Marginal Utilities and Marginal Costs of Having Children

Abstract

When families make decisions about having a child ex ante, they calculate with steeply decreasing marginal utilities. In other words, the 1st baby brings a huge amount of pleasure (utility), while the 2nd and further babies bring less and less utilities. Historically, it hasn't always been this way: in poor societies, the main motive for having children was that children were able to work from a young age. Therefore, marginal utility decreased only slightly, to the point around the average utility. The social utility of having children only has a slight influence on families; however, every new child's social utility is almost the same. This explains politicians' intentions to encourage families to have more children. The final conclusion is that within the factors taken into consideration in the study, there is no equilibrium, and the observable trends will not result in a social optimum. Decreasing population and the aging of the society cannot be eliminated or significantly alleviated on national level, no matter the amount of money the government is willing to spend to take over some of the costs parents bear to have children. 1

The Outlines of a Possible Pension System Funded with Human Capital

“…In order for a positive value to be produced with relation to the number of children, a positive utility must also be attributed to children, and accordingly we introduce the utility function for children, UCH(n t ). This is, of course, also a decreasing function with a positive slope (UCH (n t ) > 0, és UCH (n t ) < 0), just like all other utility functions (see Mihályi (2019)), but we also assume that the demand for children is not infinite, meaning that the utility of children (at individual level) has a maximum, and therefore UCH (n t ) > 0 is only true up to a certain maximum number of children n max , and from then on it is zero, or possibly negative.…”

Family Allowance and Pension Dependent on the Number of Children: Optimality and Neutrality : Reaction to „The Inherent Faults of the State Pension System and the Main Direction of its Improvement” by József Banyár

“…This difference in terms of delay manifests itself emphatically in the case of the tens of thousands of hungarian workers moving permanently abroad at adult age. Although not every hungarian economist accepts the arguments (for example, Mihályi, 2012;2019;Németh, 2012;simonovits, 2012), the approach is dominant for the time being, and it detrimentally overshadows other questions, which are at least as important as this one (the increasing polarisation of pensions within retirement years and between retirement years; the blending of the rigid and the flexible age limit for retirement).…”