Babies Demand

A pair of articles posted on National Review Online yesterday illustrate the enormous gulf in economic perspective between the deified-market right and the traditional-values right.

John Tamny claims that Tech Booms Trump Baby Booms: Governments in the 21st century need not sweat low birthrates. (This article also starkly contrasts with the Mark Steyn article that was listed on NRO hotlinks the previous day.) According to Tamny,

If rising birthrates were essential for economic growth, there would be no need for taxpayer-financed handouts to maintain rising birthrates. More realistically, citizens of the world possess an acute understanding of the infant-replacement rates necessary to achieve increasing standards of living.

The article then makes an obvious point: technology increases each individual's capacity for production. We can produce more with fewer people with the help of computers and other technological innovations. No dispute there.

But is greater production necessarily equivalent to greater wealth, as Tamny suggests? He cites the enormous market capitalization of Google, saying that, on average, a Google employee creates $15 million in wealth. But market capitalization depends on demand. If demand falls, the "wealth" represented by market capitalization will disappear as profits decline. In fact, no thing has a value apart from its demand. A declining population will eventually mean declining demand, which will cause the "wealth" that Tamny equates with production to prove ephemeral.

And what about Tamny's implicit claim that free markets will produce the "right" amount of babies? This careless assertion is aptly refuted by C. R. Hardy in the second NRO article:

The benefits [of childbearing] are somewhat obscure: How, for example, do you measure the benefits for society of a child that grows up to join the Sisters of Charity of Mother Theresa, ministering to the poorest of the poor around the world? Or how do you measure the benefit to society of a child that will spend 18 years studying and 50 or more years thinking, producing, working, and paying taxes? Or what about the child that will grow up to cure cancer, negotiate peace in the Middle East, or discover a renewable clean source of fuel? The fact is, it's impossible and silly even to think about it. What's the value of a human life, considered ex ante?

But the costs -- oh, the costs are so easy to calculate! So many diapers, so much formula, so many inconvenient trips around Harvard Square with one extra little guy who doesn't fit into my double stroller.

Not only are the costs apparent while the benefits are obscure, but nearly all the costs accrue to the parents of a child while the benefits accrue to society at large. Has Mr. Tamny heard of a common economic phenomenon called "free-riding"?

Though the government cash incentives for childbearing that Tamny criticizes are not necessarily good public policy, his cavalier dismissal of the economic problem of declining population is alarming. As the market-deifiers and family-values groups uneasily share the same political party, economists like C. R. Hardy who consider the intersection of family and markets need to have a larger voice. Families and free markets cannot afford to ignore each other when both are under siege.