Win-Win Babies As Infrastructure

I recently used cost-benefit analysis, and estimates of the dollar value of life, to consider the sensitive issue of covid masks, lockdowns, etc. While it can be emotionally hard to compare money and lives, we must do so if we are to think carefully about such things. Hey, as long as you and I have already paid that cost, why don’t we continue on to deal with another even more sensitive topic: abortion.

In the US about 18% of pregnancies end in abortion, for a total of 862K abortions per year. Many see this as a terrible moral wrong, while others consider it more wrong to limit mothers’ choices. When framed as a moral issue, we get stuck, and so one side or the other just wins if they have more political power. I’d like to frame this issue instead in terms of economic efficiency, and see if we can’t make more progress.

First, is abortion efficient? In the US today, mean GDP per capita is $67K, while mean lifespan is 78.5 years. Given the reasonable estimate that one life year is worth three years of income, the total value of a life at birth becomes $16M. All abortions in a year are then a loss of $13.7T, which is more than the $10.9T estimated loss that the US will suffer from covid from all causes for all time. So abortions are objectively a big deal. (Total US annual GDP is $20.5T.)

Middle income parents apparently spend $234K to raise a kid over the entire childhood, not including labor costs. And a poll I just did suggests that about 70% of abortions would be prevented by offering the woman $100K cash. So if the total cost to create a kid is about $0.5M, while the value created is $16M, that’s a 32 to one return on investment! Yes, taking interest rates into account would reduce the rate of return. And if we used the median income of women who abort today (75% of them make <$31K), instead of average income, that might cut life value to $4M, though it may also cut the costs to raise a child by a similar factor.

But still, it sure looks like abortion is quite often inefficient in a cost-benefit sense. And there may be even larger inefficiencies associated with failing to create more children more generally. After all, the calculation seems similar; the value the child gains from their life seems to often be far more than the cost the mother incurs to create that child.

This analysis suggests that we should seek ways to reduce abortions, and encourage fertility. Perhaps even via finding a way make these into win-win deals. You see, there’s a general econ theorem to the effect that it is always possible to find a set of cash transfers to make everyone prefer the package of those transfers added to any economically efficient policy. (For example, we might have freed the slaves by paying slave-owners, and that would have been cheaper than fighting the US civil war.) So if avoiding abortion is efficient, there should be win-win deals to make that happen.

The obvious win-win deal to consider here is to have the child later pay back the the cost of creating and raising them. That is, if not for legal barriers, pregnant women not inclined to raise their children would in effect pay others to raise their kids and endow those kids with debt, or equity-like obligations, that they must pay back over their lifetimes. If children usually end up valuing their lives more than the cost of creating and raising them, then we expect people to find the win-win deals possible here. In these deals, the mother prefers to have the kid, someone prefers to raise them, and the kid is grateful to exist, all relative to the alternate scenario of the kid having been aborted.

However, in actual practice we don’t allow adoptive parents to pay the original mother more than limited expenses, nor do we allow parents to endow their kids with debt or equity that they must repay and cannot easily evade via bankruptcy or emigration. So it seems we have two choices:

• A) expand freedom of contract to allow such deals between moms, child-raisers, and children, or

• B) have the government step in and try to produce a similar effect, suffering its usual reduced flexibility and adaptation to context.

When expanding freedom of contract, we might try to use something like incentivized guardians to negotiate on behalf of the children-to-be.

A government-based solution could look like this. The government pays each mother per child born, and pays people to raise those children, giving preference to the mother if she’s willing. When children are grown, they pay taxes to compensate for these expenses. Either the money comes out of general tax revenue, or just from those whose moms were paid to have them. Maybe these policies are very uniform, with every mother getting the same payment and every person paying the same taxes. Or maybe payments and policies vary by context, such as by the income or genetic fitness of the mother, or estimated values of these for the child. Maybe we give the mom the option to not accept payments up front, if in trade the child owes fewer taxes later. Such adaptation to context is something that private contracting tends to do better, but still the government maybe be able to do some things.

Note that I haven’t talked about whether to allow or ban abortion, which seems a separate issue. I’ve instead talked about how to entice mothers into not having abortions, and perhaps to even plan to have more kids.

This sort of government policy looks a lot like the “infrastructure investment” that people talk a lot about these days, because interest rates are so low. But instead of paying to build roads or power plants, this pays to build people. The usual problem with infrastructure investment is trusting the government to choose the types and amounts of different kinds of spending, and trusting them to choose efficient suppliers, instead of taking bribes to approve inefficient suppliers. Relative to roads, etc., investing in babies looks easier to manage, and requires citizens to less trust the details of government choices.

So, win-win babies seem an especially good government infrastructure investment.

Added noon: Many are mad that I described two approaches, one based on contract and the other on direct government transfers. They say my post would be fine if it only mentioned their favored approach, but that I look evil if I mention the other approach. They are evenly split re which side they favor.

Added 27Oct: Many say endowing kids with debt is slavery. But the US federal government endows each child at birth with $345K in debt. Cities & states add to that. Yes you could might escape this debt by moving to another nation, but the US might not let you take all your assets with you, and you can usually escape all kinds of debt if you are willing to run far enough away. Yes nations can inflate away or repudiate their debt, but these are expensive acts, which is why they are rare. Individuals can also go bankrupt, or use the threat of that to renegotiate their debt, but these are also expensive acts. So in practice the main difference is that national debt is collective.