Article 2: The Institution of the Family—The Dialectical Movement of Life-Reproduction Capacity and Relations of Life¹

Introduction

This article focuses on the most easily overlooked yet most fundamental force within the Grand Tripartite—Family-Household Rights, Enterprise Rights, and Government Power: the family. The family is the bearer of Life-Reproduction Capacity (shengmingli), the basic unit of population reproduction, and the starting point of the underlying logic of the market economy. Yet modern (Western) economics gives seriously inadequate attention to the family. It reduces the family to “the owner of factors of production and the final consumer”, overlooking the fact that the family is itself a complete agent of production, producing the most indispensable product of the market economy: human beings.

I. The Organizational Character and Basic Functions of the Family

Historically, the human family was a basic social organization integrating life and production. After a long process of evolution, the modern family generally takes the nuclear family as its principal form, but also includes single-parent families, families of couples without children, remarried families, grandparent-headed families, and other forms. The focus here is not on prescribing a single ethical form of family life, but on the family’s basic functions as the agent of population reproduction and household consumption: population procreation and cultural transmission.

From an economic perspective, the family’s process of population procreation is a process of “production through consumption”: the process of household consumption is simultaneously a process of population production. In the reproductive processes of childbearing, child-rearing, education, and physical development, the family must consume various material and cultural-spiritual means of subsistence; these constitute the factors of daily living in the family’s reproduction of population.

The family’s invariable property right, based on natural law, is Private Ownership of Labour-Power as Embodied Human Capital. Labour-power as embodied human capital exists by nature within the life of the individual and therefore belongs by nature to the family or the individual, except under slavery. It can be extinguished only by the destruction of life itself.

II. Rational Household Behaviour: Labour-Income-Based Happiness Maximization

We hypothesize that the objective of families in a market economy is the pursuit of labour-income-based happiness maximization: happiness is the end, while wages are the means of pursuing happiness.

Most household income comes primarily from wages or salaries earned through labour. Therefore, the pursuit of the maximization of wages and salaries is a basic feature of rational household behaviour. This forms a dialectical relationship of mutual contradiction and mutual dependence with the profit-maximizing behaviour of enterprises.

Work–Life Equilibrium

The longer the hours worked, the higher the wages and the greater the purchasing power for factors of daily living; the happiness obtained from consuming the means of subsistence also rises. Yet as working hours continue to increase, fatigue grows and marginal happiness diminishes. This is the law of diminishing marginal happiness arising from work and wages.

At the same time, recreational consumption and family life exert a stronger attraction on happiness, but increasing the time devoted to recreational consumption means reducing working time and wage income. This is the opportunity cost of recreational consumption. As the time devoted to recreational consumption increases, the opportunity cost incurred rises at the margin.

Maximum happiness therefore requires workers to find an equilibrium between hard work and the enjoyment of life. This is the regularity described by the Work–Life Equilibrium Curve: when the marginal return to wages equals the opportunity cost of recreation at a particular point, the family reaches an equilibrium of happiness maximization.

III. Two Patterns of Child-Rearing and the Family Population Possibility Frontier

Raising children requires families to commit resources and incur costs. Limited household income and the scarcity of factors of daily living determine the possible combinations of the number, quality, and structure of children whom a family can raise and develop.

Here, child-rearing practices are divided into two broad patterns.

The Extensive Child-Rearing Pattern

Extensive child-rearing means meeting only the basic needs required to sustain children’s lives and growth, with the same basic means of subsistence devoted to each child. Under extensive child-rearing, and on the basis of the natural fertility rate, the family population is characterized mainly by quantitative growth, while improvements in quality are relatively limited. “Extensive child-rearing” and “intensive child-rearing” are two input patterns in the analytical model; they are not moral judgements about different family approaches to raising children.

The Intensive Child-Rearing Pattern

Intensive child-rearing means paying greater attention to children’s comprehensive moral, intellectual, physical, and aesthetic development, with educational attainment used as the measure. From primary school and secondary school through undergraduate, master’s, and doctoral education, intensive child-rearing is a dynamic process in which standards of material and cultural-spiritual life continually rise.

The Trade-Off between Quantity and Quality

Given a fixed level of household income, extensive child-rearing can increase the size of the population, but improvement in population quality stagnates. Intensive child-rearing, involving greater investment of educational resources, can improve population quality but also reduces the number of children.

For example, suppose a family has an annual education budget of RMB 200,000. It could support:

• four primary-school pupils at RMB 50,000 per child, balancing income and expenditure;
• three secondary-school pupils at roughly RMB 66,000 per child, with a remaining surplus;
• two university students at RMB 100,000 per child, balancing income and expenditure; or
• one postgraduate student at more than RMB 200,000, with a small shortfall.

This creates an unavoidable household decision: Should the family have children? How many? Should it adopt intensive or extensive child-rearing?

Observation of actual behaviour shows that people’s views on raising children are influenced by two sets of conditions. Subjectively, they are constrained by household budgets. Objectively, they are constrained by the employment market—particularly by their understanding of future changes in the supply of and demand for labour. Young people facing rapid changes in the employment market and uncertain future income are often not unwilling to raise children; rather, they fear that they cannot afford to raise them or raise them well.

IV. From Population Explosion to Population Contraction: Transformation of the Population-Growth Pattern at the Macroeconomic Level

Definition of the Transformation

The transformation of the population-growth pattern is defined as the transition in the growth of society’s total population from extensive quantitative expansion to an intensive pattern characterized by decline in the total population, improvement in quality, and optimization of structure.

Historical Background

Population explosion once caused widespread alarm. From Malthus’s An Essay on the Principle of Population to the Club of Rome’s The Limits to Growth, these ideas exerted an important influence on population theory and policy in China. The idea and policy of family planning slowed China’s population growth, but this was not the principal cause of the transformation of the population-growth pattern. The implementation of the “one-child policy” for several decades instead produced an irrational age and sex structure in the population at the macro level, together with numerous economic and social problems.

The theory and policy of family planning overlooked a crucial issue: with technological progress and changes in the employment market, a turning point would eventually arrive at which the total population declined and population quality improved. Once that turning point is crossed, the process of transforming the population-growth pattern begins, involving a decline in population size, improvement in quality, and optimization of structure.

Data on China’s Population Transformation

China recorded 9.54 million births in 2024, an increase of 520,000 over 2023, but still significantly below the 2016 peak. According to data published by the National Bureau of Statistics of China, the figure for 2025 was 7.92 million and the rate of natural population increase was −2.41‰.

The Internal Mechanism of the Transformation

As the “Diagram of the Dialectical Circulation of Two Kinds of Production” clearly shows, technological progress by enterprises in the first quadrant raises the requirements for the quality and structure of human resources. Transmitted through the labour market to population production in the third quadrant, these requirements call for a smaller quantity, higher quality, and optimized structure in the supply of human resources. Ultimately, the transformation of the population-growth pattern results from the operation of the market mechanism and from the allocation of human resources through the labour market.

V. The Movement of Unity of Opposites between Families’ Life-Reproduction Capacity and Enterprises’ Productive Forces

Productive Forces Running Ahead, Life-Reproduction Capacity Lagging Behind

Under a laissez-faire market mechanism, Productive Forces Running Ahead, Life-Reproduction Capacity Lagging Behind is a widespread state of disequilibrium for five reasons.

First, at the level of institutional arrangements: the evolution of enterprise institutions—with continual strengthening and steadily rising organizational efficiency—and the evolution of the institution of the family—with gradual deterioration and retreat from the extended family to the nuclear family—move in contrary directions.

Second, at the level of income distribution: when the configuration of Enterprise Rights and Family-Household Rights is markedly asymmetric and lacks corrective redistribution, wage growth often fails to keep pace with profit growth. Enterprises occupy the stronger position and families the weaker. The distribution of wealth becomes polarized between rich and poor, leaving most families that depend on wages to support themselves with insufficient purchasing power.

Third, at the input–output level: under the foregoing conditions, household consumption inputs often lag behind enterprise production inputs, and the level of household consumption often fails to keep pace with the level of “productive consumption”.

Fourth, at the level of the reproduction cycle: because “intermediate demand” exists, enterprise reproduction has room in the short run to circulate autonomously and independently of population reproduction. This is why excess capacity and overinvestment can occur.

Fifth, at the level of monetary circulation: both the velocity and the volume of monetary circulation among enterprises exceed those between enterprises and families.

Consequences of the Disequilibrium between the Two Kinds of Production

The foregoing five forms of disequilibrium manifest themselves in the labour market as an imbalance between supply and demand and the normalization of unemployment; in the goods market as excess capacity and deficient effective demand; and in family life as a decline in the willingness to have children and insufficient investment in population quality.

In the long run, the state of disequilibrium characterized by Productive Forces Running Ahead, Life-Reproduction Capacity Lagging Behind is unsustainable and must reach equilibrium in one way or another—either through the destructive balancing of an economic crisis or through institutional rebalancing by government intervention.

VI. Policy Implications: Population Policy Must Undergo Transformation

Core idea: population production is “production through consumption”. Low consumption can produce only low-quality labour-power; high expenditure on educational consumption corresponds to the production of high-quality human resources.

The priority of future population policy lies not in controlling quantity, but in improving quality, optimizing structure, and achieving a rational distribution.

Specific directions include:

• Primary distribution: increase the share of household wage income in national income, enabling families to maintain stable household consumption and educational investment;
• Redistribution: increase expenditure on social welfare and social security, and gradually raise the publicly funded share of medical care, compulsory education, childcare, and lifelong education;
• Education reform: link the selection of academic disciplines and teaching materials closely to technological progress and the evolution of industrial structure, thereby reducing the burden of educational costs on families; and
• Housing policy: reduce housing costs for young families and create the material conditions for intensive child-rearing.

The transformation of the population-growth pattern is an irreversible long-term trend once economic and social development reaches a particular stage. Only by recognizing this trend can correct population and economic policies be formulated.

Theoretical Comparison and Open Questions

Becker’s economics of the family treats the family as a unit of rational choice and emphasizes cost–benefit calculations in decisions concerning childbearing, education, and marriage. This framework adopts that analytical method but goes further by elevating the family into a foundational organization and rights-bearing agent alongside the enterprise and the government.

Malthusian population theory focuses on the pressure exerted by population growth on resource constraints. This framework examines the opposite situation: against the background of the modern market economy and the AI revolution, population growth may shift from quantitative expansion towards a decline in the total population, improvement in quality, and optimization of structure.

Open questions:

1. Will intensive child-rearing further increase the burden on families and thereby reduce the fertility rate in turn?
2. By which indicators should families’ Life-Reproduction Capacity be measured: the birth rate, educational investment, health status, family stability, or a more comprehensive human-development index?
3. If the government assumes a greater share of childcare, education, and medical costs, how can fiscal unsustainability be avoided?

Notes

1. Becker, G.S. (1981). A Treatise on the Family. Harvard University Press.
2. Malthus, T.R. (1798). An Essay on the Principle of Population.
3. Meadows, D.H. et al. (1972). The Limits to Growth. Universe Books.
4. National Bureau of Statistics of China. Communiqué of the Seventh National Population Census (No. 6). May 2021.
5. National Bureau of Statistics of China. Statistical Communiqué of the People’s Republic of China on the 2023 National Economic and Social Development. February 2024.
6. National Bureau of Statistics of China. Statistical Communiqué of the People’s Republic of China on the 2024 National Economic and Social Development. February 2025.
7. National Bureau of Statistics of China. “China’s Economic Development in 2025 Became More Innovation-Driven and Higher-Quality, and the Anticipated Targets Were Successfully Achieved.” 19 January 2026; Statistical Communiqué of the People’s Republic of China on the 2025 National Economic and Social Development. 28 February 2026.
8. World Bank, World Development Indicators, indicator SP.DYN.TFRT.IN (total fertility rate), data for China, accessed 22 July 2026.

Translator’s note: The English title of the first publication cited in Note 7 is a working rendering from the published Chinese source. An official English title for that item has not been independently verified for this translation.