Becker, Murphy and Tamura: Human Capital, Fertility and Economic Growth

GS Becker, KM Murphy, and R Tamura, “Human Capital, Fertility, and Economic Growth,” Journal of Political Economy 98, no. S5 (1990): 12.

"Our analysis of growth assumes endogenous fertility and a rising rate of return on human capital as the stock of human capital increases. When human capital is abundant, rates of return on human capital investments are high relative to rates of return on children, whereas when human capital is scarce, rates of return on human capital are low relative to those of children. As a result, societies with limited human capital choose large families and invest little in each member; those with abundant human capital do the opposite. This leads to two stable steady states. One has large families and little human capital; the other has small families and perhaps growing human and physical capital" (12).

Smith talked about growth vis-a-vis the division of labor, but not rigorously. Malthus presented a theory of economic growth that achieved a kind of steady-state through changes in fertility and death rates. Neoclassical accounts go much further than these accounts and pointing towards the determinants of economic growth. However, these authors present a theory that focuses most heavily on human capital accumulation. "Crucial to our analysis is the assumption that rates of return on investments in human capital rise rather than decline as the stock of human capital increases, at least until the stock becomes large" (13). This leads to a potential variety of steady-states.