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OF ALL THE LIFE CHOICES men and women make, none is more important for society, none has more far-reaching consequences, none represents a more complete blending of economic, social, biological, and emotional forces than the decision to bring an-other life into the world. For an individual, the timing and circumstances of birth significantly affect the character, quality, and duration of life. For a society, the birth rate is a major determinant of its economic, political, and social development. Let the rate exceed society’s capacity to provide the necessities of life, and the outcome will be the poverty and misery so graphically described by Thomas Malthus. Let the rate fall below the replacement ratio, and the society is on its way to extinction.
U.S. fertility is now only one-fourth of what it was in 1800 and has been below replacement level since 1973. We will examine the long-term downward trend in the light of changes in the costs and benefits of children and changes in the cost of preventing births. The economic perspective will also help us understand why the number of births per thousand women of childbearing age rose by 67 percent from 1936 to 1957 and then fell by 55 percent during the following two decades.

Without an economic perspective, changes in household living arrangements, fertility, and other social phenomena are often automatically attributed to changing “norms” (or “preferences” or “attitudes”). A more careful examination, however, might reveal that the changes are the result of shifts in income or prices within a stable set of preferences. The distinction is more than a semantic one; a clearer description of what is happening facilitates clearer thinking about causes and consequences. After all, when we observe people buying more filet mignon in response to rising income, or when we see a decrease in the quantity of coffee demanded as a result of an increase in its price, it is neither accurate nor helpful to say that people’s “preferences” for filet
mignon or coffee have changed.
One further point helps clarify the economic approach to understanding behavior. Economists, as a rule, are not concerned with the internal thought processes of the decision maker or in the rationalizations that the decision maker offers to explain his or her behavior. Economists believe that what people do is more relevant than what they say. The novelist I. B. Singer epitomizes this point of view in a story he tells about a boy who came to the cheder (Hebrew school) where Singer studied. The boy said, “My father wanted to box my ears.” The teacher said, “How do you know that?” The boy replied, “He did it.”

It would be foolish to claim that income and price are the only things that ever affect social behavior, Decisions about fertility, marriage, living arrangements, health, and the like are affected by other factors, just as the amount of coffee demanded also depends upon one’s taste for coffee, the weather, one’s sleeping habits, and so on. Moreover, there may be irrational, subconscious forces at work that conflict with the model of a rational decision maker who is trying to maximize his or her well-being. The economic perspective does not assert that these other factors and forces are never present. It simply says that it is useful to analyze the effects of changes in constraints and prices under the assumption that the other factors are constant. Sometimes this is a reasonable assumption; sometimes it is not. To the extent that we know about changes in the other variables, we can try to control for them. For instance, in studying the influence of income and price on the demand for medical care, it is possible to take into account changes in health which we know also affect this demand.

Now let’s keep income the same and vary prices. Suppose that a frost in Brazil cuts the coffee crop in half and sends the price of coffee up in the supermarket. Again, we will see a response, though not necessarily by every consumer. The quantity of coffee put into shopping carts is likely to decline, while the quantity of tea, cocoa, and other substitutes is likely to rise. Purchases of some other goods, such as cream, that are used with coffee – called complementary goods might decline. How much effect a price change will have depends upon the price elasticity of demand-that is, the percent change in the quantity demanded divided by the percent change in price.
These concepts are usually used by economists to analyze market choices, but in this book they are mostly used to analyze behavior outside conventional markets. What role has income played in increasing the proportion of adults who live alone? How has the birth rate been affected by a decrease in the cost (primarily psychic) of birth control through the introduction of the pill and intrauterine devices? Why do men now retire from work at a much younger age than they did thirty years ago? As constraints change, or as prices change, it is not surprising that people’s nonmarket behavior changes, much as their behavior in the supermarket does.

The applicability of this paradigm to consumer behavior in supermarkets is readily evident. Shoppers are influenced by many taste factors that have their origins in culture, climate, biology, and so on. If these factors are held constant, however (by abstracting from them or assuming that they have not changed), we can see that consumer choices are determined by income and by the prices of the commodities themselves. A rise in income (prices and other things remaining the same) will sharply increase the demand for filet mignon and other luxuries; a decline in income will have the reverse effect. How large the change will be for each commodity depends upon its income elasticity of demand-the percent change in the quantity demanded divided by the percent change in income.

The central features of this paradigm are as follows.
1.People are constantly confronted with the necessity of
making choices – as consumers, workers, investors, parents, and in many other roles.
2.In making these choices, they try to do the best they can,
given the constraints they face-constraints of money, time, energy, and information.
3.Their choices are influenced by relative “prices”- using this term in its broadest sense to include not only money costs but time costs, psychic costs, alternative costs, and others.
4.Their choices may also be influenced by a host of other factors, such as religion, social class, physical and psychological needs, and external pressures, When we observe large-scale, systematic changes in behavior, however, a sensible research strategy is to Iook first to see if there have been changes in the constraints or in relative prices.

The combined assumptions of maximizing behavior, market equilibrium, and stable preferences, used relentlessly and unflinchingly, form the heart of the economic approach.
Ever since Adam Smith, economists have devoted a great deal of thought and effort to gaining a better understanding of how markets work. Much of the power of economics is rooted in the fact that a single set of assumptions and a single set of analytical concepts (demand, supply, price, quantity) have proven useful in explaining behavior in such diverse settings as commodity markets, labor markets, foreign exchange markets, and so on. In recent years, economists led by Gary Becker (1964, 1976, 1981) .have been using the market paradigm to obtain new insights about many so-called nonmarket phenomena such as marriage, divorce, fertility, health, education, and crime.

To say that economic theory provides a framework rather than precise predictions is not to damn it with faint praise. Darwin’s theory of natural selection, long regarded as one of the great scientific insights of all time, does not provide precise theoretical predictions either. It, too, is a loose theory, a framework that helps us think about and describe important phenomena. Finally, it should be emphasized that our focus here is on American society in the second half of the twentieth century. We do not need to face the question of how well the universalist assumption would hold if we were simultaneously trying to explain behavior in classical Athens, medieval England, and the contemporary Kalihari desert.
With these qualifications in mind, we can return to the economic perspective and look at its most important application-the market paradigm.

Opposed to universalism is the particularist view, which emphasizes the uniqueness of every human being and the features of life cycle development special to each cohort—- that is, each set of people born in a given period within the same society. There is much to be said for such a view. No two human beings are exactly alike; even twins have different fingerprints. Not only do individuals vary, but there are differences among societies and among cohorts in the same society.
Preoccupation with the particularist view, however, limits analysis of the questions pursued in this book because it is relatively devoid of theoretical content. It warns us that each individual is different, but awareness of differences alone does not provide a general guide to understanding behavior. The economic point of view attempts to provide such understanding. It assumes that people are basically alike in the sense that they share similar drives and goals. If we observe different cohorts, or different groups within the same cohort behaving differently, economic theory suggests where to look for explanations. Such suggestions are not always helpful because economic theory is far from perfect, but it does provide a systematic framework for analyzing behavior.

In applying the economic perspective to behavior over the life cycle, it is usually appropriate to adopt a universalist view of humanity–a view that emphasizes the similarity of human experience across eras, continents, and individuals. Birth and death, the beginning and the end of each human life, are the same regardless of how varied are the years in between. From biology and psychology come many insights about developmental processes that are experienced by all or nearly all individuals, Moreover, every society needs a system for the mating of adults of childbearing age, a system for caring for helpless infants, a system for educating and socializing the young, and a system for producing and distributing goods and services.