Thoughts on economics and liberty

Is population a problem? #2

Continuing from here, two comments from BFN.

a) From the text of the main book:

Our population remained illiterate and poor. It also kept growing in size – for poverty breeds desperation, and desperation breeds children.[i] Millions of innocent lives were created and blighted in our so-called ‘free’ India. Millions of innocents were forced to live and to die in hunger, poverty, squalor and disease: all because of Nehru’s policies.
Large but well-educated populations are never a problem. However, ours is a large and illiterate population now. There are good reasons for seeing this as a problem even though one can neverthink of any other human being as a problem except when issues of individual accountability arise with a particular person.

[i] I explain this comment in Box 15 in the Online Notes at [].

b) From the Online Notes:

    Fertility is related to the level of freedom

The subject of human population growth has spawned numerous debates over the past 210 years since Malthus first published An Essay on the Principle of Population in 1798. I am summarising below a rigorous and persuasive model that has been found far better at explaining observed changes in human population than Malthus’s conjectures. This models explains fertility at the individual level, ie, the number of children a couple choose to have. Being an economic model, it applies well on average; not necessarily to specific individuals. If you are interested in a more detailed discussion, you can read my PhD dissertation.[1] Even though no parent consciously calculates the things summarised below, this model successfully predicts, on average, the number of children parents actually choose to have. It also applies irrespective of whether parents live in developing or developed societies.
A model of fertility
When considering the number of children they want to have, couples ask themselves either explicitly or implicitly the following questions:
a)   Survival of children:How many of our children will survive?”
Human population hardly increased for tens of thousands of years. Malthus’s laws seemed to apply: populations would rise for a while and then be decimated by natural causes, bringing them back to square one each time. Until modern health came on the scene, it was critical to the survival of the human species for each woman to have about seven children. That was roughly the ‘natural’ level of fertility that the human species had evolved to. On average, of these seven children, just over two would survive well into adulthood.         However, this need for women to have all the children they could possibly have, has changed dramatically after modern health has come to the scene. Malthus’s laws no longer seem to apply.
But the high fertility of the past was not an instinctive phenomenon; it was a rational response to the high mortality rates that parents observed. Parents estimate the  probability of their children not surviving childhood, by looking around them. Infant and maternal mortality rates are generally high in less free countries because these countries are poor and can’t afford health care. In societies like Nehruvian India parents may rationally choose to have all the children they can possibly have. Nonetheless, even with the extremely poor health care programmes put in place in India, more children and women started surviving than they had in the past. This led to an unanticipated bump in India’s population as parents had not anticipated that so many more of their children will survive. Newer parents have quickly re-adjusted their estimates of child survival, and have fewer children than their parents did.
Having access to family planning technology has been important for this choice to be exercised, but not critical. Numerous historical instances of family planning being practiced without modern technology are well known. Even today, one-third of Italian couples (Italy has a particularly low birth rate) use withdrawal as the family planning method since Catholicism doesn’t encourage contraception. When parents are determined not to have children, technology becomes a secondary factor.
b)  Cost-benefit:
After the survival question has been answered, there is another important question. Parents can choose to have (1) fewer but better-educated children, or (2) a larger number of poorly-educated children. Parents answer this question by maximising their benefits and minimising their costs.
“What will we gain from our children?” Parents everywhere, but particularly in countries such as India which do not have old-age pension or welfare systems, take into account two kinds of financial and non-financial returns from their children: one, some form of ‘help’—not necessarily financial—when the children are young, and two, ‘insurance’ if the parents need to be looked after in old age. This insurance comprises of two components, a financial return if needed, and a non-financial ‘care’, if needed. This gives us the total expected benefit from each child. To estimate this benefit, parents first need to predict their country’s future economic prospects. That will tell them what their children could earn in the future when they (the parents) are old. Parents generally look at the current economic policies of a country to predict the future. If capitalist, free market policies are in place in a country, parents expect future growth in incomes for their educated children. On the other hand, if socialist policies are in place, parents can’t see much of a future for their children.
“What will the children cost?” Bringing up children and, in particular, educating them, costs time and money, both the real costs of bringing up children and the opportunity costs of the time of parents and the children, assuming that the state provides ‘free’ education.
Final decision:
Parents will choose to educate their children and hence have fewer children since parents only have limited resources, if they expect their children’s future income to become significantly larger than if they were not educated. This will happen only if the future economy is likely to generate good jobs for educated people.
Conversely, they will choose not to educate their children and hence have more children if they believe that their children’s future income will not be affected by the children’s  level of education because of the poor future economic environment.
What rational parents will choose in socialist India
In India—which was predominantly socialist at least till the late 1980s—the so-called ‘education’ provided in ramshackle school buildings in villages and slums was not really an education. The future income of such children was only marginally impacted by such ‘education’; nepotism and bribery were far more influential in securing jobs. Jobs that required genuine education were very scarce, anyway: many MA degree holders could also not get jobs beyond that of junior office clerks.
Parents in village India could see clearly that there was no point in having fewer, more educated children. It was far better for them to have many children and use these children as labour when the children were young, save money for their old age, and also hope that at least one or two of these children would take care of them in old age. Child labour was therefore significantly exacerbated by Nehru’s socialist policies. The first major change in fertility in India was prompted by declining infant mortality rates. But it was only from late-1980s, with increasing liberalisation, that parents in villages realised that educating their children made economic sense. Today they know that educating their children can make a huge difference to their children’s future income. Therefore, private English medium schools are sprouting even in remote villages wherever the modicum of good governance is being delivered by governments. Parents are sensible enough not to send their children to government schools. I commend millions of Indian villagers for displaying eminent common sense and reacting rationally (and in my mind, beautifully!) to economic incentives, something their urban well-educated counterparts rarely display when talking about our villagers’ highly evolved thinking capacities.
Some implications
We therefore learn that policies of freedom and good governance always reduce the demand for children. Indeed, policies I advocate in this book will not only stabilise India’s population, but will help to significantly shrink it over the next 50 years. The wealthier a society becomes, the lesser parents need to be financially supported by their children in old age. That further reduces the ‘demand’ for children. They do continue to need non-financial ‘care’, though, and so this demand never falls to zero. Most people will still have at least one child.

What is the ‘optimal’ level of population for a society? There is no such level. Nevertheless, once a free society arrives at a sustainable balance with the environment, then the society can aspire for is average woman choosing to have 2.05 highly educated children. That would sustain that level of population potentially for ever. Of course, this is not something for a government to spend its policy resources or taxpayer’s money on. An important implication to keep in mind: this model shows that it is not sensible to introduce old age pensions in a society. Where such schemes exist, the demand for children can plummet precipitously, and relations between parents and children can get strained. Let the government not disturb this age-old relationship.

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