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Henderson on John Batchelor Show on Family Allowance

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Evan Sherman May 7 2021 at 3:50pm I noticed that the question of externalities did not come up in the interview. David, what would you say to that question? (I assume that this cannot be the first time a respondant has raised this question in response to your argument.) E.g. Families A and B each contain 2 adult workers doing the same jobs (same productivity, same compensation, etc.). However, Family A has two kids and Family B has zero kids. Family A accrues considerable expense (sweat, tears, and treasure) in raising the two kids into productive workers and citizens – and, to be fair, does receive some specific rewards in return (e.g. an extra private family

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Evan Sherman
May 7 2021 at 3:50pm

I noticed that the question of externalities did not come up in the interview. David, what would you say to that question? (I assume that this cannot be the first time a respondant has raised this question in response to your argument.)

E.g. Families A and B each contain 2 adult workers doing the same jobs (same productivity, same compensation, etc.). However, Family A has two kids and Family B has zero kids. Family A accrues considerable expense (sweat, tears, and treasure) in raising the two kids into productive workers and citizens – and, to be fair, does receive some specific rewards in return (e.g. an extra private family safety net for retirement.) Family B, conversely, is exposed to none of that child-raising cost. Both Family A and Family B enjoy the general benefits of a society with more productive workers and citizens (e.g. Family A will produce goods/services and thus tax revenue that will support the retirements of both Family A and Family B).

Is there not an externality at play? Is it not the case that Family B has a better cost-benefit ratio than Family A? Would that imbalanced cost-benefit ratio not incentivize people to have less kids – further reducing the general benefits of more productive workers and citizens in the future? etc.

David Henderson
David R. Henderson (born November 21, 1950) is a Canadian-born American economist and author who moved to the United States in 1972 and became a U.S. citizen in 1986, serving on President Ronald Reagan's Council of Economic Advisers from 1982 to 1984.[1] A research fellow at Stanford University's Hoover Institution[2] since 1990, he took a teaching position with the Naval Postgraduate School in Monterey, California in 1984, and is now a full professor of economics.[3]

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