Intergenerational Transfers, the Biological Life Cycle, and Human Society

Humans are highly social, living and sharing in families and in larger social groups, not autarkic individuals living in self-reliant isolation. Intergenerational transfers are an economic expression of the links among individuals of different ages and generations, who are often but not always kin. Changes in the population age distribution place stress on some of these links and relax others, affecting the economies of families, social groups, and countries. For autarkic individuals, population age distributions would be irrelevant. Intergenerational transfers are donations of resources from one age group or generation to another, with no expectation of explicit repayment, and therefore transfers do not include economic exchanges.1 Examples are resources devoted by parents to childrearing, adult children supporting their elderly parents, and elderly people assisting their adult children or grandchildren.2 Intergenerational transfers are central to many important topics in economic demography. For example, expected or planned net transfers to a child by parents are equivalent to the private costs of a child, thus connecting transfers to fertility theory. Transfers to children may also be used for human capital investments (health and education), connecting them to later productivity, well-being, and economic growth. Expectations of future transfers to be received by an individual in excess of transfers expected to be made constitute a form of wealth known as “transfer wealth.” Transfer wealth can substitute for physical wealth or assets in an individual's portfolio, thereby connecting transfers to saving behavior, capital accumulation, and economic growth (Barro 1974; Feldstein 1974). Transfers can be private, or they can take place through the public sector, as in the case of public pensions or publicly provided health care or education. Where transfers are contingent on traits or behaviors other than age alone, they inevitably create incentives and may require monitoring by families or public agencies. Public pensions often create incentives for early retirement (Gruber and Wise 1998), and publicly provided health care can lead to overuse. Transfers can enable societies to achieve more balanced allocations of consumption over the life cycle in some circumstances when markets cannot (Samuelson 1958). Here I will weave together some of these themes and observations across the long sweep of human history. Necessarily much will be speculative, and there are many sweeping generalizations in what follows, but I will draw on data from anthropological studies and the National Transfer Accounts3 project where relevant. In hunter-gatherer societies the central problem was obtaining sufficient food to rear costly dependent children while sustaining the adults, all of whom contributed to this task. Resources flowed downward from adults of all ages to the young, including from the elderly. In modern industrial societies with low fertility, aging populations, and high consumption by elderly who do not work, the central problem is inverted: how can societies afford to support growing proportions of costly elderly? In some rich countries, resources have begun to flow upward rather than down.