2023-12-01

Balaji Srinivasan

Now we will hear from our special guest remoting in from Singapore, Balaji! Okay guys. Let me see if I can project. Can you all hear and see me? Alright.

I am going to give some quick slides today and then do a quick Q&A. I am going to talk about hyperdeflation of family formation. I am going to give a few slides to get the conversation going about how I would think about the problem.

Basically the cost of raising a child is estimated around $250,000 over 18 years. Can we radically reduce the cost of raising a family? Why are birth rates down? How can we bring them back up?

Certainly others have shown this or seen this reverse j-shaped curve where the birth rates are down across the industrialized world in line with your increasing income and then your fertility drops. It comes back up when you are at very high income and then children are luxuries.

This has been happening for some time. It goes back to the 1800s. You see this drop as women become more wealthy and more educated that birth rates go down. One reason for that if you get into the micro is that, people can afford more things then why not have more children? One possible reason for this is that my hypothesis is that the price of children is rising faster than other things.

Children has become a luxury good.

As the society becomes wealthier, the costs of having children goes up because of housing, food, child care, etc. This doesn't even include child tuition if you were as unfortunate to send your child to college now.

This is just one hypothesis. I think it's just part of the equation. But you might ask, how might this change? There are three broad classes of strategy. I wrote the book "The Network State" god, state and network.

What do you think is the most powerful force in the world? is it almighty god? is it the US military or the central state? Or is it technology and decentralized networks?

The first one would be god or religious faith. This is obvious for a lot of religious conservatives. Israelis or it used to be Mormons... they just have fundamentally higher fertility by religiosity and it's still above replacement even when excluding ultra orthodox like in Israel.

The Mormons used to be cited as having a higher TFR. In recent years, it has fallen off a cliff. Some people in the audience, maybe Mormons, it has coincided with secularization of the population. Religious faith has to be maintained somehow to correlate with high TFR and that's hard to do in a purely secular age. This is one piece of the puzzle but it's not easy to maintain on its own.

The second piece is centralized incentives through the State. Hungary has a tax exemption where if you have 4 kids there is a tax exemption. Some of those 4 kids might produce more taxes than otherwise, and so it might be profitable. Children are so expensive that you need a windfall level of incentives.

China has been doing much more than people realize. It has a 3 child policy. It is stopping 996. It is starting traditional masculinity promotions. It subsidizes IVF. In China, a nudge can become a shove. It's that simple. It's not just encouraging you to do it. It is telling them to do it and giving them strong incentives. If you need a vaccine passport to go into a store and get on a bus, which was all setup a few years ago, it's not inconceivable that a woman with 3, 4, or 5 children sits in front of the bus instead of the back. Or boards planes first. China can just snap their fingers and roll this out. Would it work, I don't know. But I think they will try stuff like that. Maybe there is a level of state coercion that perhaps combined with tax exemptions gets you out of the ditch - a combination of coercion and incentivization.

There are also baby bonuses where you get small payouts for having children. But it's not as much as Hungary's tax exemption which is a way larger amount. These are State-focused solutions.

The third category is network, technology, and techno-fertility. Some of you there will be horrified and others are delighted. I think it's part of the puzzle. There's a lot of fertility technologies that could get funding or some that are already being worked on. Artificial wombs, for example. That's IVF. That's genetic screening. There's a ton of stuff in this broad area. China is actually looking at doing something. This hasn't been reported very much but one of the thing that China does is takes something that the West has got to work and then they study the process and they take out all the inefficies and then scale it up. They want to scale up IVF so that it is not just for 1-2% of the population but for something like 10% can afford and subsidize IVF across society. Everyone should be able to have kids at a certain age and the State will go very hard on fertility technology to make that possible. If a society is actually embracing that, it's a very different thing.

These are the three possible angles I think. Religious angle, faith based. Centralized State incentives, and then techno-fertility and probably some combination of those could get interesting. There is much more I could say, and these are just some ideas. We will need a fusion of those.

BW: I think there's a generalization of the religious angle which is mutualism and networks for reducing costs. Basically it takes a village to raise a child. More communal housing and mutual aide. Do you see a path for that?

BS: Absolutely. There's a book I wrote called The Network State and one of the things I'm writing about in v2 of it is if you form a community online and you crowdfund some territory offline then you could setup something where oyu have... even with 100 people, you could setup an entire culture around remote work plus a centralized childcare facility and a gym or something.