The economic case for pro-natalism

An economy is made of people

Paul Krugman was tweeting over the weekend about the idea that public policy should try to support people’s aspirations to have larger families, and he concluded that “the economic case for pro-natalism is really weak — so you're left with some kind of ‘family values’ argument (I mean, look at how fatherhood has mellowed and matured Donald Trump) or, not-so-hidden subtext, the need for more white Christians.”

I think this is wrong, and the economic case for investing in parents and children is very strong.

Indeed, in the course of the very thread, Krugman puts together all of the elements of one of my arguments in favor of such investments. Then there is a whole separate argument grounded in innovation and long-term economic growth that he completely neglects.

Last but not least, I think the position Krugman articulates in the thread is very politically counterproductive. Krugman, after all, supports more government investment in parents and children. And he acknowledges that one way to make the case for these ideas that he supports is in terms of a values argument that appeals to right-of-center people. But rather than embracing the idea that it’s good to have a policy agenda that can appeal to multiple value systems, he gets sarcastic about the idea of family values and suggests maybe the whole thing is racist.

That’s nuts. Joe Biden and the Democratic Party have delivered historic cash assistance to parents and children in the form of an expanded Child Tax Credit. Their favorite thing to say about this is that it will dramatically reduce child poverty. That is true and important. But it also broadly nudges Americans toward marginally larger families, which appeals to some people. That’s good! It’s good to have appealing ideas and to explore the full range of dimensions on which they might appeal.

What are we talking about here?

Now what is true is that as best as I can tell, the most effective “pro-natalist” policy in the world would be to become a society based largely on farming in which women have minimal educational opportunities. That’s a bad idea for any number of reasons, and certainly, there is no economic benefit to doing that.

More prosaically, it seems like among rich countries the level of religiosity is the main determinant of how many children people have. So more children are in America than in Europe, and within America, you have the most in Utah.

There is not a great policy lever available to make people more religious. And to the extent there is one, it’s probably through the opposite causal channel — people with kids are more likely to go to church, so if you support more child-having, that will probably support more religiosity.

But the suite of policies I am interested in is more banal — financial support for parents of children that scales with the number of kids. In “One Billion Americans” I call for:

  • Child allowance à la Biden’s proposal.

  • Paid parental leave.

  • Publicly funded summer camp and afterschool programming.

  • Preschool for four-year-olds.

There are other things you can do (“baby bonus” payments, for example) that have this basic character. And of course, a lot of the traditional welfare state like SNAP and Medicaid is pro-natal with respect to the lowest-income families. A more genuinely pro-natal intervention would be something like a starter version of Medicare for All that enrolls all children at birth and covers them up to age 18.

Now Krugman interestingly concedes the two main points that I normally find myself arguing about:

So pro-natalist policy is good! And yet Krugman wants to deny that there is any economic reason to pursue it per se, insisting that all the benefits come from the improvement in child well-being rather than the increase in the number of children.

The argument from secular stagnation

Krugman walks right up to exactly the argument I wanted to make, which has to do with something that (following the late economist Alven Hansen) we call “secular stagnation.”

The way this works is that when the population growth rate is low, the current market demand for long-lasting physical investments (buildings, basically) is also low. That makes interest rates very low. Low interest rates have some attractive properties, but one thing that happens in a low-rate environment is that you’re constantly bumping up against the limits of central banks’ ability to stimulate the economy with interest rate cuts. You either need to do more exotic monetary policy actions, or else you need fiscal stimulus.

Krugman’s answer is we shouldn’t worry too much about this as an economic problem because we can always just fix it by doing the fiscal stimulus.

But here’s the problem. For a country with a flat or declining population to do what Japan does and pour tons of money into transportation infrastructure projects is awfully wasteful. The conditions that make market demand for private capital low also make the value of public capital low. And indeed we see this in the United States, where the surface transportation funding formula ensures that they keep doing highway expansion projects in Rust Belt states with no population growth, and aside from the direct job creation impact of building the roads, it doesn’t do anything to promote community revival.

Here’s an idea, though — what if instead of doing infrastructure projects with our fiscal stimulus, we invested money in parents and children?

Well, as Krugman says, that would have a lot of benefits in terms of long-term health and productivity. And as Krugman also says, it would increase the population growth rate. And as Krugman also says, that would raise the market demand for private capital and lift the economy out of the spiral of secular stagnation. That, to me, is a pretty good reason to do it.

And there’s also a better reason!

The argument from endogenous growth

Waiving broadly in the direction of Paul Romer’s work on economic growth, the point here is that inventing new stuff is really good.

If someone has a technological breakthrough like how to use mRNA to make vaccines, then a very large share of the world’s population (and in principle, the whole population) benefits from the breakthrough. And the more people there are around, the more candidates there are for making potential breakthroughs.

It’s not a coincidence that small societies based on small hunter-gatherer communities are always very technologically primitive. And it’s not that the individual people are stupid or something either. It’s just impossible to sustain a high-innovation dynamic when you have so few people around. Large populations lend themselves to specialization in lots of other useful ways. But the particular form of specialization that lets people be researchers or work on developing practical applications for the research of others has particularly large benefits.

Now obviously it’s a little simplistic to say “if we had twice as many people, we’d have twice as much innovation.” Life is more complicated than that. But it’s not really that much more complicated. Progress relies on the efforts of singular individuals who move things forward. The fact that the “lone genius” is a bit of a myth only further underscores that having more people around gives you more opportunities for those singular individuals to come together and do things.

None of this is racist

If the idea of larger families doesn’t speak to you personally, I can sympathize. This is very personal. I have one kid myself, and I think that’s a great lifestyle.

That being said, instead of recoiling from the fact that religious conservative types like this idea, the sensible reaction is to work with it. Try to do marginally better with religious voters. Or try to get more Republicans on the Mitt Romney bandwagon.

The move to suggest that pro-natalism is racist is a way of just shutting down creative thinking on politics. It also doesn’t make sense. The total fertility rate for Black and Hispanic women is higher than for white women. And more to the point, the cohorts of people under 40 who would benefit from these policies are much less white than the population average. Investing in parents and children would accelerate the demographic transformation of the country, which might be something that some people don’t like about it. But those people should be less racist.

Now is it true that there is some racist somewhere who is looking at the fact that the white TFR is lower than the Black or Hispanic TFR and dreaming of some kind of race-specific scheme to juice white fertility? Probably so! It’s a big country full of kooks. But this is not what’s on the table in the policy conversation, and the actual proposals we are discussing are not racist at all. They’re just good ideas, and we should do them.