Some Thoughts on Birth Dearth
Ross Douthat’s most recent column is devoted to fretting about whether America is catching the “birth dearth” disease that has supposedly hobbled the economic performance (and hence the political and cultural clout) of Europe and, increasingly, East Asia. The column makes a number of arguments with which I am familiar, in many cases because I would have made them myself a decade ago. Many of these are now worth pushing back against, or at least qualifying. I’m no longer convinced at all that modestly-below-replacement fertility is a problem at all. Indeed, I suspect that, under contemporary conditions, that’s exactly what most developed countries should be aiming for.
Douthat mentions that American overall fertility has been boosted, historically, by immigrants, who exhibit higher fertility than natives. But it would be more accurate to say that immigrants exhibit higher fertility than otherwise-similar individuals who remained in their home countries. And the reason is straightforward: kids are expensive. Immigrants benefit economically, in general, from immigration (otherwise they wouldn’t come). Hence they can afford more kids than they could back home. But if back home in Seoul or London or Tel Aviv they would have had 1-2 kids, they don’t come to America and have 4-5; they come to America and have 2-3. By contrast, if, back in Mexico or Guatemala, they would have had 3 kids, they might very well have 4-5 kids in America, where there is more opportunity to improve one’s economic situation.
But fertility rates are falling rapidly across Latin America. They’re now below replacement in Brazil and Chile, and rapidly falling towards replacement in Mexico and Colombia. It would be very strange indeed if we didn’t see fertility among immigrants from these countries drop proportionately. If we want to maintain high levels of immigrant fertility, we will need not merely high levels of immigration, but high levels of immigration from countries with relatively high fertility – moving from Mexico to Peru, from Vietnam to the Philippines, and from much of the world to sub-Saharan Africa. But the baseline level of fertility is primarily driven by two factors related to development: the level of urbanization and the prevalence of female literacy. Even assuming we want to maintain high levels of fertility, is it optimal to do so by favoring immigration from countries that are significantly more rural and less-well-educated than America?
The baseline level of fertility seems to be driven primarily by development factors. Relative to that baseline, fertility rates seem to vary with economic factors. In countries where housing is very expensive and establishing oneself in a career takes a long time – like Italy and Japan – fertility is especially low. Similarly in countries – like much of the former Soviet bloc – where prices rose much more rapidly than incomes in the wake of economic liberalization. The United States has benefitted historically from relatively inexpensive housing, as Douthat points out, and to some extent the post-bubble reemergence of lending standards has something to do with the decline in fertility (along with rise in unemployment and in levels of bad consumer debt). But more persistent drags on fertility include wage stagnation and the rising cost of educational credentials. In any event, given our ongoing economic doldrums, a decline in fertility is to be expected. If that weren’t happening, we would have to be concerned that prospective parents seemed unconcerned with the poor economic outlook for their children.
Douthat is aware of all this, and argues for a more family-friendly tax system along with a more robust job market as ways to raise fertility. But he also assumes that we need higher fertility to maintain our collective well-being, and I increasingly question that.
The main argument why positive rates of population growth are good for individuals within an economy, and not just for the size of the pie as a whole, is a technical matter related to discounting investment in fixed assets. If you assume a rising population, then an up-front investment in infrastructure seems much more likely to be paid back than if you assume a static or shrinking population, because while, on the one hand, a bridge will wear out with time, on the other hand the value of the bridge will keep going up because more and more people depend on it economically. A declining population can give you Detroit, a shrinking tax base less and less capable of maintaining the existing infrastructural base.
But I think this is mostly a technical problem rather than an economic law. Rapidly rising populations create an incentive to invest in less-durable infrastructure, because we know that in the future we will be able to afford to replace whatever we’ve built with something newer, and better. If we assumed a static or slowly declining population, we’d have an incentive to invest in structures less-likely to require replacement – because maintenance will be “more expensive” in the future than it is today (because workers will be more scarce, and hence more expensive). It’s not obvious that, net of environmental externalities, the latter choice makes us less-wealthy on average. As for Detroit, it experienced a precipitous drop in population. There’s no reason to assume that a modest and slow decline over time would mean Detroitization of the country.
As for discount factors: this is really an artifact of the “zero bound” which, in turn, is an artifact of physical cash. If you have a declining population, you will probably eventually reach a point where labor force contraction outweighs productivity gains, and you have declining real aggregate economic growth. That, in turn, creates a problem for investment returns – without the prospect of positive returns, why take risk? why not just stay in cash? – which in turn would seem likely to feed back into reduced productivity growth in an acceleratingly-negative cycle. But really the only reason there’s a problem at all is that cash has a yield of zero. If there were no such thing as physical cash, then overnight instruments, in such a situation, would naturally have a negative nominal yield – and suddenly investments that broke even over a long time horizon would look perfectly attractive. And we are very close to the point where eliminating physical cash is a very real policy option.
Even without eliminating physical cash, the evidence from Japan over the past twenty years is that you can have stagnating fertility, and stagnating overall economic growth, while still experiencing rapidly-rising standards of living. That being the case, we should question the assumption that a society that is relatively static population-wise – as most human societies have been for most of human history – would also become progressively poorer.
The biggest problem Japan has is that they have too many old people. This is partly a function of rapidly-rising longevity, which cannot be solved by increasing fertility. Trying to raise fertility in response to increases in longevity is a formula for accelerating population growth, because those young people will eventually (one hopes) grow old to become an even larger contingent of dependent elderly. Moreover, this isn’t what we observe in any developed country today. The problem of longevity can only be solved either by extending one’s working life beyond historic norms, or by advances in productivity that make it possible to maintain a large dependent population on a smaller workforce, or by reduced overall standards of living. Inasmuch as Japan currently has a transition problem (until longevity stops increasing and/or fertility picks up to closer to replacement and/or it achieves rapid advances in productivity), the most obvious solution is to export its elderly to retirement colonies in countries with a large and substantially under-employed youthful labor force, such as India.
After looking at and fretting about these economic drivers, Douthat talks about a cultural shift away from “child-centered” family life, but again I suspect he’s got causality backwards. How “child-centered” was family life in the 18th century, the period when children were apprenticed out as soon as they were old enough to physically manage the work? And yet, this was a period of phenomenal fertility in America – because arable land was extraordinarily cheap. Douthat tracks a change from 1990 to 2007 in people’s attitudes toward the importance of children for a successful marriage, but American fertility hasn’t declined precipitously since 1990; it has fluctuated around a relatively stable level since the mid-1970s. Instead, what’s happened is that the culture has, over time, adjusted to the way people are actually living. And they are living with smaller families, on average.
That “on average” is important. One of America’s strengths remains our comfort with a diversity of sub-cultures. One consequence of this diversity, however, has been something of a “sort” into relatively homogeneous groups who don’t always understand one another, or want to. Fertility is one of the principal axes of division. The childless people I know tend to hang around with other childless people; the people I know with large families tend to hang around with people people with large families – which, in turn, has fueled a move by some toward a more traditional religious orientation precisely to find a community that is culturally supportive of a large families. The result is that what looks to Richard Florida like the engine of the economy looks to David Brooks like an epiphenomenon, when of course in fact we have only one economy, to which both the “creative class” and “patio man” make their unique contributions.
Which makes it all the more unfortunate that Douthat describes that adjustment in near-apocalyptic terms:
The retreat from child rearing is, at some level, a symptom of late-modern exhaustion — a decadence that first arose in the West but now haunts rich societies around the globe. It’s a spirit that privileges the present over the future, chooses stagnation over innovation, prefers what already exists over what might be. It embraces the comforts and pleasures of modernity, while shrugging off the basic sacrifices that built our civilization in the first place.
That’s a funny diagnosis when you look at the data. The countries that are the least-dynamic and that are most-opposed to innovation – countries like Afghanistan and Yemen – are also the countries with the highest fertility rates in the world. Moreover, the list of countries with the highest global savings rates – which, you would think, would be evidence of a future-oriented outlook rather than a decadent, present-oriented one – is dominated by old-fashioned European states like Germany and France, Belgium and Austria, Sweden and Switzerland. And swamping them all is China, where extraordinarily high rates of savings – and a rapid march into the future – has accompanied (and may have been driven by) a sharp decline in fertility driven by the one-child policy. Finally, maybe it’s just because I live in Park Slope, but I haven’t noticed that we live in a civilization that has retreated from child-rearing.
It may be that civilization itself leads inevitably to decadence – Ibn Khaldun certainly thought so – but that’s not the kind of thinking that leads to speculation about how “pro-family” tax policy might help America turn the corner, nor even about how “individual choices” can eventually “turn the tide.” Eventually, the desert will cover all.
In the meantime, allow me to take a very long view. In the history of life on earth, humanity conquered the globe in the blink of an eye. Then human population growth slowed down, until the invention of agriculture. This made possible another huge leap in human populations, and much conflict – until, once again, the population stabilized at a certain rough level. Then the industrial revolution made possible another huge leap in human populations, again accompanied by much instability. Human family structure changed dramatically after each leap, and then settled down into new, relatively stable forms.
We may or may not be at the beginning of another period of relative population stability. I rather hope we are, and that the kinds of trends Douthat worries about are signs of adaptation to that state, to be appreciated as such. It may be that the more pessimistic ecologists are right, and we cannot afford stability – we need to shrink, and quickly, if we are to survive at all. I hope they are wrong. But it strikes me as very strange to identify stability with “decadence” and “exhaustion.”