Run M Ragged Blog

I was recently sent a copy of an article written by Ben Stein, who is (among other things) a writer and an economist.  The article which you can read in full here, discusses the Net Value of Children and suggests reasons for a diminishing birth rate in the US.

I found this article to be really interesting, mostly because I love the study of economics and  the models it provides for explaining how the world works and because its about kids and I spend almost every moment of my life surrounded by children either here at Run M Ragged or at home.

The article itself is obviously based on America and the upper-middle class (well it was written for FORTUNE magazine) but it does raise some interesting points.

What Ben says is that the cost of raising a child in upper middle class America has become too great and to the point that it has exceeded the benefits of having children and therefore the birth rate in America has dropped.

In modern Australian society is the benefit provided by having children greater than the cost?  Under economic theory if the cost of an activity outweighs the benefit then people will stop doing that activity (in this case having kids).

Traditionally having children and lots of them was sound economic policy.  More children meant more hands in the field, more bodies to protect against raiders, better chance of being looked after as you got older plus it provided redundancy needed in a harsh environment which was pretty dangerous for children.  Now society provides for most of these functions without the need for children.  So why do we keep having them when you look at the cost to raise a child (not to mention the devastating non financial costs of having teenagers)?

For our economy to grow and prosper we need our population to grow and grow rapidly.   So from an individuals point of view it may not make sense financially to keep having kids, but from a society and community point of view both economically and financially it is essential.

Remember Peter Costello urging parents into the bedroom to reproduce and the resulting baby bonuses offered?  The government understood the imperative to reproduce faster.  The result is a baby boom now that has not been seen since post WWII.  The economic wave that we rode as the previous baby boom generation grew can only be replicated by another baby boom generation.  An aging population with low birth-rates does not thrive.

So I guess what I am saying is that the net value of a child (financially cause we just love ‘em anyway) might be reducing from a micro perspective but from a macro or society perspective it makes good economic sense to keep having kids, so do the right thing by your country and keep making babies.