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.
One interesting question is what is the value of the positive externality of having an additional member of the society?
The most controversial point of the proposal is to endow the children with personal debt. But, as you said, it is socially permissible for the govt to take on public debt.The second controversial point is to pay foster parents for the task of raising the children. But, we already have families that want to do that for free, and either can't have children on their own, or can't find healthy toddlers for adoption.The third controversial point is to pay the parents of existing children - and the problem it creates with having more (genetically) low-quality people. But, we already have laws in place for the surrogacy (and the overton window is shifted to view is as socially permissible).
Thus, I would say the most practical version of the proposal would be for the govt to completely subsidize the in-vitro + surrogacy + raising children cost for willing (and vetted) prospective parents, funded by public debt - if the answer to the question at the beginning is that this value is substantial.
The economic value of a child ranges from moderate negatives to large positives, with the mean being equal to lifetime economic productivity. I am abstracting here from any value the child might ascribe to its own existence, and I disregard other measures of human life value, such as the spiritual value of a soul, in this analysis.
Clearly, an efficient policy should take these inhomogeneities into consideration. The child of two borderline psychopathic morons, likely to grow up into a psychopathic moron, is less economically valuable than the child of two highly intelligent persons with high conscientiousness, high H-factor, moderate agreeableness and low neuroticism.
I am not sure how to construct a market-based mechanism to assure efficient creation of children, both regarding the number of children, and their quality. Still, as an initial, simplified approach, I would think it would be efficient to require (e.g. through a government levy) each person to pay a certain percentage of their income into a general human infrastructure fund. The fund would be used to purchase children from prospective parents, i.e. to pay prospective parents to conceive and raise children. For now let's leave aside how the exact number of children to be bought would be determined. In order to be efficient, the fund might pay some people to not have children, e.g. by paying them to agree to be sterilized. The fund would also pay some parents much more than average, in accordance with the expected value of their children. Payments might take the form of milestones, for the birth of a healthy child but not a deformed child (to encourage prenatal testing, eugenic abortion and prenatal vitamins), for the attainment of various educational milestones and for joining and staying in the workforce (to encourage imparting socially productive attitudes to children). The obligation to pay into the fertility fund would not end with the death of one's parents, to discourage parricide.
This system of transfers would counteract the trend towards childlessness that is hollowing out many modern societies. It would have beneficial eugenic effect. It would assure that a person's contribution towards creating the human component of the economy (i.e. labor) would bring a financial return, similar to the returns from one's contribution towards capital (from savings and investments).
Now, I am bit hesitant to state such views in a public forum, since most of the modest proposals I make here are likely to be vehemently condemned from many quarters, from pro-life to pro-abortion, and from socialist to free-market libertarian sides. Still, whatever one's feeling might be, it's a clear fact that modern societies are dying out, diverse traditional societies encounter dramatic fertility declines in contact with modernity, and that something needs to be done about it, if there are any humans to be around in the developed world in the next 200 years.
The alternative of course is for AIs and EMs to take the torch of civilizational progress from the faltering hands of biological humans, but this is a whole another interesting subject.