Next time you see a parent, maybe you should give them a big “Thank You.”
Are Children Good?
If I surveyed America asking “Are children good for society?” I assume I would get plenty of “Yes-es.” After all, kids are great, right?
I also suspect, however, some would express doubts. Aren’t kids just the means of overpopulating the earth? Won’t that increase our carbon emissions? Won’t we have to educate those kids in public schools? Don’t more people mean more costs for an already broke government?
The Baby Externality
I think we can agree children offer personal benefits to most parents. (See my previous post for some examples. You can also read about why parents choose baby names.) But, we can also ask whether choosing to have kids affects others in society. When something you do affects a bystander, economists call it an “externality.”
Externalities can be either positive or negative. For example, a smoker may cause a negative externality on those nearby due to the unpleasantness of second-hand smoke. Or, a gardener will create a positive externality for passers-by who enjoy seeing her flowers. In both cases, positive and negative, the bystanders were affected by someone else’s behavior (i.e. smoking or flowers).
We can imagine many ways parenthood could affect others. Some potentially negative paths I mentioned above. However, the average person is more than likely a net benefit to society. That is, the average person will make us all a little richer.
To think about this, ask whether the average American is a net consumer or net producer. I’m afraid the media sometimes subtly portrays “more people” as a bad thing. Let me tell you why it is not.
More people allows us as a society to specialize in what we are best at. I can do economics, you can sell insurance, she can photograph weddings, and he can build houses. This is what economists term “division of labor” and it is one of the key ingredients in serious economic growth. Division of labor makes society productive which at the core means we are richer. The average person is a productive unit which helps society become wealthier. When someone becomes a parent, it’s like they are giving everyone a gift.
One particularly important way babies benefit us is by becoming adults who invent new things. Imagine where we would be if Henry Ford, Thomas Edison, or Mark Zuckerberg had not been born? How boring would our lives be if our favorite singers, movie stars, writers, and artists didn’t exist? On a much smaller scale, all of us figure out ways to do things better at out jobs. These add up to benefit everyone else.
Reduce the Deficit with Kids
As I have tried to explain above, babies are good for us because they turn into productive, idea-generating adults. They also pay taxes.
In a newish paper, the authors try to measure the impact on government expenditures due to someone becoming a parent. Their child will become a tax payer and also a consumer of government services, and we would like to know whether overall this helps or hurts the public finances. If I am correct that the average person is a net producer for society, then it should not surprise us that someone transitioning to parenthood will have a net positive impact on the government’s finances. This positive effect on government finances is called a positive “fiscal externality.”
This is the paper’s main result:
the net present value of the fiscal externalities of becoming a parent…equals… $217,501 in 2009 dollars. This number represents our central finding: the net fiscal externality of becoming a parent is positive, and is substantial.
So, becoming a parent seems like it is a good thing for our fiscal situation. If you are worried about our national debt – and you should be – maybe you should do your part and become a parent. (I am using all restraint to not insert a joke about stimulus and baby-making here.)*
*I have of course been focusing on the average individual which is different from the marginal individual. Those are separate questions, but I will affirm that I believe a person is inherently valuable just by the fact that they are a person, regardless of what an economics calculation says.