Population, Fertility, and Liberty

People have been fretting about the “population problem” for at least fifty years. But over those five decades, the perceived problem has practically reversed. From the sixties to the eighties, the problems on people’s minds were overpopulation and the “population explosion.” The proposed solutions were usually government programs ranging from mild nudges (like free condoms and sex education) to horrific coercion (like India’s involuntary sterilizations and China’s one-child policy and forced abortions).[1]

During this period, libertarians were predictably quick to oppose government action and defend individuals’ right to have as many children as they wished.[2] But they also developed a more intellectually creative response. Under the seminal influence of Julian Simon, libertarians embraced the view that high and growing population is good. The title of Simon’s most famous book became a leading libertarian slogan: People are the ultimate resource.[3]

Over the last two decades, the perceived population problem has radically changed. Fertility has sharply fallen all over the world. It fell in less-developed nations, deflating long-standing Malthusian fears. But it fell in developed nations as well. Except for the United States and Israel, every modern economy now has fertility below the replacement rate.[4] Without high levels of immigration, most will see their populations fall in coming decades.[5] In Germany, Japan, and Russia, with total fertility rates around 1.3, population decline has already arrived.

Libertarians could celebrate these changes as proof that the problem of overpopulation solves itself whether or not governments do anything about it. But if Julian Simon and the intellectual tradition he inspired were right, libertarians should be experiencing severe cognitive dissonance. People with zero appreciation of Simon now worry about low birth rates and falling populations. How can those of us who long maintained that “people are the ultimate resource” fail to see anything amiss?

The easiest out for libertarians is to toss Simon’s pro-population arguments down the memory hole. We could hail economic growth and modernization for slaying the genuine dragon of overpopulation, and move on. The main problem with this easy out is that Simon’s arguments were correct. Indeed, population has benefits that Julian Simon himself undersold. My goal in this essay is two-fold. First, it is to recap and refine the case for population. Second, it is to find libertarian solutions for the world’s genuinely disappointing demographic trends.

The Case for People

There came to me the memory of reading a eulogy delivered by a Jewish chaplain over the dead on the battlefield at Iwo Jima, saying something like, “How many who would have been a Mozart or a Michelangelo or an Einstein have we buried here?” And then I thought, Have I gone crazy? What business do I have trying to help arrange it that fewer human beings will be born, each one of whom might be a Mozart or a Michelangelo or an Einstein—or simply a joy to his or her family and community, and a person who will enjoy life? —Julian Simon, The Ultimate Resource 2

The case against population is simple: Assume a fixed pie of wealth, and do the math. If every person gets an equal slice, more people imply smaller slices. The flaw in this argument is that people are producers as well as consumers. More sophisticated critics of population appeal to the diminishing marginal product of labor. As long as doubling the number of producers less than doubles total production, more people imply smaller slices.[6]

These anti-population arguments have strong intuitive appeal. But they face an awkward fact: During the last two centuries, both population and prosperity exploded. Maybe the world just enjoyed incredibly good luck, but it makes you wonder: Could rising population be a cause of rising prosperity?

Yes. Economists’ central discovery about economic growth is that new ideas are more important than labor or capital.[7] The main reason we’re richer than we used to be is that we know more than we used to know. We know how one man can grow food for hundreds. We know how to build flying machines. We know how to build iPhones. Best of all: Once one person discovers a new idea, billions can cheaply adopt it.

Once you recognize the power of ideas, the value of population comes into focus.[8] People—especially smart, creative people—are the source of new ideas. Imagine deleting half the names in your music collection—or half the visionaries in the computer industry. Think how much poorer the world would be. But population doesn’t merely increase the supply of new ideas. It increases the demand as well. Suppose an idea is worth $1 per person, but takes a decade to develop. On an island with a hundred inhabitants, the idea would remain undiscovered; inventors are better off picking coconuts. But in a world with seven billion customers, inventors scramble to bring the new idea to market.

Consider languages. There are far more books, movies, and television shows in English than in Romanian. Supply is one reason: Far more writers and directors speak English than Romanian. But demand is also crucial: English-speaking customers are far more numerous. Michael Kremer’s celebrated “Population Growth and Technological Change: 1,000,000 B.C. to 1990” generalizes this insight to all of human history.[9] Small, isolated populations in places like Tasmania stagnate or regress.[10] Large, connected populations in places like Eurasia progress—and the pace of progress quickens as their populations multiply.

Population also enriches us in a more immediate way. Despite constant complaints about cities’ crowds and congestion, city folk gladly pay higher urban rents. Even introverts and outright misanthropes shell out massive premiums to live near millions of strangers. What are they after? The obvious answer is choices—choices about where to work, what to buy, how to play, and who to meet. These choices, like ideas, come from people—suppliers who offer them, and demanders who sustain them. When population goes up, everyone gets extra choices.

The population-choice connection is most visible in a city. But physical proximity is not essential. Thanks to modern communications and transport, people in the middle of nowhere still belong to a global civilization. Whether we’re urban, suburban, or rural, we all enjoy a vast menu of occupations, lifestyles, hobbies, cultures, and social networks thanks to the billions of strangers who share the planet.

After two centuries of rising population and rising prosperity, attempts to blame low living standards on overpopulation have worn thin. The most popular anti-population arguments now come from environmentalists. But their case is surprisingly weak. We’re not “running out” of food, fuel, or minerals. Despite occasional price spikes, real commodity prices have fallen about 1% per year for over a century.[11] Air and water quality in the First World have been improving for decades despite rising population.[12] Genuine problems remain, but limiting population to counter environmental problems is using a sword to kill a mosquito. Pollution taxes and congestion prices are far cheaper and more humane remedies.[13]

The most popular argument for population growth, no doubt, is that government retirement systems depend on it. Social Security and Medicare are pyramid schemes; as long as the ratio of workers to retirees is high, low taxes are enough to support the elderly in style. Libertarians might daydream that low fertility will topple the welfare state. But Americans of all ages love these programs. If they have to pay higher taxes to preserve them, they will.

The fiscal argument for population also has a catch. It only justifies the creation of tomorrow’s net tax-payers—not people per se. But the catch isn’t as binding as it looks. You don’t have to raise the average to pull your weight. Much government spending—including the military and interest on the national debt—is “non-rival”: The total cost stays the same as population goes up. To be a net tax-payer, you merely have to cover the marginal cost of the services you consume and the benefits you collect.[14]

The most neglected benefit of population growth, though, is that more people get to exist. Almost everyone is glad to be alive. Thanks to the magic of hedonic adaptation, most people around the world consider themselves happy—even when severely handicapped or mired in Third World poverty.[15] There are plenty of good reasons not to reproduce, but “It wouldn’t be fair to the child” isn’t one of them. How can it be “unfair” to give a gift so reliably better than nothing?

One can admittedly imagine negative externalities of population vast enough to outweigh all the positives. Just picture a world so crowded that there’s no room to move. But there’s no sign that the real world is anywhere close. Over the observed range, people and good outcomes go hand in hand—and there’s no sign of anything else on the horizon.

Population, Policy, and Persuasion

In a statist society, highlighting a problem sounds like a thinly veiled call for government intervention. As a result, libertarians feel a strong and often justified impulse to deny that problems exist. Occasionally, though, libertarians’ own arguments require them to take a problem seriously. Low fertility and underpopulation are two such problems.

Coercive policies to promote fertility and population growth abound. Communist Romania banned contraception to boost its birth rate.[16] Raising fertility is one rationale for Scandinavia’s “family friendly” parental leave regulations and child care subsidies.[17] French policy has been explicitly natalist since the 1930s.[18]

None of these are policies that libertarians can or should support. The decision to have a child is so personal that even nonlibertarians recoil at the prospect of applying social engineering to it. Fortunately, there are effective libertarian alternatives. Governments can boost population and fertility by repealing some especially foolish regulations and cutting some especially destructive taxes.

Relaxing or abolishing immigration restrictions is a simple, potent cure for underpopulation. At the world level, underpopulation and low fertility are roughly the same problem. But at the national level, they’re separable.[19] Every First World country can swiftly increase its population—but not its fertility—with the stroke of a pen by liberalizing immigration. A billion people on earth live on a dollar a day or less. Many, if not most, would move to any First World country willing to admit them. Doing so would also drastically increase their productivity and wages.[20]

Free immigration is the most morally imperative remedy for underpopulation. Respecting foreigners’ rights to accept job offers from willing domestic employers and rent apartments from willing domestic landlords is a matter of justice, not charity.[21] Given the benefits of population, First World countries lack even the bad excuse that immigration restrictions are in their national self-interest. But sadly, free immigration has almost zero political support. Is there any libertarian remedy for underpopulation that appeals to a wider range of political philosophies? Yes. The best available evidence implies that giving parents one-shot tax credits for every child they bring into the world would literally pay for itself.

To verify this strong claim, we need two measurements. First: What is the total “fiscal externality” of a new baby—the present discounted value of the marginal cost of all the government services the baby will ever consume, minus the present discounted value of all the taxes the baby will ever pay? Second: How much do you have to pay people to persuade them to have another child?

Because much government spending is non-rival, estimates of the fiscal externality of a new baby are positive and large. The highest-quality study is probably Wolf et al (forthcoming).[22] For the United States, it calculates a positive externality of $217,000 in 2009 dollars—roughly five times per-capita GDP.[23] [See correction, below.] Estimates of the responsiveness of fertility to cash are also fairly high. The highest-quality study is probably Milligan (2005), which carefully analyzes Quebec’s quasi-experimental baby bonuses.[24] It finds that a baby bonus of Can $1000—just 5% of per-capita GDP— increased the probability of having a child by 16.9%.[25] Since Quebec’s total fertility rate at the time was roughly 1.5, this implies roughly a .25 increase in the total fertility rate. Since you get about one additional child for every four bonuses, the total cost per child created equals 20% of per-capita GDP.

Researchers have to make many simplifying assumptions to get such simple answers. But if their conclusions are remotely accurate, natalist tax credits are a fiscal free lunch.[26] If the government can capture an income stream with a present value of $217,000 by foregoing $9000 in taxes today, who could oppose it? Libertarians and conservatives should be happy to reduce the tax burden. Liberals and moderates should be happy to improve the government’s fiscal health. Anyone who appreciates the broader benefits of population should be happier still.

Alas, as my first book, The Myth of the Rational Voter, argues, democracies often stubbornly refuse to adopt policies that no reasonable person could oppose.[27] Freer immigration and natalist tax credits are great ideas, but they probably aren’t going to happen. Fortunately, a viable apolitical remedy for low fertility and underpopulation exists. Bringing this apolitical remedy to a broader audience is a major goal of my new book, Selfish Reasons to Have More Kids.[28]

My thesis is that people underestimate not just the social benefits of having kids, but the private benefits as well. Parents emotionally overcharge themselves for kids because they overestimate the long-run effect of upbringing. If heavy parental investment and sacrifice are necessary to turn your children into successful, well-adjusted adults, being a good parent isn’t very fun—and being a good parent of a lot of kids is no fun at all. Fortunately, four decades of adoption and twin research show that high-effort parenting is greatly overrated. The estimated effect of parents on health, intelligence, happiness, success, character, and values usually ranges from small to zero.[29] This doesn’t mean that you can harmlessly abandon your child in Haiti; adoption and twin researchers study vaguely normal families in First World countries. But the diverse parenting styles within this vaguely normal range are about equally good.[30]

The immediate lesson of adoption and twin research is that parents should relax, make fewer painful sacrifices, and focus on enjoying their time with their children. But there is a deeper lesson: The kids you want are cheaper than you think.[31] And how do common sense and basic economics tell you to respond to lower prices? Buy more. Once parents let go of their unnecessary unhappiness, having another child becomes a much better deal. If that deal is good enough to tip the scales, the child, his parents, taxpayers, and the world share the benefits.

Can one book really noticeably raise overall fertility? Probably not. The world is a big place; the best of books won’t move it much. But that doesn’t mean that education and persuasion are ineffective. No single book noticeably reduced smoking rates or anti-gay prejudice, either. But decades of education and persuasion have made a huge difference. There’s no reason why education and persuasion couldn’t have equally large effects on fertility and population.

Libertarians of all people should be open to this possibility. They know better than anyone that civil society already handles most of the social problems that governments habitually ignore, aggravate, and create. Governments could boost population and fertility by admitting more immigrants and cutting parents’ taxes. But there’s no reason to wait around for governments to do the right thing. The surprising science and economics of nature and nurture is already here. Anyone who values the lessons of Julian Simon should spread the word.

Correction on Fiscal Externalities

After writing this essay, I realized that I had misinterpreted Wolf et al’s $217,000 “fiscal externality of becoming a parent” estimate (above, at note 23). Most articles in this literature estimate the fiscal externality of having a child. But Wolf et al instead estimate the total fiscal externality of being a parent instead of a non-parent. As they put it:

The difference between the NPV [Net Present Value] of the fiscal flows of parents and nonparents, i.e. NPV P − NPV NP + NPV OFFSPRING , represents the fiscal impacts of replacing an average nonparent with an average parent.

A rough estimate of the per-child externality is therefore not $217,000 as I originally wrote, but $217,000 divided by (average number of children | number of children > 0). For the United States, that denominator is roughly 2.6, so the per-child externality falls to about $83,000—roughly 180% of per-capita GDP. This is still about nine times larger than the estimated tax credit the U.S. government would have to offer to induce parents to have another child.

I thank Douglas Wolf and especially his co-author Ronald Lee for timely responses to my inquiry on this point. The mistake was entirely my own.

Notes

[1] See e.g. Matthew Connelly. 2008. Fatal Misconceptions: The Struggle to Control World Population. Cambridge: Harvard University Press.

[2] Edwin Dolan’s seminal free-market environmentalist TANSTAAFL: The Economic Strategy for Environmental Crisis. 1971. New York: Holt, Rineheart, and Winston, p.64 does sympathetically entertain Kenneth Boulding’s proposal for tradable baby permits, but ends by endorsing laissez-faire.

[3] His magnum opus is Julian Simon. 1996. The Ultimate Resource 2. Princeton, NJ: Princeton University Press, a much-expanded version of the original 1983 edition. See also Julian Simon, editor. 1995. The State of Humanity. Cambridge: Blackwell Publishers.

[4] The United States had a total fertility rate of 2.1 in 2008; it has since slipped slightly below replacement. Several oil-rich Gulf states with high per-capita income also have fertility above the replacement rate, but they arguably don’t qualify as “modern economies.” For total fertility rates, see UNdata.

[5] For current and projected population data, see UNdata.

[6] On the Malthusian model, see Greg Clark. 2008. A Farewell To Alms: A Brief Economic History of the World. Princeton: Princeton University Press, pp.19-39.

[7] See e.g. David Weil. 2005. Economic Growth. New York: Addison-Wesley, pp.182-265, and Paul Romer. 2010. “Economic Growth.” In David Henderson, ed. The Concise Encyclopedia of Economics. Indianapolis, IN: Liberty Fund, pp.128-31.

[8] Besides Julian Simon’s writings, see also Michael Kremer. 1993. “Population Growth and Technological Change: 1,000,000 B.C. to 1990.” Quarterly Journal of Economics 108: 681-716, and Paul Romer. 1986. “Increasing Returns and Long-Run Growth.” Journal of Political Economy 95, pp.1002-1037

[9] Kremer 1993.

[10] On Tasmania’s less-than-zero progress, see Jared Diamond. 2005. Guns, Germs, and Steel: The Fates of Human Societies. New York: W.W. Norton, pp.312-313.

[11] Paul Cashin and C. McDermott. 2002. “The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability,” IMF Staff Papers, pp. 175–199, find that the inflation-adjusted price of the Economist’s index of industrial commodities fell by about 1 percent per year from 1862 to 1999. Stephan Pfaffenzeller et al. 2007. “A Short Note on Updating the Grilli and Yang Commodity Price Index,” World Bank Economic Review 21 (1), pp. 151–163, report that, adjusting for inflation, the Grilli and Yang commodity price index (which includes metals, food, and nonfood agricultural products) fell by about .8 percent per year between 1900 and 2003.

[12] See Bjorn Lomborg. 2001. The Skeptical Environmentalist: Measuring the Real State of the World. Cambridge: Cambridge University Press, pp. 163–177, 189–205.

[13] See e.g. Alan Blinder. 1988. Hard Heads, Soft Hearts: Tough-Minded Economics for a Just Society. New York: Basic Books, pp.136-159.

[14] Worth noting: Top-heavy age pyramids would remain a problem even if government got out of the retirement business entirely. Imagine what would happen if everyone stopped having kids. In three generations, we’d all be “retirement age.” But what would your retirement savings buy in a world with a worker/retiree ratio of zero? Most of us would wind up spending our sixties and seventies working for people in their eighties. The point is not that this nightmare is likely, merely that under laissez-faire, retirees’ quality of life continues to depend on the fertility of younger generations.

[15] See Frederick Shane and George Loewenstein. 1999. “Hedonic Adaptation.” In Daniel Kahneman et al, eds. Well-Being: The Foundations of Hedonic Psychology. New York: Russell Sage Foundation , pp.302-329.

[16] Charlotte Hord et al. 1991. “Reproductive Health in Romania: Reversing the Ceausescu Legacy.” Studies in Family Planning 22, pp.231-240.

[17] See e.g. Anders Björklund. 2007. “Does a Family-Friendly Policy Raise Fertility Levels?” Swedish Institute for European Policy Studies 3.

[18] Claude Martin. 2007. “A Baby-Friendly State: Lessons From the French Case.” Pharmaceuticals Policy and Law 9, pp.203-210.

[19] If you take Simon seriously, liberalizing immigration sounds like a “beggar-thy-neighbor” policy. Doesn’t the sending country lose the positive externalities that the receiving country gains? There are however two mitigating factors. First, since relocation increases a worker’s income, it makes his positive externalities more positive. Rich consumers do more than poor consumers to foster innovation, expand choices, and share fiscal burdens; creators are more likely to realize their potential in the First World than the Third. Second, migrants return much of their new-found wealth to people in their home countries as remittances. Some positive externalities of population hinge on physical proximity; but thanks to modern communication and transportation, the whole world benefits when an immigrant moves from the Third World to the First.

[20] See Michael Clemens, Claudio Montenegro, and Lant Pritchett. 2008. “The Place Premium: Wage Differences for Identical Workers Across the U.S. Border,” Washington, DC: Center for Global Development Working Paper #148.

[21] See Michael Huemer. 2010. “Is There A Right to Immigrate?” Social Theory and Practice 36, pp.249-261.

[22] Douglas Wolf et al. forthcoming. “The Fiscal Externalities of Becoming a Parent.” Population and Development Review.

[23] 4.7 times to be more precise.

[24] Kevin Milligan. 2005. “Subsidizing the Stork: New Evidence on Tax Incentives and Fertility.” Review of Economics and Statistics 87, pp.539-555.

[25] Milligan finds that responsiveness varies with pre-existing family size. The 16.9% figure is the estimated responsiveness for people who already have one child.

[26] There is at least one major reason to think that natalist tax credits are better than simple estimates suggest. Quebec’s program paid baby bonuses to everyone. My proposal, in contrast, only rewards parents who actually pay taxes. Since income runs in families, the extra children born are especially likely to be net taxpayers.

[27] Bryan Caplan. 2007. The Myth of the Rational Voter: Why Democracies Choose Bad Policies. Princeton, NJ: Princeton University Press.

[28] Bryan Caplan. 2011. Selfish Reasons to Have More Kids: Why Being a Great Parent Is Less Work and More Fun Than You Think. New York: Basic Books.

[29] Caplan 2011, pp.37-91.

[30] There are exceptions to the rule that nurture doesn’t matter much. Parents do have strong effects on the religion and political party you say you belong do. But this influence is fairly superficial: Nurture matters much less for religious doctrines, issue positions, church attendance, and voting. (Caplan 2011, pp.62-66) Parents’ most meaningful effect is on kids’ appreciation – how they feel about and remember their parents. A study of older Swedish twins confirms that this really does last a lifetime. (Caplan 2011, pp.71-72) The haunting lesson: Struggling to perfect your kids isn’t just fruitless; it can easily backfire by hurting the parent-child relationship.

[31] Caplan 2011, pp.84-91.