Fertility and sexual selection

Markets are moving, and I’ll have more to say about that in due course, but we before we get to that, I am finally ready to present the third chapter in my running demographics project. The landing page for the project can be found here. You can get the PDF for the third chapter below, or via the landing page.

This chapter kicks off the description, analysis and discussion of fertility and birth rates. It is the first of, I suspect, three chapters on fertility. In it, I try to cover three bases. First, I cover the basics, defining the different ways in which fertility and birth rates are described quantitatively in the literature, and the distinction between these terms. Secondly, I summarise the stylised facts about the global fertility transition, when it began, and how it is going. My objective has been to strike a balance between the big picture and sufficient detail to allow for the discussion individual case studies across individual nations, or groups of countries. The key point, from both an empirical and theoretical perspective, is that fertility does not stabilise at replacement levels in the final stages of the demographic transition. In this way, the fertility transition is an ongoing phenomenon, in contrast to the picture painted by the stylised model of the demographic transition. Thirdly, I run through the theory of sexual selection as described by Trivers (1972), and used in Richard Dawkins’ seminal, The Selfish Gene. There are two reasons for this. First, the basics matter. The game of mate selection, which feeds through to how parents share the costs of reproduction and child-rearing, is crucial to understand why births occur in the first place. The idea that evolved behaviour described by Trivers (1972) can be used to explain phenomena in a modern context invites us to heed F. Scott Fitzgerald’s advice that “the test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function.” It is reasonable to expect that many phenomena observed in a modern society can be traced back to core evolutionary processes. But equally, it is unreasonable to go searching for an evolutionary explanation for every phenomenon that social scientists might be interested in, in a modern economy. Whatever the balance between these two positions, the link between modern behaviour and pre-modern evolutionary theorems is a constant source of debate and controversy in the literature on demographics and fertility.

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Mark to Market

I’ve recently added a new chapter to my long-running demographics journal, which I will present in more detail later this month. Before I get to that, I thought that I would have a look at my own financial performance in 2021. In preview, I did ok, but not as well as the market. My portfolio, split across two accounts at AJ Bell and Nordea, returned 6.6% in 2021, when adjusted for a significant zero-return cash position, and around 10% on its own. I am embarrassed to say that I dropped the ball on the month-to-date PnL calculations throughout the year to a larger extent than usual, so these numbers are a bit a uncertain. They are, in any case, far from the show-stopping returns of the MSCI World equity, index at just over 21%, let alone the performance of the mighty S&P 500, at 27%. My first two charts plot the top and bottom 10 performers, which is as good a basis as any to talk about markets.

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Not yet

Apart from soul-searching on the endgame for Covid—see my version here—the arrival of Omicron seems to have had two relatively predictable effects on financial markets. Volatility has shot higher, and the yield curve has flattened. Put differently, stocks have sold off, and the long bond has rallied. The MSCI World is down just under 4% from its peak at the start of November, and the U.S. 10-year yield is off some 25bp. Neither of these numbers are dramatic, but they’re eye-catching, all the same. I suspect these shifts are driven by both fears of Omicron—despite little hard evidence that it is the vaccine-evading super-bug everyone has feared—and the fact that monetary policymakers so far have had little interest in changing their stance. More specifically, Fed officials have said nothing to shift expectations that it is expected to taper QE to zero by the middle of next year, and start raising rates shortly thereafter.

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What now?

Everyone has a plan until they get kicked in the nuts by a new virus variant, apparently. The speed with which markets deteriorated on Friday on the news that the B.1.1.529 variant—first detected in South Africa and Botswana, but now confirmed in both Europe and Asia—was telling. So is the swiftness with which many countries already are digging deep in the pre-vaccination toolbox of travel restrictions and, inevitably, domestic restrictions of some form. Indeed, even before the new variant, recently renamed ominously to Omicron, arrived on the scene, Europe was inching closer to new restrictions. Austria and Netherlands were in full or semi-lockdown before Friday, and given the direction of numbers in the major economies, it was only a matter of time before more widespread restrictions were introduced. So, here we are; 18 months of rolling lockdowns and travel restrictions, trillion of dollars in public support, and around 70% of the adult population double-jabbed—and shall we say another 10% with immunity from previous infection?—and we’re back to square one. Someone, somewhere, will soon have to start asking questions, but maybe not yet.

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