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Milton J. Madison - An American Refugee Now Living in China, Where Liberty is Ascending

Federalism, Free Markets and the Liberty To Let One's Mind Wander. I Am Very Worried About the Fate of Liberty in the USA, Where Government is Taking people's Lives ____________________________________________________________________________________________ "Extremism in defense of liberty is no vice. Tolerance in the face of tyranny is no virtue." -Barry Goldwater-

Sunday, May 21, 2006

The Drop In Birth Rates....

There has been some recent chatter by several bloggers on the drop in birth rates in Western countries, particularly those in Europe. In a population, a woman needs to produce 2.1 babies in order for that population to maintain itself. Obviously producing a replacement for the husband [we know that happens], themselves and also to produce for those that are barren and those that die before producing. Some European countries as-well-as Japan have been experiencing birthrates in the low single digits and a fall in total population will be the expected outcome. Donald Sensing comments on Glenn Reynolds' article in Technorati on this phenomenon.

Freshman year in college, 1977, I remember attending a class by my microeconomics professor, Steven Klepper, where he theorized that having children was an economic good and that the production of this good can be measured by measuring the marginal cost [MC] and the marginal utility [MB], also known as marginal benefit of this good. As the above chart implies, as the marginal cost [MC] rises-the rising line shifts to the left- The equilibrium point [E] shifts left and the number produced falls. When the value of children changes, the marginal utility [MB]- the falling line shifts, say, upwards- the equilibrium point [E] shifts right and number of children rises.

So, economic theory tells us that as the value [marginal utility-benefit] of children changes, then the number of children produced will change and as the cost [marginal cost] changes, this too will change the number produced.

Of course, this illustration when offered to us in the class caused quite an uproar since all of us youngsters, just children ourselves at the age of 18, didn't figure that were just an economic good!

As the above articles postulate, there have been many changes in the marginal costs and benefits of producing children [widgets in economic terms] and this has caused a change in birthrates.

Several large marginal benefit factors such as the shift from agricultural to city-living where children are not needed to work the fields have impacted production of widgets. Additionally, with the rise of pensions and savings, there is no need to produce children to support old folks in their later years. So the marginal benefits of producing the widgets has declined.

Marginal cost have also risen. The absolute costs may have risen relative to incomes when the high cost of real-estate and higher education are taken into account in such places as Hong Kong. An apartment here can cost upwards of US$1,000 per square foot and adding children takes more space. If each child consumes 150 square feet, then that costs US$150,000.

Donald Sensing theorizes that other social factors have impacted the production of widgets by increasing the marginal costs or benefits to production. These factors include environmentalism, feminism and the stigma or 'non-coolness' of having widgets. However, I think that for wealthy societies, these factors can largely be explained as indulgences given the rise in wealth, more-so than social factors that have arisen out of the clear blue sky.

So, I am going to take the hard-line on this debate and state that it is purely economic factors that determine the number of children produced and that social factors cited are largely driven from the same economic factors.


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