Economic Justification for Chinese Coercion?
By Pierre Lemieux
The Chinese government relaxed to three children per family its former limit of one child after 1979 and two after 2015 (Lyian Oi, “China Delivers Three-Child Policy, but It’s Too Late for Many,” Wall Street Journal, June 1, 2021). Standard economic analysis provides an easy justification for limiting children: a child can be viewed as a negative externality “for society” because a more numerous population imposes costs on taxpayers and, through reduced family resources for education and other factors, on economic growth. This argument has been used, sometimes via environmentalism (example: a World Bank study of 1990).
This, however, mainly demonstrates the plasticity and omnipresence of externalities and the uselessness or danger of the concept itself. As I suggested before, the concept of externality is much more ambiguous and slippery than most non-economists and even many economists believe. Externalities can mean anything and everything, from pure transfers between individuals (“pecuniary externalities”) to what some individuals like (positive externalities) or don’t like (negative externalities). If externalities are generated by your children, they may be negative externalities for certain people and positive externalities for others. The capacity to transmute all that, plus forecasting and discounting everything over time, into a meaningful “net social cost” or “net social benefit” is an illusion.
Invoking the concept of externalities for public-policy purposes (with cost-benefit analysis, for example) gives rise to an even more crucial problem. Even assuming that all the costs and benefits can be calculated correctly, the benefits of a policy typically accrue to other people than to those who are forced to pay the cost. Coercing the latter (including the parents deprived of a basic freedom) to provide benefits to others is not an economic decision, but at best a moral trade-off by the philosopher-king and, in practice, a purely political decision.
The original one-child policy was probably based on a faulty intuition of the “net cost” of a child for the government or “for society.” Its reversal comes from a correct perception that a larger and younger population constitutes a “national resource,” that is, a resource for the state to plunder—for war and other forced services to Leviathan.