in your child

44:25.614 --> 44:28.074
and go to the city or go abroad,
get a good job,

44:28.067 --> 44:30.947
and their income will be so
much more than yours that they

44:30.947 --> 44:33.067
can send you back a significant
amount.

44:33.070 --> 44:35.930
These investments in children
are called human capital,

44:35.929 --> 44:38.649
or the result of them is called
human capital,

44:38.650 --> 44:41.650
it's the health and education
of the population.

44:41.650 --> 44:45.780
It's now realized that when
economists study "why is

44:45.784 --> 44:49.334
one country rich and one country
poor?",

44:49.329 --> 44:51.879
well part of it is their
physical, their stock of

44:51.880 --> 44:52.890
physical capital.

44:52.889 --> 44:56.069
Physical capital is the
factories, the machines,

44:56.070 --> 44:59.050
the buildings,
and all the stuff that you can

44:59.050 --> 44:59.930
knock on.

44:59.929 --> 45:02.889
They've realized that that's
not the biggest difference,

45:02.889 --> 45:05.209
the biggest difference is
human--what they call human

45:05.208 --> 45:08.338
capital,
how educated and how healthy

45:08.338 --> 45:10.128
the population is.

45:10.130 --> 45:12.860
So it's a very big thing.

45:12.860 --> 45:18.770
An interesting thing,
we have two different factors

45:18.773 --> 45:24.333
that are now in play,
why a child becomes a good

45:24.333 --> 45:26.703
investment good.

45:26.699 --> 45:30.239
One, with education they can
get a higher paying job,

45:30.239 --> 45:34.669
and with better health they can
live longer and the parents can

45:34.668 --> 45:37.948
live longer,
so they're paying you back not

45:37.949 --> 45:42.519
only at a higher rate if they're
educated and healthy but for a

45:42.518 --> 45:44.138
longer time period.

45:44.139 --> 45:46.439
We normally think of that
things add,

45:46.440 --> 45:50.190
well you get a certain benefit
from their education,

45:50.190 --> 45:52.720
earning more per year,
and you get a certain benefit

45:52.717 --> 45:54.917
from their health,
they're living longer and you

45:54.923 --> 45:56.373
might be tempted to add those
two,

45:56.369 --> 45:58.279
but in fact they multiply.

45:58.280 --> 46:02.950
That you're getting a certain
extra amount per year over 30

46:02.945 --> 46:07.785
years or something like that,
so the two factors multiply and

46:07.791 --> 46:12.191
that's one of the really big
things in Becker's theory is how

46:12.188 --> 46:17.098
these factors that go into the
increment a child will bring in,

46:17.099 --> 46:21.419
the health and the education
multiply with each other and so

46:21.416 --> 46:25.796
even fairly small increments in
either one lead to a very big

46:25.804 --> 46:29.284
return;
multiplication is a very large

46:29.277 --> 46:29.987
effect.

46:29.989 --> 46:34.219
The end of this that as an
investment good,

46:34.219 --> 46:37.749
investment in children's health
and education is very rewarding,

46:37.750 --> 46:41.070
it's a really rewarding kind of
investment in the kind of

46:41.065 --> 46:43.905
economic situation that we've
been discussing.

46:43.909 --> 46:48.309
Here's the catch,
that if you're poor you can't

46:48.309 --> 46:53.379
make these investments in a
whole lot of children,

46:53.380 --> 46:56.780
and so the best strategy,
instead of having a lot of

46:56.782 --> 47:00.922
children and dividing up your
assets among a bunch of them,

47:00.920 --> 47:04.290
you have a very few children
and you concentrate your assets,

47:04.289 --> 47:07.429
you concentrate what you can
invest in a few children,

47:07.429 --> 47:10.799
and you get them fairly good
healthcare and as good an

47:10.804 --> 47:12.974
education as you can get for it.

47:12.969 --> 47:16.119
Children that have these two
things,

47:16.119 --> 47:18.359
it's called the quality of the
child,

47:18.360 --> 47:20.420
again that's another economic
jargon term,

47:20.420 --> 47:24.260
that the health and education
of a child are the quality of

47:24.255 --> 47:25.045
the child.

47:25.050 --> 47:30.820
The way this change that goes
on in the demographic transition

47:30.824 --> 47:35.844
is called the switch or the
trade off from quantity to

47:35.842 --> 47:36.982
quality.

47:36.980 --> 47:40.200
Before the transition parents
want a lot of children because

47:40.199 --> 47:43.419
the main thing they're worried
about is the probability that

47:43.418 --> 47:46.688
they're just going to die and
there's nothing the parents can

47:46.693 --> 47:49.513
do about that,
the local folk medicine is

47:49.514 --> 47:53.324
almost totally ineffective so
the kids are just going to die

47:53.315 --> 47:58.315
kind of randomly,
but as time goes on that's not

47:58.315 --> 48:02.195
true anymore,
they can do something to keep

48:02.199 --> 48:06.389
their kids alive and they get
the kids educated so that they

48:06.393 --> 48:08.813
can earn a good rate of income.

48:08.809 --> 48:12.909
There's this trade,
a switch from wanting quantity

48:12.911 --> 48:16.011
to wanting quality in the
children.

48:16.010 --> 48:20.720
Parents catch onto this very
quickly,

48:20.719 --> 48:24.209
some of the very rapidity of
some of the third world

48:24.213 --> 48:27.163
fertility declines has been due
to that--

48:27.159 --> 48:30.599
when the land gets filled up by
people it becomes very obvious

48:30.599 --> 48:33.979
right away that you've got to do
something and the only thing

48:33.981 --> 48:36.351
available are jobs in the cities
and--

48:36.349 --> 48:41.419
they know very well that the
kids need education to compete

48:41.422 --> 48:43.262
in that job market.

48:43.260 --> 48:48.650
In terms of policy you get some
really interesting kind of

48:48.650 --> 48:49.880
conundrums.

48:49.880 --> 48:53.120
One is, education is what the
people want,

48:53.119 --> 48:57.539
they want it desperately and
yet if they keep having eight

48:57.539 --> 48:59.999
children,
the country is going to be

49:00.001 --> 49:02.611
hopeless,
so policy makers like the idea

49:02.608 --> 49:06.128
that in order to get an
education people have to reduce

49:06.134 --> 49:09.524
their fertility,
but they also with good hearts

49:09.518 --> 49:11.528
want to make education free.

49:11.530 --> 49:15.360
The question in a developing
country is how much to charge

49:15.362 --> 49:16.442
for education.

49:16.440 --> 49:19.940
Its a very, very major issue
because you need to strike a

49:19.940 --> 49:23.230
balance between--
setting the price low enough so

49:23.231 --> 49:26.691
that you can get a lot of your
children educated,

49:26.690 --> 49:30.950
yet setting some price so that
it's an incentive to parents to

49:30.945 --> 49:35.405
not just absolutely flood the
system and overwhelm everything.

49:35.409 --> 49:40.009
Wherever you set this ,
parents will always use

49:40.014 --> 49:43.924
strategies to maximize their
benefit.

49:43.920 --> 49:46.900
One of the kind of strategies
that people worry about,

49:46.900 --> 49:51.610
that parents can do,
is the first child stays at

49:51.608 --> 49:53.968
home,
second child stays at home,

49:53.965 --> 49:57.415
eventually that child grows up
and starts doing work and then

49:57.422 --> 50:00.652
they can do the work around the
house that's needed,

50:00.650 --> 50:03.310
and the weeding the fields and
the work on the farm.

50:03.309 --> 50:05.609
The third child is now,
in a sense, surplus,

50:05.608 --> 50:07.158
you don't need their labor.

50:07.159 --> 50:09.579
If there's free education you
get them educated,

50:09.579 --> 50:12.349
send them to the city,
and you can do that if there's

50:12.351 --> 50:14.751
no cost to getting a child
educated third,

50:14.750 --> 50:16.450
fourth, fifth,
sixth there's no limit to the

50:16.449 --> 50:18.109
number of children that you
could have,

50:18.110 --> 50:20.740
you send them all off to the
city, they send you back money.

50:20.739 --> 50:24.029
Same with healthcare,
that if you have a welfare

50:24.034 --> 50:27.474
government and it doesn't set
this just right,

50:27.469 --> 50:31.589
if healthcare is also free or
nearly free,

50:31.590 --> 50:34.680
then again there's no cost to
having the extra children,

50:34.679 --> 50:38.589
people may continue to have
that many children and then the

50:38.590 --> 50:42.030
whole system just gets flooded
and you have a failed

50:42.027 --> 50:43.037
experiment.

50:43.039 --> 50:49.069
Education and healthcare are
some of the fundamental

50:49.070 --> 50:56.520
variables in this relationship
between economic development,

50:56.518 --> 50:59.828
jobs becoming available,
and how many children that you

50:59.829 --> 51:00.259
have.

51:00.260 --> 51:03.490
In developing countries,
as you know,

51:03.489 --> 51:05.739
there are a lot of people,
labor is cheap,

51:05.739 --> 51:08.129
but capital is scare,
they're not rich,

51:08.130 --> 51:12.700
they don't have a lot to invest
in factories and everything,

51:12.699 --> 51:15.459
so it's hard for them to build
a steel plant or a petrochemical

51:15.458 --> 51:17.378
plant,
that takes a lot of bucks and a

51:17.376 --> 51:18.206
lot of know how.

51:18.210 --> 51:21.390
What about producing a teacher?

51:21.389 --> 51:24.719
Is that an expensive or a cheap
proposition?

51:24.719 --> 51:27.949
Teaching is labor intensive,
it's not capital intensive,

51:27.951 --> 51:31.651
you need maybe a chalkboard and
some chalk and some places don't

51:31.652 --> 51:32.772
even have that.

51:32.768 --> 51:36.428
Education, being labor
intensive, it is one of the

51:36.432 --> 51:39.202
cheap things that countries can
do.

51:39.199 --> 51:43.079
Basically even the poorest
country can have surplus labor,

51:43.081 --> 51:46.211
largely female,
and give it a minimal amount of

51:46.213 --> 51:47.103
training.

51:47.099 --> 51:50.589
All you have to do is make them
basically literate and they can

51:50.585 --> 51:53.785
go out into the villages and
teach children to read and to

51:53.791 --> 51:56.361
write,
which is amazing progress,

51:56.356 --> 51:58.826
and then that bootstraps
itself.

51:58.829 --> 52:02.419
If you look at developing
countries, that's one of the

52:02.420 --> 52:04.520
things they really invest in.

52:04.518 --> 52:10.868
First, primary education and
they get a big return from that;

52:10.869 --> 52:12.769
they have the finances to do
that.

52:12.768 --> 52:17.518
In fact, almost all developing
countries also have a pretty

52:17.521 --> 52:22.191
good university structure,
not a research level university

52:22.192 --> 52:24.652
but a teaching university.

52:24.650 --> 52:27.580
If you look at places--they're
producing doctors--

52:27.579 --> 52:30.849
I don't know if you know this,
but in America something like

52:30.849 --> 52:34.339
half of all the doctors that get
licensed are trained abroad.

52:34.340 --> 52:36.090
Now some of them are from
England, Sweden,

52:36.085 --> 52:38.635
Germany that are training them
pretty much the way we are.

52:38.639 --> 52:39.809
But, more are coming in from
India,

52:39.809 --> 52:42.589
Pakistan, Philippines,
places like that,

52:42.590 --> 52:45.900
and the people are just as
smart as anywhere else,

52:45.900 --> 52:48.750
they maybe work harder,
more ambitious,

52:48.750 --> 52:52.170
maybe it's harder even to get
into but they can train

52:52.172 --> 52:54.612
thousands and thousands of
doctors.

52:54.610 --> 52:58.060
A medical school class in
Mexico City would be like 3,000

52:58.059 --> 53:01.509
students or something,
the law classes are all very,

53:01.505 --> 53:05.185
very huge because it's cheap
and the marginal cost if you

53:05.188 --> 53:08.278
already have a class in
physiology with somebody

53:08.277 --> 53:11.117
lecturing,
add another 100 students

53:11.117 --> 53:13.127
doesn't cost you anything.

53:13.130 --> 53:17.310
Education up to very high
levels is something that

53:17.307 --> 53:22.167
developing countries can often
afford because it's a labor

53:22.168 --> 53:24.298
intensive occupation.

53:24.300 --> 53:27.650
When you think of the brain
drain, what happens then is you

53:27.652 --> 53:30.142
get more doctors than India can
support,

53:30.139 --> 53:33.049
more doctors than Mexico can
support,

53:33.050 --> 53:35.350
so they want to come to the
United States and you get the

53:35.353 --> 53:35.933
brain drain.

53:35.929 --> 53:38.579
The most highly educated people
from all these developing

53:38.583 --> 53:40.473
countries,
which the government has

53:40.469 --> 53:42.639
invested in to pay for their
education,

53:42.639 --> 53:44.619
they go to England,
they go to America,

53:44.619 --> 53:46.709
they go to France,
they go to Japan,

53:46.710 --> 53:49.890
if they're allowed in,
and they get a job.

53:49.889 --> 53:52.639
That's the old style
brain-drain, where the people

53:52.635 --> 53:56.455
physically move to here,
but it's also the modern job

53:56.463 --> 53:58.833
flight that now,
again as I said,

53:58.826 --> 54:01.886
with the internet and cheap
shipping costs all these jobs

54:01.893 --> 54:05.183
can stay in India or somewhere
and we ship the jobs out,

54:05.179 --> 54:06.119
the accounting.

54:06.119 --> 54:09.089
Accounting is done in the
daytime, banks do all kinds of

54:09.085 --> 54:11.425
transactions,
they ship all that data

54:11.429 --> 54:14.129
overnight to India and during
our night,

54:14.130 --> 54:16.580
which is India's day,
the Indian accountants work on

54:16.577 --> 54:19.407
it and by the morning you have
all your accounts settled.

54:19.409 --> 54:23.839
Engineering is worked on in
Chicago during the day and then,

54:23.840 --> 54:27.050
however far the plans have got,
is shipped off to again,

54:27.050 --> 54:29.780
usually India,
and the architects there work

54:29.784 --> 54:32.144
on it and ship it back to
Chicago,

54:32.139 --> 54:34.699
and that's increasing.

54:34.699 --> 54:38.769
One of the important factors in
this is basically the cheapness

54:38.768 --> 54:41.478
of education,
that education is a labor

54:41.476 --> 54:45.186
intensive operation and so
developing countries can do it

54:45.190 --> 54:46.120
quite well.

54:46.119 --> 54:49.659
Within the developing
countries, they can rather

54:49.659 --> 54:53.579
rapidly produce a lot of say
college educated people,

54:53.577 --> 54:56.437
and these people expect good
jobs.

54:56.440 --> 54:59.080
They've risen up,
maybe by a great amount of

54:59.076 --> 55:01.566
effort,
risen up from the utter poverty

55:01.568 --> 55:05.078
in their villages and now they
have a college education and

55:05.083 --> 55:06.723
they're ready for a job.

55:06.719 --> 55:10.419
The country usually doesn't
have jobs for them,

55:10.420 --> 55:14.890
the economy is not yet
developed, so what is there--

55:14.889 --> 55:19.139
there's a tremendous demand
for--for white collar jobs.

55:19.139 --> 55:22.059
And if they don't get these
white collar jobs,

55:22.059 --> 55:26.019
there is tremendous unrest
among the young educated people;

55:26.018 --> 55:27.148
they're very verbal,
they know each other,

55:27.150 --> 55:29.050
they know how to communicate,
they're mobile,

55:29.050 --> 55:32.700
you can have a very unstable
political situation develop

55:32.704 --> 55:33.574
right away.

55:33.570 --> 55:35.880
The governments in all these
places almost always respond

55:35.880 --> 55:38.680
with government jobs,
since there isn't--the private

55:38.684 --> 55:41.474
sector is not yet capable of
producing jobs,

55:41.469 --> 55:42.769
there's government jobs.

55:42.768 --> 55:46.068
You get these enormously
bloated bureaucracies in almost

55:46.074 --> 55:48.364
every underdeveloped country
where,

55:48.360 --> 55:51.300
to do the tiniest little thing
you need 16 different people to

55:51.300 --> 55:53.590
stamp it,
sign it, and approve it,

55:53.585 --> 55:57.635
and it takes three days for
each of these people to make a

55:57.637 --> 55:58.487
decision.

55:58.489 --> 56:03.019
That's sort of--things get out
of whack when--

56:03.018 --> 56:06.348
because it's cheap you can
produce a lot of education but

56:06.353 --> 56:09.693
then you can't them jobs and
once you establish these big

56:09.688 --> 56:12.118
bureaucracies,
then further economic

56:12.121 --> 56:15.781
development may become difficult
because to do the slightest

56:15.780 --> 56:18.070
thing,
build a factory or do something

56:18.070 --> 56:20.980
new or import something you have
to go through all this

56:20.981 --> 56:21.791
bureaucracy.

56:21.789 --> 56:24.789
Because the government doesn't
have money to pay these people,

56:24.793 --> 56:26.913
they get paid very poorly,
so corruption;

56:26.909 --> 56:30.689
if you give us a very small
bribe this is a wonderful thing

56:30.686 --> 56:33.666
for the bureaucrat,
so he'll pay attention to your

56:33.670 --> 56:36.770
thing and only take two days
instead of three days to approve

56:36.771 --> 56:38.581
whatever it is you've given him.

56:38.579 --> 56:43.179
Again, this is the problem of
the relation between demography

56:43.184 --> 56:48.024
and international and economic
development in poor countries.

56:48.018 --> 56:49.318
It's all these interlocking
things;

56:49.320 --> 56:52.710
the demography always
interlocks with every other

56:52.706 --> 56:55.386
aspect of your economic
development.

56:55.389 --> 57:01.609


57:01.610 --> 57:08.740
In terms of the whole picture
of the changes in the world,

57:08.739 --> 57:11.419
probably this is the kind of
sequence--

57:11.420 --> 57:17.150
we've talked about a lot of
different factors that happen to

57:17.146 --> 57:20.056
bring people into modernity.

57:20.059 --> 57:24.909
I want to sort of summarize a
lot of that.

57:24.909 --> 57:28.079
The first thing that apparently
happens,

57:28.079 --> 57:32.739
it starts in the renaissance in
the West and continues on into

57:32.744 --> 57:35.224
the enlightenment,
and then the industrial

57:35.224 --> 57:35.684
revolution.

57:35.679 --> 57:38.659
The first thing that happens is
people stop thinking

57:38.659 --> 57:42.169
supernaturally about things and
start thinking about the real

57:42.166 --> 57:45.086
world and trying to think
rationally about it.

57:45.090 --> 57:48.920
Technological progress ensues
and allows them better shipping,

57:48.920 --> 57:51.020
better navigation,
they get all the way to

57:51.016 --> 57:53.136
America,
discover American foods,

57:53.135 --> 57:56.955
bring them back and start a
population increase in Europe.

57:56.960 --> 58:00.880
Good ways to prevent disease
are discovered,

58:00.880 --> 58:03.490
industrial revolution increases
productivity,

58:03.489 --> 58:06.549
you start thinking rationally
about things and everything can

58:06.554 --> 58:07.224
get better.

58:07.219 --> 58:12.639
More food means less death and
so population increases and this

58:12.635 --> 58:17.085
starts in the 1700s in Europe
and really starts--

58:17.090 --> 58:21.870
1900s in the currently
developing countries and we saw

58:21.865 --> 58:26.295
before that sometime--
that the relationship between

58:26.302 --> 58:30.382
mortality drop and fertility
drop was not a given,

58:30.380 --> 58:34.360
but in almost all cases,
whether they went in parallel

58:34.362 --> 58:37.072
and mortality was below
fertility.

58:37.070 --> 58:40.530
Since early time,
population has been increasing

58:40.525 --> 58:43.015
and,
even in an agrarian society,

58:43.018 --> 58:46.758
that means as population
increases the pressure on the

58:46.764 --> 58:50.724
land is going to go up and
you're going to get tinier and

58:50.721 --> 58:53.761
tinier plots until you reach a
crisis.

58:53.760 --> 58:58.430
Now, some places--Remember what
a surprise we had that England,

58:58.429 --> 59:00.879
which was industrially
advanced, its urbanization was

59:00.882 --> 59:02.272
advanced,
its education was advanced,

59:02.269 --> 59:04.909
everything was advanced,
but it had one of the latest

59:04.909 --> 59:06.429
fertility transitions.

59:06.429 --> 59:07.679
Why?

59:07.679 --> 59:10.859
Maybe because of primogeniture,
that they didn't have that kind

59:10.856 --> 59:13.926
of pressure on the land because
only the oldest son inherited

59:13.931 --> 59:16.751
and the land plots did not get
smaller and smaller.

59:16.750 --> 59:20.390
The political structure was
such that the landed gentry were

59:20.391 --> 59:23.851
the ones that controlled
parliament and the cities really

59:23.849 --> 59:27.369
didn't count that much where the
excess people were,

59:27.369 --> 59:32.599
so England did not experience
the same kind of tinier and

59:32.601 --> 59:37.651
tinier plots and the vast
amounts of rural poverty that

59:37.646 --> 59:39.606
other places had.

59:39.610 --> 59:44.840
Anyway, with the scarcity of
land,

59:44.840 --> 59:47.470
the plots gets smaller and huge
number--

59:47.469 --> 59:50.879
in most places--huge numbers of
people fall into this abject

59:50.882 --> 59:52.272
kind of rural poverty.

59:52.268 --> 59:55.308
Then the two things that I've
talked about today or one of the

59:55.313 --> 59:57.863
things that I've talked about
today happens next.

59:57.860 --> 1:00:01.200
First, individual families have
to figure out a new strategy,

1:00:01.199 --> 1:00:04.709
they realize that education for
kids is the only way out of

1:00:04.710 --> 1:00:08.220
their situation and that means
that they have to have fewer

1:00:08.222 --> 1:00:09.012
children.

1:00:09.010 --> 1:00:11.470
At the same time,
with respect to the currently

1:00:11.467 --> 1:00:14.197
developing countries,
the Western governments either

1:00:14.195 --> 1:00:17.035
out of the goodness of their
heart or because they're scared

1:00:17.038 --> 1:00:19.008
about revolution,
and communism,

1:00:19.014 --> 1:00:22.554
and anti-Americanism,
they have to help the third

1:00:22.552 --> 1:00:27.042
world so they start supporting
family programs and what they do

1:00:27.039 --> 1:00:28.269
is two things.

1:00:28.268 --> 1:00:32.818
One, they buy advertising and
just setting up clinics,

1:00:32.820 --> 1:00:35.950
the social, the cultural
acceptability of controlling

1:00:35.949 --> 1:00:38.719
fertility by some sort of
contraception becomes

1:00:38.717 --> 1:00:39.617
acceptable.

1:00:39.619 --> 1:00:43.059
It's not anymore a totally
taboo topic, and then they

1:00:43.056 --> 1:00:46.756
actually provide the goods
themselves so it allows people

1:00:46.757 --> 1:00:47.547
to work.

1:00:47.550 --> 1:00:50.630
Their economic interest is in
having fewer children but if

1:00:50.626 --> 1:00:52.376
they're--
if there are not the

1:00:52.378 --> 1:00:54.868
contraceptives available as say
in China,

1:00:54.869 --> 1:00:57.429
there was for a long time,
or it's not culturally

1:00:57.431 --> 1:01:00.551
acceptable,
they can't act on that desire.

1:01:00.550 --> 1:01:03.250
Family planning programs come
in, either government ones or

1:01:03.246 --> 1:01:06.846
foreign supported ones;
their own government supported

1:01:06.849 --> 1:01:11.569
ones or foreign ones and that
allows people to act on their

1:01:11.565 --> 1:01:14.325
desires to have fewer children.

1:01:14.329 --> 1:01:19.289
Then fertility falls because
they're now using some sort of

1:01:19.286 --> 1:01:23.596
contraception and then,
as we saw, I guess last

1:01:23.599 --> 1:01:29.049
lecture, that when fertility
falls then you get this bulge of

1:01:29.048 --> 1:01:32.408
workers and the economy takes
off.

1:01:32.409 --> 1:01:36.939
So that's kind of a way of
putting the whole thing

1:01:36.942 --> 1:01:37.962
together.

1:01:37.960 --> 1:01:42.450
Now this is all very nice
theory that I proposed to you

1:01:42.445 --> 1:01:47.425
and you notice there's not too
many data slides that I put up

1:01:47.429 --> 1:01:48.509
for this.

1:01:48.510 --> 1:01:51.140
It sounds great,
I'm sure you're all convinced;

1:01:51.139 --> 1:01:52.489
yeah that's a good answer.

1:01:52.489 --> 1:01:59.899
When you start looking at this
in more detail things don't turn

1:01:59.900 --> 1:02:03.010
out to be so convincing.

1:02:03.010 --> 1:02:08.000
One, about the cost of children
going up, which is the first

1:02:07.996 --> 1:02:11.626
part with children as a
consumption good.

1:02:11.630 --> 1:02:14.420
Well what did children actually
need?

1:02:14.420 --> 1:02:17.320
They need some clothing,
they need some food,

1:02:17.320 --> 1:02:21.210
that's basically what they need
to stay alive and that's all

1:02:21.208 --> 1:02:23.448
that they got in the old days.

1:02:23.449 --> 1:02:27.609
Well what's happened to the
price of clothing in the last

1:02:27.612 --> 1:02:28.952
several decades?

1:02:28.949 --> 1:02:33.329
No, the price of clothing all
around has fallen tremendously.

1:02:33.329 --> 1:02:36.139
Clothing with the new fabrics,
you can't wear them out at all.

1:02:36.139 --> 1:02:38.509
I have that problem,
I can't throw things away so my

1:02:38.509 --> 1:02:41.249
clothes just are all -- it's
very cheap, it's made in China,

1:02:41.250 --> 1:02:42.970
Bangladesh, all around the
world.

1:02:42.969 --> 1:02:45.419
The price of clothing has
dropped tremendously as a

1:02:45.420 --> 1:02:47.870
fraction of income,
you always have to do that as a

1:02:47.871 --> 1:02:49.001
fraction of income.

1:02:49.000 --> 1:02:52.140
The price of food has dropped
around the world as a fraction

1:02:52.137 --> 1:02:54.807
of income,
so the basic necessities of

1:02:54.811 --> 1:02:59.361
children have really dropped and
dropped quite drastically when

1:02:59.362 --> 1:03:02.742
you see a graph of that it's
quite drastic.

1:03:02.739 --> 1:03:06.859
If you consider the cost of
providing the same goods that

1:03:06.856 --> 1:03:10.456
pre-transition people provided
for their kids,

1:03:10.460 --> 1:03:14.970
if it's a cost to providing
that now has gone way down as a

1:03:14.974 --> 1:03:16.614
fraction of income.

1:03:16.610 --> 1:03:21.150
As I said, often--usually
education is provided free by

1:03:21.148 --> 1:03:26.018
the government and sometimes
healthcare is provided free by

1:03:26.023 --> 1:03:27.623
the government.

1:03:27.619 --> 1:03:31.859
It doesn't look like an
economic issue that if you want

1:03:31.858 --> 1:03:36.488
to just have kids the way you
used to have them the cost has

1:03:36.490 --> 1:03:39.710
not risen but the cost has gone
down.

1:03:39.710 --> 1:03:43.360
What has changed is in the
minds of people they now

1:03:43.358 --> 1:03:47.878
perceive that they must provide
for their children a completely

1:03:47.884 --> 1:03:50.554
expand--
different and expanded set of

1:03:50.550 --> 1:03:51.970
goods than previously.

1:03:51.969 --> 1:03:56.219
Children have to have the kind
of education that they never had

1:03:56.222 --> 1:03:56.842
before.

1:03:56.840 --> 1:04:00.700
They have to have enrichment
activities, all kinds of stuff.

1:04:00.699 --> 1:04:03.979
If you read about China,
I mean it's amazing what

1:04:03.983 --> 1:04:07.953
Chinese--they only have one
child and that child is so over

1:04:07.949 --> 1:04:10.549
programmed it makes you look
lazy.

1:04:10.550 --> 1:04:13.360
I mean they go to dancing
lessons and music lessons,

1:04:13.360 --> 1:04:15.400
and English lessons,
all after school,

1:04:15.400 --> 1:04:17.660
the kids are just working like
crazy.

1:04:17.659 --> 1:04:20.049
You may have noticed near the
beginning,

1:04:20.050 --> 1:04:21.690
but not at the beginning of the
previous lecture,

1:04:21.690 --> 1:04:24.550
a whole bunch of Chinese came
in and sat over there,

1:04:24.550 --> 1:04:26.760
they were the Presidents of the
student--

1:04:26.760 --> 1:04:29.610
I didn't know who they were,
they turned out to be the

1:04:29.614 --> 1:04:32.424
Presidents of the Student
Associations at some of the

1:04:32.416 --> 1:04:34.406
really big universities in
China.

1:04:34.409 --> 1:04:38.379
So these are--to get to be a
top dog in a huge university is

1:04:38.384 --> 1:04:39.264
a big deal.

1:04:39.260 --> 1:04:40.810
What were they interested in?

1:04:40.809 --> 1:04:44.389
This issue of modernization,
that they're spoiled,

1:04:44.389 --> 1:04:47.069
they realize that,
they were telling me--

1:04:47.070 --> 1:04:49.590
I spoke to them later,
that they didn't want to have a

1:04:49.586 --> 1:04:51.246
sibling,
they were really enjoying

1:04:51.248 --> 1:04:52.978
getting everything as an only
child,

1:04:52.980 --> 1:04:54.350
and they did not want a sibling.

1:04:54.349 --> 1:04:56.099
She's laughing because you know
that story.

1:04:56.099 --> 1:05:00.579
The other side of the coin is,
as the only child they have to

1:05:00.581 --> 1:05:01.331
succeed.

1:05:01.329 --> 1:05:04.859
They have to get top grades in
their education,

1:05:04.856 --> 1:05:09.376
so the amount of pressure on
them to work like crazy all the

1:05:09.380 --> 1:05:12.600
time to study,
study, study is severe.

1:05:12.599 --> 1:05:15.139
They were interested
in--largely in the pressures on

1:05:15.143 --> 1:05:16.693
them which they were feeling.

1:05:16.690 --> 1:05:19.510
I guess as Presidents of their
student body's they were

1:05:19.507 --> 1:05:22.377
probably overachievers like
crazy and so they would feel

1:05:22.376 --> 1:05:23.886
this pressure enormously.

1:05:23.889 --> 1:05:28.099
Then you hear other stories
where kids learn to play this

1:05:28.097 --> 1:05:30.317
game,
so if a parent wants them--why

1:05:30.315 --> 1:05:33.055
don't you wash the dishes
tonight or help around the

1:05:33.061 --> 1:05:34.651
house,
‘oh if I do--if I take

1:05:34.650 --> 1:05:37.600
time away from my studying,
I'll fail my course.'

1:05:37.599 --> 1:05:43.069
It's this change in mentality
that has raised the cost of

1:05:43.070 --> 1:05:47.180
childrearing,
it's not the actual--that the

1:05:47.175 --> 1:05:50.395
actual cost of child raising.

1:05:50.400 --> 1:05:53.360
If you raised them the old way,
that went way down,

1:05:53.360 --> 1:05:57.090
but there's been a culture
change that's required an

1:05:57.092 --> 1:06:00.902
enormous increase in the
expenditures on children.

1:06:00.900 --> 1:06:04.440
Of course nowadays for you,
parents don't expect probably

1:06:04.443 --> 1:06:07.483
anything from you in return as
an investment,

1:06:07.480 --> 1:06:10.870
just to pay one year of Yale is
probably more than some Chinese

1:06:10.867 --> 1:06:12.667
might make in their whole life.

1:06:12.670 --> 1:06:18.270


1:06:18.268 --> 1:06:21.858
Now opportunity cost is another
interesting thing.

1:06:21.860 --> 1:06:27.560
We talked about the mother's
time, so as you remember,

1:06:27.559 --> 1:06:31.619
the cost of children is not
just what you spend in cash but

1:06:31.619 --> 1:06:34.839
it's the opportunity cost of
childcare time.

1:06:34.840 --> 1:06:38.300
If you're out doing childcare
you don't have the option to

1:06:38.304 --> 1:06:39.524
also work at that.

1:06:39.518 --> 1:06:43.638
Studies have shown that it's
actually the time cost of

1:06:43.637 --> 1:06:48.527
children that way outweighs the
direct cost of buying things for

1:06:48.532 --> 1:06:52.962
them and 70% of the cost of a
child is in the value of the

1:06:52.961 --> 1:06:54.751
time spent on it.

1:06:54.750 --> 1:06:58.200
As people get richer,
yes, they buy more for their

1:06:58.202 --> 1:07:01.872
children and they buy more
expensive things but their

1:07:01.867 --> 1:07:06.027
earning power also rises and
it's this rise in earning power

1:07:06.027 --> 1:07:09.787
that makes the 70%--
so that 70% of the cost of

1:07:09.788 --> 1:07:13.568
children is the time they're not
spending working.

1:07:13.570 --> 1:07:21.240
When the people go out and do
these time study things,

1:07:21.239 --> 1:07:24.139
I don't know how well you can
see this,

1:07:24.139 --> 1:07:28.289
but this is the amount of time
that a mother spends in

1:07:28.289 --> 1:07:30.559
childcare for her children.

1:07:30.559 --> 1:07:39.449
If it's one child it's 2.2
hours a day and even up to 6--

1:07:39.449 --> 1:07:42.469
when they have 5 to 6 children,
the wife is not employed,

1:07:42.469 --> 1:07:44.869
so this is a stay at home mom,
it's 1.9 hours.

1:07:44.869 --> 1:07:47.549
There's really no significant
difference depending on the

1:07:47.545 --> 1:07:49.215
number of children that you
have.

1:07:49.219 --> 1:07:51.459
This is upstate New York in,
I think, the 1950s,

1:07:51.463 --> 1:07:53.903
this is fairly recent,
this is not even a developing

1:07:53.896 --> 1:07:54.466
country.

1:07:54.469 --> 1:07:56.909
The amount of time spent is
actually quite small.

1:07:56.909 --> 1:07:58.949
Now compare this to the mother
getting a job,

1:07:58.949 --> 1:08:02.459
she's--so people work 40 hours
a week,

1:08:02.460 --> 1:08:06.720
say if it's 9 to 5 and if they
don't get paid for the half hour

1:08:06.717 --> 1:08:10.147
of lunch they can--
they work eight hours a day and

1:08:10.150 --> 1:08:13.810
depending on how you do lunch it
can be 8.5 or 9 hours,

1:08:13.809 --> 1:08:16.149
and then they have to commute
maybe a half an hour to work and

1:08:16.154 --> 1:08:18.734
a half an hour back with--
getting properly dressed for

1:08:18.725 --> 1:08:21.445
the job and commuting and
actually getting there,

1:08:21.448 --> 1:08:26.058
so we're talking 9,10 hours a
day that a working mother,

1:08:26.060 --> 1:08:27.410
in this case,
but it could be a father,

1:08:27.408 --> 1:08:29.748
is away from home,
so that's the cost of having a

1:08:29.750 --> 1:08:32.510
job is like 10 hours,
the cost of having any number

1:08:32.511 --> 1:08:34.161
of children,
I mean seven to nine then

1:08:34.157 --> 1:08:36.637
something different is going on,
and remember it's only about

1:08:36.644 --> 1:08:37.434
two hours a day.

1:08:37.430 --> 1:08:42.990
The cost in time of children is
not really all that great,

1:08:42.988 --> 1:08:45.838
and the only time it gets
bigger is if the child is less

1:08:45.841 --> 1:08:48.691
than one year old,
which it takes three or four

1:08:48.694 --> 1:08:51.094
hours a day to take care of
children.

1:08:51.090 --> 1:08:55.170
Now this is for all the members
of the family,

1:08:55.170 --> 1:08:57.690
this is just the mother,
this is all members of the

1:08:57.690 --> 1:09:01.100
family so again--
now this is 2.7 compare that to

1:09:01.095 --> 1:09:02.475
2.2--
they have one child,

1:09:02.476 --> 1:09:05.206
it's a half hour,
the other members of the family

1:09:05.213 --> 1:09:08.363
together put a half an hour into
the child is 2.3,

1:09:08.359 --> 1:09:12.209
this is a little bigger,
but it's never more than an

1:09:12.212 --> 1:09:16.522
hour a day put into the child
for all the other things.

1:09:16.520 --> 1:09:19.230
Again, it doesn't change an
awful lot with a lot of

1:09:19.233 --> 1:09:21.313
children;
later children are cheap

1:09:21.306 --> 1:09:24.936
because there's basically little
incremental cost to that.

1:09:24.939 --> 1:09:30.569
Here's more recent data and
this--the red line here is

1:09:30.573 --> 1:09:37.273
mother's childcare and this is
per week, this is not per day;

1:09:37.270 --> 1:09:42.170
it's something that starts out
in the 1960s and 1970s which is

1:09:42.171 --> 1:09:44.981
comparable to the data you just
saw.

1:09:44.984 --> 1:09:48.054
It was nine;
ten hours a week which is just

1:09:48.045 --> 1:09:51.715
a little bit over an hour a day,
and time goes on and I'll talk

1:09:51.716 --> 1:09:52.896
about that later.

1:09:52.899 --> 1:09:57.719
It increases but it's very
small and here's the father's

1:09:57.715 --> 1:10:01.125
housework, it's like 2.5 hours a
day.

1:10:01.130 --> 1:10:07.550
It's not--the amount of time it
takes to deal with children,

1:10:07.550 --> 1:10:09.730
although our myth is that it's
very,

1:10:09.729 --> 1:10:12.859
very time consuming,
the actual fact when you take

1:10:12.858 --> 1:10:15.858
the data it doesn't really work
out that way.

1:10:15.859 --> 1:10:20.559
Now you have to be careful,
this is extra time,

1:10:20.560 --> 1:10:25.250
so this--if you do house--these
numbers are extra time so even

1:10:25.252 --> 1:10:30.182
if you have no children it takes
a certain amount of time to take

1:10:30.175 --> 1:10:33.555
care of a house so that's a
fixed thing.

1:10:33.560 --> 1:10:36.270
Then all these numbers ask how
much extra time you're spending

1:10:36.265 --> 1:10:38.925
if you have children,
so it compares people without

1:10:38.927 --> 1:10:42.397
children to people with children
and of course that's the proper

1:10:42.402 --> 1:10:43.672
number that we want.

1:10:43.670 --> 1:10:54.980


1:10:54.979 --> 1:11:01.149
Here is an interesting thing,
so as this data gets more

1:11:01.148 --> 1:11:05.828
sophisticated,
you say well does childcare

1:11:05.831 --> 1:11:06.861
mean?

1:11:06.859 --> 1:11:09.789
When you take no children and
compare it to people with

1:11:09.788 --> 1:11:11.978
children,
but if you look differently at

1:11:11.975 --> 1:11:14.985
what the mother is actually
doing sometimes it's her primary

1:11:14.993 --> 1:11:17.113
activity,
she's actually doing the

1:11:17.109 --> 1:11:20.439
child--not really doing--
if anything else she's doing it

1:11:20.439 --> 1:11:23.669
secondary like watching TV or
washing the dishes so I know

1:11:23.673 --> 1:11:26.743
that's primary and that's an
hour and a half a day.

1:11:26.738 --> 1:11:29.538
If it's primary or secondary,
so she may be washing the

1:11:29.543 --> 1:11:32.813
dishes or vacuuming and the kid
is right there and she's talking

1:11:32.814 --> 1:11:35.364
to the kid and playing with it a
little bit,

1:11:35.359 --> 1:11:37.869
it goes up a little bit.

1:11:37.868 --> 1:11:41.038
But it's still--this is pretty
much the same number you've seen

1:11:41.042 --> 1:11:44.322
in the two previous slides so
there are a couple hours a day,

1:11:44.319 --> 1:11:46.739
this is again per day,
and the other slide was per

1:11:46.743 --> 1:11:47.093
week.

1:11:47.090 --> 1:11:50.520
If you just count the time
they're with the children at

1:11:50.515 --> 1:11:51.975
all,
they can both be watching

1:11:51.975 --> 1:11:54.245
television together or they're
not really doing childcare

1:11:54.247 --> 1:11:57.577
they're just with the children,
it's still--it gets to be more

1:11:57.577 --> 1:12:01.707
significant but this is not time
taken away from anything else,

1:12:01.710 --> 1:12:03.850
just the child happens to be
there.

1:12:03.850 --> 1:12:08.400
Now--and this is moderately
stable, it doesn't change

1:12:08.398 --> 1:12:11.458
between '65 and '98,
about the same,

1:12:11.458 --> 1:12:15.218
a little bit different,
about the same.

1:12:15.220 --> 1:12:18.690
Now there's something
interesting that you might have

1:12:18.685 --> 1:12:20.215
missed in the slides.

1:12:20.220 --> 1:12:25.730
I know I have to stop in a
minute, what happens between

1:12:25.734 --> 1:12:27.374
1965 and 1998?

1:12:27.368 --> 1:12:32.688
We're in the previous graph
between 1965 and 2003?

1:12:32.689 --> 1:12:36.159
Women go to work,
there's a huge difference in

1:12:36.163 --> 1:12:39.573
the number of women--
the fraction--either both the

1:12:39.569 --> 1:12:42.939
number and the fraction of women
working between any of these

1:12:42.939 --> 1:12:43.389
ages.

1:12:43.390 --> 1:12:45.070
Yet what do you see?

1:12:45.069 --> 1:12:49.359
The amount of time that the
mother spends in childcare goes

1:12:49.363 --> 1:12:53.813
up from the total during this
period 9 to 10 hours up to like

1:12:53.806 --> 1:12:54.766
14 hours.

1:12:54.770 --> 1:12:59.120
That as women go to work they
spend more time with their

1:12:59.118 --> 1:13:01.718
children;
part of the answer to that is

1:13:01.716 --> 1:13:03.856
this is in the rest of house
care,

1:13:03.859 --> 1:13:07.729
non-child house care,
and with modern gadgets and

1:13:07.725 --> 1:13:12.795
throwaway stuff that amount has
allowed women to spend more time

1:13:12.800 --> 1:13:14.250
with children.

1:13:14.250 --> 1:13:17.400
Again, all this goes to
contradict that part of the

1:13:17.402 --> 1:13:21.252
economic theory that says that
childcare competes with working

1:13:21.247 --> 1:13:26.797
and the evidence is very,
very skinny on that hypothesis.

1:13:26.800 --> 1:13:30.480
In fact, if you ask your
mothers or any woman that has

1:13:30.478 --> 1:13:33.808
children, what goes away when
they go to work?

1:13:33.810 --> 1:13:36.260
Not childcare.

1:13:36.260 --> 1:13:41.020
Leisure time and sleep;
survey after survey says that

1:13:41.024 --> 1:13:45.034
what women do differently when
they work is they get less sleep

1:13:45.033 --> 1:13:46.653
and less leisure time.

1:13:46.649 --> 1:13:56.099
I guess that's all we can do
today, see you Thursday.

1:13:56.100 --> 1:14:00.980
We may not continue on this
topic, I think you get the idea.

1:14:00.979 --> 1:14:05.999