| 0:37 | Intro. [Recording date: September 10, 2026.] Russ Roberts: Today is September 10th, 2026, and my guest is Jesús Fernández-Villaverde, the Howard Marks Presidential Professor of Economics at the University of Pennsylvania. Our topic for today is fertility and demography, based on a recent paper he wrote--he coauthored--with Patrick Norrick, and that paper is "Terra Incognita: The Economics of a Shrinking World," a paper I found to be honest, shocking in its claims, but the claims are mostly facts. So, put on your seatbelt, folks. It's going to be an interesting ride. |
| 1:16 | Russ Roberts: We're going to start with some basics. I told Jesus before we started, this is, I think, the first episode on demographics that we've ever had on EconTalk, so we'll make sure that we get you up to speed before we get you to some of the more complex ideas. I want to start with the Total Fertility Rate, sometimes abbreviated as TFR, the total fertility rate. You will hear that it needs to be at least 2.1 to be at replacement level. As we'll learn from this conversation, that's not true in general. It could be true in specific cases. But, what is the total fertility rate? Jesús Fernández-Villaverde: Okay. So, we take a population, let's say the United States, and we measure how many children women have on average, and that's total fertility rate. Now, there's a couple of subtleties that you don't need to worry much. But, when we say that the total fertility rate in the United States right now is 1.57, what it means is that women will have, on average, 1.57 children over their lifetimes. Russ Roberts: But that's a strange thing because many of the women in our conversation are still in their childbearing years. So, literally, if I understood your paper--or the video that I'll also link to--correctly, childbearing years--there's exceptions, but they're small in number and its impact on the total childbearing years are 15 to 45, approximately. So, to calculate the TFR, we look at how many children women of 15 are having, 16, 17, 18, 19, all the way up through 45, even though there are many women we're interested in who are 23. And we're assuming, when we calculate that TFR, that total fertility rate, that a woman today who is 30, say, will have the same experience when she's 31, 32, etc., that women of that age are now. Is that a correct way to summarize it? Jesús Fernández-Villaverde: Yes, exactly. So, there is a similar concept called Completed Fertility Rate. Completed Fertility Rate--we are in 2026 now--so, we look at women who are 46 today, and we ask, how many children did they actually have over their lifetime? Now, the problem of completed fertility rate is that it comes with a big lag, by definition. Russ Roberts: A lag, yeah. Jesús Fernández-Villaverde: A lag, because it means that, for instance, we are not going to be able to tell the fertility rates of women born around 2000 until 2046. So, the big question is, how far away is total fertility rates for completed fertility rates? If we go to the historical record, turns out to be the case they are not that different. Russ Roberts: Historically. Jesús Fernández-Villaverde: Historically. That's fair enough. It's fair enough. But, historically, they're not that different. Russ Roberts: Yeah. One of the things I learned from your work is that things can be very different very quickly. Alfred North Whitehead, I think, said, 'Nature doesn't make jumps,' meaning that things are somewhat continuous. But, in this problem, as I said, it's kind of shocking. |
| 4:53 | Russ Roberts: So, let's talk about the Replacement Level of the total fertility rate of 2.1. Now, I want to start with the naive argument, if you would, to explain to our listeners: Why is 2.1 the number that many people were taught is replacement? Why is that a reasonable starting place? We'll then talk about why it's probably not exactly right. Jesús Fernández-Villaverde: Okay. So, this is very easy. Imagine that you have 100 women in the population. To keep population constant over time, you will need another 100 women in the next generation. So, 100 women in this generation, 100 women in the next generation. So, how many children these 100 women need to have? Well, they need to have around 210. The reason is the following. Nature, in the absence of any type of selective abortion, implies that we tend to have around 5% more boys than girls. This is probably evolutionary reasons. Testosterone basically means that a lot of teenagers do stupid things and get themselves killed. Testosterone also means that men die of illnesses earlier. So, evolutionary forces have probably forced us to be 1.05. That means that of these 210 children, around 106 are going to be boys, around 107; 103 are going to be girls. Now, of these 103 girls, not all of them will reach their fertility age. They will die in infant times, they will die as teenagers, they will die in the middle of the fertility age. In a country like the United States, the number of women that will survive is around 98%. So, of the 103 girls that are born, 100 move to be mothers themselves, which, on average, will have 210 children, and that way you keep 100 again and again and again. So, that's why 200 comes. Russ Roberts: So, 2.1 is the number most people think of as what it takes to keep a population stable, constant at that level. Just as an example, I think I have this right--you'll correct me--in the 1950s, the total fertility rate for the world was about 5. So, of course, every year, the population was growing--the world population--as it has continued to do until recently. And, we'll get to that in a second. It's one of the more remarkable findings that you share. But, explain why 2.1, which seems like a totally defensible number, is probably not the right number for some other countries for keeping a stable population. Jesús Fernández-Villaverde: Exactly. First, you have selective abortions. In countries like China and India, a lot of girls are aborted, so you have that the sex ratio at birth is much higher. It's 110, 115. So, when we say-- Russ Roberts: Male to female? Jesús Fernández-Villaverde: Male to female, yes. So, when we see that there are 10 million children being born in China, we are not talking about 5 million and 5 million. We are talking about a much more skewed difference, maybe five and a half million versus four and a half million. The second thing is, in developing economies, a lot of the girls do not reach their fertility age, the fertile age, because they die before. When you put these two things together, you can easily get that replacement rates are much higher: 2.3, 2.4. In some Sub-Saharan countries, it can be as high as 2.5. I want to emphasize, Russ, I'm not inventing this. I promise that if you take any undergraduate textbook in demography, this is Chapter 2. This is as mainstream, conventional a statement as you can get. For some reason, most people do not seem to have reached to Chapter 2 of Introduction to Demographics 101. So, I promise, this is conventional. |
| 9:18 | Russ Roberts: Great. Now, what has changed with--you make a claim in your paper that something has happened in the last few years that has never happened in probably, almost certainly, in the hundreds of millions of--at least thousands of years of recorded history. Jesús Fernández-Villaverde: Yeah. So, when you take account of the effects I was mentioning you before, the replacement rate for the whole planet is around 2.2. And right now, the total fertility rate of the planet is probably around 2.18, 2.17. Means that for the first time in our histories as species, we are below replacement rate. We are not having enough children to keep population constant in the long run. Now, that doesn't imply that population has stopped growing. There is something called momentum, and momentum is very easy to explain. Imagine that you have two parents, and they only have one child, but the parents have not died yet, so the population of that family has grown from two to three. That's momentum. It's when the parents pass away that the population goes down to one. Okay? So, that's exactly where the planet is right now. A lot of the grandparents have not passed away, there are not a lot of grandchildren, so it looks like the population is still growing. When the grandparents start passing away over the next few years is when the population will peak and then start declining. But, the point is, we don't have enough grandchildren already. Russ Roberts: Yeah. We're going to talk soon about whether this is good or bad.You listeners out there may have some thoughts about this is great news or scary news, depending on your perspective. But what I think is fascinating about it is: it's news. I didn't know it. I did not realize this until I saw your post you did on X about this. You point out, for example, that China, which is, I think, the world's second most populous country, records 3.3 million more deaths than births a year. Jesús Fernández-Villaverde: Yes. Russ Roberts: I did not expect that. I think you point out we had 138 million births per year in 2012. Jesús Fernández-Villaverde: Yes. Russ Roberts: That was for the world, correct? Jesús Fernández-Villaverde: Yes. Russ Roberts: Now, that number's down to 124 million, which is why we're at 2.18. Population will, as you say, because of momentum, continue to rise until, you estimate--it has to be an estimate--2055. Jesús Fernández-Villaverde: Mm-hmm, exactly. Momentum historically has lasted around 30 years, and that's why we are going to be peaking in 2055. Now, I want to be very honest. I think it's extremely important for anyone involved in the study of society to be very humble. Things can change. Okay? Tomorrow morning, we all decide to start having kids like crazy, and things can change. So, I want to be very, very humble about it. But, given what I have observed as of 10:40 AM on September 10th, 2026, this doesn't seem to be stopping, and it's going to completely change the planet. It's going to completely reshape the geopolitics of the planet. It's completely going to reshape the political economy of the planet. Regardless of whether you think this is good or bad, I think that most people hugely underestimate the change that this is going to imply in our society. |
| 13:26 | Russ Roberts: So, I want to say one thing about the humility part. I made the remark earlier that nature doesn't make jumps; and yet, as we'll see, there have been some remarkable changes, which we're going to highlight, that were not anticipated and that we don't understand, that help us understand how we got to where we are. Before we get to that--and we'll get to that in a second--I want you to say one thing--well, maybe four things--about the United Nations [UN]. Because, the United Nations forecasts population, and in passing--in another presentation you made, you mentioned that you are skeptical of those forecasts. You know this world, of course, in a way I don't know it. A lot of people rely on those forecasts or find them objective or the best available. They're crazy. They don't make any sense. Jesús Fernández-Villaverde: Not at all. Russ Roberts: That's a fascinating problem in and of itself, but explain why you don't trust them. Jesús Fernández-Villaverde: Okay. So, first of all, something you can do is the following. The United Nations will tell you that so many children were born in country X, and what you can do--they actually tell you how many children were born in country X in 2023 or in 2022, in the past. And then you go to the National Institute of Statistics of this country, and the number is very different. And it's always lower. Now, you can say, 'Maybe this is a country that doesn't do a very good job at accounting for data. Maybe it's a developing economy that is struggling to get with the statistics.' But, we are not talking about those countries. We are talking about Denmark. Okay? Denmark, for good or for bad--the good thing about having a very developed welfare state is that every child, as soon as he's born, it gets his social security number, it goes into a database, everything is recorded. The most striking example that I have is Colombia, where the United Nations is overestimating births by, like, 60%. I talk with people at Colombia. Colombia has great statisticians and great demographers, and I ask them, 'Are you guys missing 60% of births?' And, they say, 'There's no chance on earth or hell that we are missing 60% of births.' Second thing--and I posted something on X this very morning--if you look at the forecast of the United Nations, every two years they are taking 250 million off from the forecast. So, the way I think this is going on is: I know that my forecast is crazy, I don't want to change my forecast all of a sudden, so what I'm going to do is take advantage that most journalists are lazy, and I'm going to take out 200 million in every two years because no one is going to look at what I have been doing for the last decade. And, before you realize, I have corrected my forecast. So, by now, they have already taken out one billion people from their forecast. I mean, one billion people from a forecast is a lot of people. In seven years. They have taken out one billion people in seven years. And remember--and I promised I was not going to use many terms of art--this is a stock variable. It's not a flow. What I mean by a stock is the total population. So, to take out one billion from the total, you need to take out a lot of births. And, the final reason why I don't believe the United Nations is because their forecast of fertility have a built-in reversion to the mean, and this is just a statistical assumption. It may be true, but this is just that you have cooked that up into the forecast. They basically have a statistical method where fertility, by construction, is going to recover. Russ Roberts: And, you show a number of examples where the trend is clearly intensely downward, and then, all of a sudden, in the forecast, it reverses. Which is possible, as you say--who knows?--but unlikely unless you have a reason to believe something is going to change. It's just a built-in statistical assumption that it's going to get back to the average. Which is implausible. Jesús Fernández-Villaverde: Exactly. And, look, what it bothers me is the follows. It's not as much that you have an assumption. Look, I'm an economist. I'm in the business, often, on making forecast. We are often wrong as a profession. I think that the important issue is to be very open about what you're assuming and let the reader decide. You say, 'Look, I think that fertility is going to recover because of reason X'; but you put it over there, at the top of the paper, at the top of the report, and then everyone can judge it. The problem is that, to figure it out, what is going on, you need to go to Appendix C11, footnote 17, third paragraph. And that's what I don't like. I don't like the fact that you're trying to hide for me from what you are doing. I'm very happy--I'm an editor of a journal, of a major journal of economics--and sometimes I get crazy papers, and sometimes I accept them. But, the crazy papers that I accept say in the first line, 'I'm going to do something crazy, but that I think is interesting,' and that's fine with me. The papers that I always reject are the papers that do something crazy, but the assumption is hidden in footnote 27. That, I don't like. |
| 19:34 | Russ Roberts: No. So, one thing we should just add as a stylized fact, as an expression economists like to use to mean mostly pretty much true, close, not exact--stylized, meaning it's close: you mentioned that you might naively believe that you need a replacement rate of 2.1 children per woman to get to a stable population. It's probably closer to 2.2. And, as you point out, we just recently passed a point where it's 2.18 worldwide. And so, for the first time in modern history, for sure, population is going to fall in the future if nothing else changes. We are having a smaller number of children per woman that would allow it to stay stable. But, you should know, listeners, if you haven't looked at this data, and I've looked at it a little bit, and Jesús has looked at it immensely more: Most countries in the West are well below 2. Other than Israel, which you mention in passing, I don't think there's a so-called developed country that is close to 2--forget 2.1--and many of them are under one and a half. Am I right? Jesús Fernández-Villaverde: Yes, and many are below 1. Russ Roberts: Gary Becker, along with Robert Barro, as you point out, had this idea that as nations get richer, instead of having more children--the quantity of children--they have higher quality of children. They invest more in their children, more in their children's education, maybe their musical loves. They get more lessons, they get more training of all kinds. And so, that's what happens as countries get richer. They have fewer children, but so-called higher quality. This is a word that creeps out, a non-economist. But, as economists, we just say, what we mean by that is they invest more. And, to make a really creepy example, it's like saying: when people get richer, they don't buy more cars. They buy a better car, a more expensive car, a car with more features. So, children and cars are not the same. It's an offensive analogy. But, economists--that's roughly the way economists look at it. Something, which I was unaware of--this is one of the shocking things--has changed. Explain the relationship between income and children--population growth, fertility--as across countries, and then within a country, rich families versus poorer families, or richer, higher-income women versus lower-income women. And, when I repeated what you're about to say to friends of mine, I literally saw a physical reaction, like, 'Well, obviously, that's not true. Obviously, that's wrong.' So, tell us. Jesús Fernández-Villaverde: Okay. So, what has happened--you're absolutely right--the Barro-Becker model. I was educated on the Barro-Becker model. Chapter 1 of my Ph.D. dissertation is the Barro-Becker model with some twist. Okay? So, for 30 years, I have been a proud card-carrying member of the Barro-Becker Union. Now, in fact, what has happened is that fertility in rich countries has gone down, as Barro-Becker will have forecast, so good for Barro-Becker. But, what is amazing is that middle-income countries, it has dropped even more, which has meant that the slope has changed from being negative--the richer you are, the fewer children you have--into being positive. Now, we want to be very careful because, for this to be true at the world level, you still need to take Sub-Saharan Africa out. I'm going to come back to Sub-Saharan Africa, if you want, later. Okay? But basically, if you say, 'Let's look at middle-income countries and rich countries,' that's already the case: that richer countries have higher fertility than poorer countries. Russ Roberts: So, their fertility rate has fallen, but it's fallen more in the middle-level countries? Jesús Fernández-Villaverde: Exactly. Russ Roberts: Give us-- Jesús Fernández-Villaverde: And, that's what Barro-Becker cannot account for. Russ Roberts: And, give us a couple examples of what would be a so-called middle-level country versus a rich country. Jesús Fernández-Villaverde: Okay. Mexico: fertility rate, 1.51. The United States: fertility rate, 1.57. Now, I know that many of your listeners are going to have the following thought: 'Oh, fertility rate in the United States is high because we have a lot of people with funny accents like you, Jesús, that have a lot of kids.' No. Let's look at the fertility of non-Hispanic white women. It's 1.55. It's higher than Mexico's fertility. So, the test I always give my undergrads, if you are at Penn--this is supposed to be a good university--'Go out and ask how many faculty knows that the fertility rate of non-Hispanic white women in the United States is higher than the fertility of Mexico.' Let me give you another example. I'm going to give you two countries, Russ. You need to tell me which one do you think has a higher fertility: Japan or Colombia? Russ Roberts: Now, Japan is a famous example of a country that has been struggling with its population. There's been a lot of things written about Japan's economy and political promises being hard to meet because women in Japan are having fewer children than they did before. So, obviously, I would say Japan has a lower fertility rate. Jesús Fernández-Villaverde: Yeah, but of course, this was a leading question. Russ Roberts: I know. I'm not trying to get a good grade. Jesús Fernández-Villaverde: I know. You're being a good sport. You're being a good sport. Russ Roberts: Exactly. I'm not trying to get a good grade. I'm just trying to help the conversation. Jesús Fernández-Villaverde: Colombia has lower fertility, and that's what is surprising. The surprising thing is not that fertility went down in Japan. Barro and Becker will say, 'We brought a model for that.' The amazing thing is that fertility has collapsed in Thailand, in Sri Lanka, in Chile, in Colombia. Let me give you another example: Guatemala. Okay, Guatemala, a lovely country, I have Guatemalan friends; but it's one of the most less developed economies in Central America. Guatemala's total fertility rate was, in 2007, around 3.7, which is the level of Sub-Saharan Africa. Last year, it was probably around 1.8. At the current rate, Guatemala will have lower fertility rate than the United States before the year 2030. Let me put it in this way. If Jesús has a time travel machine and goes back to 2005 and finds my younger self as an assistant professor at Penn and tells him, 'Guatemala will have lower fertility rate than the United States by the year 2030,' I will have to say, 'I'm willing to take a $1 to $1 million bet that that's not going to be the case.' And I will have been broke. And that's the amazing thing. Now, let me come back to the within-country. So, again, it used to be the case that poorer people--now let's think about the United States--poorer people in the United States will have more children; richer people in the United States will have fewer children. That has flipped, and that has flipped. If I can make the joke for a second, the joke I always make in my talks to the big public is that the ultimate status symbol for a finance bureau is Arabian and three kids. And it's very easy to tell. You talk with a lot of people in the financial sector, you talk with a lot of people in high-income professions, and three kids is not unusual. And, at the same time, you go to the lower levels of the income distribution, and you have one. Let me give you another observation. Since the creation of the United States until around early 2024, the fertility rate of African Americans was higher than the fertility rate of non-Hispanic whites. And, that's the reason why the African American population stayed roughly constant as a percentage of the United States population, despite the fact that there were huge influx of immigration from other groups in the 19th century, from whites from Europe, later in the 20th century, from people from Latin America, and more recently, from Asia. Since 2024, the fertility of non-Hispanic whites is higher than the fertility of African Americans, and the fertility of African Americans is collapsing at an enormous speed. Now, unfortunately, it's still the case that, in the United States, African Americans tend to be associated with lower income. That's a very easy way to tell it in the data. The collapse in fertility right now is being concentrated among the low educated, the low income, or the middle educated and the middle income, both within countries and across countries. And, that's really what the Barro-Becker model struggles a lot to understand. |
| 29:26 | Russ Roberts: But, forget the model. What we're looking at is a reversal of an empirical regularity, which is why I use the 'stylized fact' word/phrase. There was a very--forget the utility functions and the math of Barro and Becker. The bottom line for a long, long time was that once you got rich, your families got smaller and its population growth would slow down, and that is true--excuse me--that that finding no longer is statistically--is not a fact--is shocking. Before we go on to the causes of this, which are frustratingly elusive, give us a feel for some of the--in Western Europe, what are some of the current levels of fertility? Because they're shockingly low. Jesús Fernández-Villaverde: Yeah. So, I can tell you from the top of my head, and I apologize if I get the second decimal wrong: in Spain, it's around 1.2; in Italy, it's around 1.2; in the United Kingdom, it's around 1.4; in France, it's a little bit higher, around 1.7, 1.6; most Scandinavian countries, between 1.5, 1.7; Germany, around 1.3. So, yeah, basically, you don't have any one above 1.8, so not even close. Russ Roberts: So they're going to get smaller in terms of the number of people who live there unless something remarkably different happens. So now, we come to the question of what has happened. Why is this--and by the way, the other part about this that was also so surprising: The trend got dramatically steeper and stronger 10 years ago. The last 10 years has seen a steroidal acceleration of this phenomenon. Jesús Fernández-Villaverde: Yes. In the paper with Patrick, we write three words that we should write more often: 'We don't know.' Conditional on that, let me tell you my best reading of the evidence. The way in which we have organized modern society makes extremely difficult to have families with more than two children. It's really very difficult to have three children. It really conflicts with your work, with your professional career. Housing is very expensive, and with three children, you need a bigger house. So, most families are opting for two. Now, you're saying, 'Well, they have--' Russ Roberts: Have children. Most families that have children tend to-- Jesús Fernández-Villaverde: That's exactly where I'm going. That's exactly where I'm going. And what we try to argue in the paper is, if, as a society, your default is two, you are going to end up with 1.4. Why? Because you are going to have a percentage of women that, for whatever the reason, don't have children, maybe biological or maybe by choice. And, you're going to have also a non-trivial percentage of women that are going to stay at one. And, you are going to have next to nobody with three or more. So, if, as a society, your default is 2, you end up with 1.4. And, that's something that I really think most people have not internalized. So, when we are talking about countries like the United Kingdom at 1.4, you will go to a park, and you will see children playing. Most children will be playing with a sibling. It's not like the one child in China. And yet, with two children, as soon as you take account of the few women that will be at zero and the non-trivial amount of women at one, you get stuck in 1.4. So, if you want to get to 2 replacement rate, you need a lot of families with three; and that's what we are not seeing anymore. And, what we try to argue in the paper is that we have organized society in a way where getting to three is extremely difficult, and those societal changes have spread through the planet like wildfire over the last 20, 30 years; and the last 10 years is just kind of the exponential part of that phenomenon where, in some sense, things that we have been building for decades are coming to fruition. Russ Roberts: Well, fortunately, I'm an economist because, if I weren't, I might be tempted to say, 'Well, you're obviously wrong because we have four kids.' But, we are the exception. Jesús Fernández-Villaverde: Yes. Russ Roberts: Obviously, we're very aware that that's an unusually large family when we lived in the United States. Here, in Israel, it's not large at all. As we mentioned earlier, Israel is well above replacement--not just among the religious population, where people assume they have large family, which they do on average, but even among secular Israelis. |
| 34:52 | Russ Roberts: But, I'm an economist, so I know that four is rare. Why would it be the case? Obviously, in 1950, when TFR, total fertility rate, was 5 for the world--what might it have been in the United States in 1950? Jesús Fernández-Villaverde: Around 2.5, 2.6. Russ Roberts: Okay, so above replacement rate--their poor population, growing steadily, as we know, many more people in the United States today than there were in 1950. Something changed. We don't know what that is. You point to that in the paper, by the way, and it's a very readable paper--for the things you won't understand if you're not an economist, you can skip those parts. You talk about some of the other theories that were less religious as a nation, America is, and the West is generally--the smartphone has changed social life, there's social media, and so on and so on. We'll talk about some of--whether that could contribute or not or how decisive it is. But, your claim--I'm going to read a quote from the paper, which is a bold claim, it's a provocative claim--you say the following: Thus, we will conjecture a more speculative possibility, modernity itself. We live in a society built around large organizations and formal credentials, which makes a third child expensive and childlessness cheap. And, that circumstance has created a mismatch between women's position outside the home and men's inside it. As modernity is spread everywhere, even in countries with low income per capita, fertility has also fallen everywhere. What was different in 1950? Why were three children expensive in the United States--excuse me--cheap in 1950 that so many people had three children? Jesús Fernández-Villaverde: So, a couple of thoughts. First, the degree to which these mechanisms that I'm emphasizing--like, for instance, the requirement for formal credentials--was much more limited. So, think about 1950. I'm a middle-class person in a small town in Minnesota. My three kids can graduate from high school, get a job in a local factory, and make a very serious middle-class income. So, I basically think about my kids. I send them to public school, they graduate. By the time they are 18, I get rid of them. Well, that's not really what you can do with your kids any longer if you want them to have a middle class life. You need to send them to college. You may even need to pay for some type of professional or postgraduate education. Before you realize, you are really on top of your children for 25, 27 years. And it's not only that you need to care much more about your children, it's that your own life starts later. Think about an economist. You go to college when you're 18, you graduate when you are 22. These days, we have this awful thing called pre-docs, which should be prohibited, but that's a different conversation. So, by the time you start your Ph.D., you are 24. Then the Ph.D., by now, is six years. So, by the time you finish, you are 30. You get your first job as an assistant professor, maybe directly when you're 30, maybe after one year of postdoc, you are 31; and that's the moment where you start thinking about building a family. You're already 31. The biological clock has already ticked more than half your fertile age. So, no matter how hard you try, no matter how hard you try to organize your life, going for three is going to be very difficult, and who, say, is an assistant professor in economics, say someone who went to law school, say someone who did an MBA [Master of Business Administrations], etc. So, you're basically saying, 'Hey, on one hand, it takes me a lot of time to get to the job market. It takes me a lot of time to settle down as a middle-income family or an upper-middle-income family. And in addition to it, this is the same thing that will happen with my kids, and I need to provision for that, and I need to take account of that.' Suddenly, having the third kid becomes extremely expensive. On the other hand, if I don't have kids, I have a welfare state. Now, in the United States, it's a little bit less generous than in other countries. But, if I'm in Europe, I don't really need kids to sustain me for my old age. I'm going to have access to some type of public health. Being a childless person is not a big deal. Something that I don't emphasize in the paper, because we run out of space: this also has a multiplicative effect. The way I like to put it is: you like to be with your friends, and you can be with your friends drinking a beer at the pub on Saturday night, or you can be with your friends at soccer practice with your kids on Saturday morning. If it happens to be the case that a non-trivial amount of your friends are childless, you can go with them to the pub on Saturday night. So, you can have these peer group effects that multiply relatively small changes very, very fast. So, that's basically what we are trying to say is, real life, modern life makes really very difficult. I mean, I'm thinking about my own graduate students. If they want to have children, it's really a very difficult situation for them, even if they want to have children. If you want to go through tenure track, it's going to be very difficult to have three children or more. And, on the other hand, the temptations of not having kids are very high because life is not very inconvenient if you don't have kids anymore. And again, I'm not saying that this is pushing everyone to go to zero. My argument is that this is basically pushing a lot of people that used to have three to two, and some people that used to have two to one. So, it's not like a dramatic decision. It's not like you meet with your wife and say, 'Honey, we are not going to have kids.' It's that when people are thinking, 'Should I have a third kid or not?' they say, 'Well, a third kid is a little bit tricky.' And, that's what gets us there. So it's not this idea of an economist solving, in the living room, a dynamic programming problem. That's not what I have in mind. What I have in mind is you are having a nice dinner with your wife or your spouse, and you say, 'Honey, should we have a third kid?' And then, your spouse enumerates the 17 reasons why having a third kid now is a little bit tricky. And then, you decide not to have the third kid. |
| 41:24 | Russ Roberts: Or you struggle. You need more time because you're not fertile immediately and not effective immediately, and so on. But, your story--for better or for worse, there aren't that many Ph.D. economists. One could argue whether that's a good thing for the world or not. But, think about a woman who is a cashier at Walmart. She does not have a Ph.D. She doesn't imagine, necessarily, that her children are going to need a Ph.D. or a law degree or an MBA, but she's having fewer children than that graduate student is going to have, is what you're arguing. Jesús Fernández-Villaverde: Yeah, exactly. Russ Roberts: So, what's going on there? Jesús Fernández-Villaverde: Okay. So, what I think is going on there is that deep change in gender relations and in gender norms in society. So, if you were a cashier and you were 25 years old in 1950, there were a lot of things that were closed to you in society as a single woman. That's not the case anymore. Russ Roberts: Closed to you, yeah. Jesús Fernández-Villaverde: Yes, closed to you. That's not the case anymore. Being a single woman in the early 1950s in Middletown, America, was not particularly pleasant. Russ Roberts: Which is why most 25-year-old women in middle America in 1950 were married. The age of marriage was early 20s. Jesús Fernández-Villaverde: Yes, and you may end up marrying someone that you don't particularly like and who is not a particularly good husband for you. So now, it's okay to be single woman when you are 25. When we were talking about whether or not some of these things are good or bad, I actually put this on the good side of the balance sheet. Russ Roberts: Sure. Jesús Fernández-Villaverde: Okay? Russ Roberts: Yeah. Jesús Fernández-Villaverde: And, it basically means--this, I think, is particularly true in a lot of these middle-income countries where the gender norms have changed drastically over the last 25 years. It was extremely difficult to be a single woman in Mexico in 1990. It's not that difficult anymore. I mean, it's still difficult that you still suffer some problems, but it's a completely different ballgame. Russ Roberts: Because? Jesús Fernández-Villaverde: Let me give you a very simple example. I remember I went to give a seminar at Harvard maybe a couple of years ago. When you take that very early flight the next day, so I was waiting at 4:00 AM for the Uber, and I saw a girl walking her dog. She may be in her early 20s. We live in a society where a single woman can walk, in Cambridge, Massachusetts, her dog at 4:00 AM with the reasonable expectation that nothing is going to happen to you. Unfortunately, that was not the case in most of the planet 25 years ago, 30 years ago. So, this woman may feel that the only alternative she has in her life is to marry someone, even if that marriage is not her first choice. But marriage in that situation probably implies that she's going to have one or two children or maybe three. That woman now is deciding, 'No, this is not for me. I'm perfectly fine. I'm a strong believer in freedom and the dignity of people.' And, if that girl who was walking her dog at Cambridge at 4:00 AM doesn't feel she wants to get married, good for her; and that's what I think it has changed a lot. Now, there is also a related issue that we can talk that I think that, at this moment, we have less marriage that we should have as a society because of some policy decisions we have made, and we can talk about those. But, I think that the first order is that, because the change in gender norms, marriage is not any longer the default for a woman, and we should be happy that that's the case. Russ Roberts: I want you to put a footnote in for Sub-Saharan Africa because I don't want to leave that. Jesús Fernández-Villaverde: Yeah. Russ Roberts: But, just as a side note, which you emphasize, which I find extremely interesting, and you've said it implicitly in this last 15 minutes, which is: it's hard to have half a child or 1.4 or 1.7. A society can have 1.4 children per woman, but a woman can have zero, one, two, three, etc. It's an integer problem, a phenomenon--not a problem, a phenomenon. And, as a result, it's a large leap sometimes from two to three or zero to one, for sure, and you can't have partial. It's not an easy--it's not possible. Jesús Fernández-Villaverde: Exactly. And, that's what I was saying before: going from two to three is a big deal. It's a big deal. |
| 46:14 | Russ Roberts: I think one way to help listeners organize your thinking--one's thinking about this, which is helpful to me and [?] thought about until I read your paper--is that, in a way, each one of those choices, those integers, is a different life experience, a different set of motivations. So, a society--again, there will be people who have five and six and seven children, but there are few enough of those that you can almost ignore them. The focus in today's world in many countries is the zero, one, two, three. So, as you shift the number of people from one to zero or three to two or two to one, you're getting this large reduction in a potentially very short period of time in the fertility rate. And, I think it's an interesting way to think about categorizing it, the proportion that have zero. It's obviously something you want to pay attention to, to try to understand, or the proportion that only have one. Two, three starts to get a little more fluid, it's a little different. But, it's, I think, a very useful way to organize your thinking. We're talking about marriage. I mentioned the age of first marriage. Age of first marriage in the United States--the only country I know a little about--has gone from 20-ish, 23, 24 for women to 27, 28. Maybe it's higher now, even, in more recent data. Jesús Fernández-Villaverde: Close to 30, yeah. Russ Roberts: And then, the proportion who have never married has risen dramatically in western countries, United States being one, right? Accurate? Jesús Fernández-Villaverde: Mm-hmm, exactly. Yeah, exactly. Over there, what I think the challenge for us as economists is trying to distinguish how many of those are really choices that we should be happy about and how many of those are choices that are being forced by bad economic policy. So, I don't-- Russ Roberts: Give one example of economic policy that's had an impact that you maybe are interested in. Jesús Fernández-Villaverde: Try to buy a starter house in the United States right now. It used to be the case that you will buy a cheap three-bedroom house in a relatively nice suburb for next to nothing--no, not next to nothing, but a very affordable way with respect to our regular wage. We have made a lot of decisions, a lot of zoning decisions, that has made that very difficult. It basically says--look, and again, this is not about the dynamic programming. You are on a date with your girlfriend or your boyfriend, and you are solving the Bellman equation. This is, 'Honey, should we get married this fall or wait for the next spring?' Your partner is saying, 'Well, we need another $25,000 for the down payment.' Russ Roberts: So, let's wait. Jesús Fernández-Villaverde: 'Let's wait six months.' It's nothing deeper than that. That's what I really want to tell people. This is nothing deeper than--and, you probably know friends, relatives that have told you something like that. It's so expensive to buy a house in Philadelphia right now that, 'Let's wait six months. I have $25,000 more for the down payment.' There, you have six months where you are not going to be able to have kids. Maybe the fecundity starts going down. Before you realize, you can only have one kid instead of two. |
| 49:16 | Russ Roberts: Okay. So, let's move to the harder question. Why should we care? Our economies will get smaller, but we don't really care about--it's not the Olympics of who has the biggest economy. We care about our standard living. We care more about our human flourishing and not just how much money we have. So, we'll be smaller. Why should this--it's fascinating in and of itself; it's part of the human experience--why should we care? In particular, what is likely to happen, positive and negative, if this doesn't reverse and the world population gets smaller and it gets ever dramatically smaller in the poorest countries? And, you can say something about Sub-Saharan Africa, sorry, before you answer that question. Jesús Fernández-Villaverde: Okay. So, let's go to Sub-Saharan Africa. Okay. Everything I have said so far holds for the whole planet. By the way, it also holds for the Muslim world, for the Islamic world. I'm going to tell you, since you mentioned Israel a couple of times, Israel is very interesting because, while fertility among Jewish mothers seems to be roughly constant, the fertility among Muslim mothers is collapsing extremely fast. And, I'm talking about the Israel-- Russ Roberts: In Israel. In Israel? Jesús Fernández-Villaverde: In Israel, and I'm talking about the Israel frontiers of 1949. I don't want to get over here in any type of big political discussion, but I'm talking about the Muslim women in Haifa, for instance. Their fertility is collapsing extremely fast. They will be below replacement rate very soon. In fact, non-religious Muslim women in Israel are already below replacement rate. And, since, I think, 2022, 2021--I'm quoting from my head--the percentage of children born from a Jewish mother in Israel is higher than the percentage of women in fertile age at that time. And, that's just example to point that, basically, fertility among among Jews in Israel is higher than among Muslims. Now, let's go back to Sub-Saharan Africa. Data in Sub-Saharan Africa is extremely bad. All the numbers of the United Nations belong to the Enron School of Accounting. They're just completely made up. So, we really don't know what is going on. Now, for a few countries like Kenya and Congo, we have good surveys--good household surveys--that measure fertility. In these countries, fertility is collapsing at an incredible speed. So, in Congo, in the last 10 years, it has gone from 5.1, which is the world in 1960, to 3.5, which is not that high anymore. By doing a very naïve extrapolation--and I emphasize the word 'naïve' three times: naïve, naïve, naïve--this means that Congo will be below replacement rate by the year 2040, which, in demographic terms, is now. Kenya, the Nairobi metropolitan area of Kenya, is already below replacement rate. These things always happen first in big cities and then spread through the rest of the country. Dakar and all that metropolitan area in Senegal is already probably below replacement rate. My conjecture is that fertility is falling very fast in Sub-Saharan Africa. It's just lagging behind the rest of the world because of some structural reasons related with African growth model, but that, basically, Africa is catching up with the rest of the planet, and that there is a very good chance that most of Africa will be below replacement rate by the year 2050 or so. And, that completely changes how we think about the future of Africa because you are going to have countries below replacement rate at incredibly low levels of income per capita. Russ Roberts: And to go back to our earlier conversation about income and causal mechanisms, normally, I would have said, 'Well, this is good news. They're getting richer, and they're having smaller families.' But that's not what you're saying. It points out that--we talked about income as one having a dramatic impact on fertility, and naturally, economists are going to look at that relationship--but there are a lot of other things going on in the world. There's the cultural change, there's this modernity thing you're talking about, there's gender roles, there's cell phones that are keeping people apart from each other and less social, there's social media which builds social interactions with friends and peers at the soccer field and the bar. So, it's complicated. But, let's stick with this finding, which is true, that the world is going to get a little bit smaller, maybe very smaller, in the next 30, 40, 50 years. |
| 54:51 | Russ Roberts: Let's now go to the question of, why should we care? Jesús Fernández-Villaverde: Okay. As you say, there are going to be good things, and there are going to be bad things. Okay, so, let's start with the good things. For instance, many Latin American countries have big cities. Think about Lima in Peru, Buenos Aires in Argentina, Sao Paulo, that grew very, very fast during the 1960s, the 1970s, and the 1980s because of the big population boom, and those cities are not really bad. They have all-- Russ Roberts: They're not what anymore? Jesús Fernández-Villaverde: No, they are not very nice places to live because you just have to build shanty towns and a lot of residential neighborhoods that are not very nice. So, you have now the room, once your population is not growing anymore, to upgrade a lot of those neighborhoods, and that will be good. We are going to be in a situation where we are going to be able to provide a lot of public services. We are going to be able to have better roads, better infrastructure, etc. So, that, I like, and that will be good for the planet. The problem is that, for good or for bad, we have built very generous welfare states in most countries in the world, surprisingly enough, even in Latin America; and those welfare states cannot handle the big demographic change ahead of us. I'm going to use my own country, Spain, to give you an example. If you look at government spending since 2007 to today, and you separate it in two bins, everything that goes to retirees, which is basically social security payments and the equivalent of Medicare, but in Spain; and everything else. Everything else has not grown since 2007. It actually has gone down a little bit. At the same time, the population of the country has gone up by eight million people because we have brought a lot of immigrants. Everything that goes to older people has kept growing and growing and growing and growing. What are the consequences of this? Well, there is no money for infrastructure repair. The highways are in bad situation. The highest speed train is not in a very good state. A lot of the day-to-day activities of the government cannot refinance, and we could not spend any money on national defense. Well, that's a problem, and that's going to happen everywhere, and that's going to happen everywhere for a very simple reason: The main voting bloc are going to be people who are retirees or close to retirement, and they are going to say, 'Should we spend a lot of money on education and keeping the infrastructure, or should we spend a lot of money on Medicare?' And I can tell you what is going to happen every place in the planet: They are going to vote for their own interest. So, we are in a situation where countries like France, Germany, Spain are just not fiscally sustainable in the year 2040. I have been thinking a lot about it. In fact, I'm trying to write something with a friend about Europe. There is just no way in which we can make this to work in 2040, and this is going to lead to a problem. I don't know exactly how this problem is going to turn out to be the case, but when you see a lot of parties putting on the table radical proposals about the future of Europe, I think a lot of that is related with the frustration of many voters about the current state of public finances. Russ Roberts: And, let me just say-- Jesús Fernández-Villaverde: Sure-- Russ Roberts: let me just say one thing, which is: people are living longer because we have innovation in healthcare, and we're also wealthier, higher per capita income, so we're generally healthier. If you don't have kids in 2016, you start having fewer and fewer kids, there's nobody growing up to be the taxpayers to support those retired people. So, the only thing I would add to your argument which I disagree with, at least in some degree, is that it's true that voting blocs tend to vote for their own. But, if you care about your children, you might feel uncomfortable having them finance your social security and your welfare and your Medicare, especially if you've done pretty well in your life, and, as a result, you'll have some money to transfer to your kids. I think it's a little more complicated. But what is true is that the political system is a very blunt--it's not nimble. And so, the ability of it to adjust in fine-tuning ways to these changes is very small. It'll take a disaster, probably, of various kinds to get people, policies to change in dramatic ways. Jesús Fernández-Villaverde: Second, public debt. The public debt matters, the size of total GDP [Gross Domestic Product]. You'll have countries like Spain with over 100% debt over GDP. If GDP doesn't grow because the population is shrinking, then it's going to be very difficult to service that public debt. And, finally--I'm sorry to be a little bit gloomy--national defense. Okay? Iceland, very rich country income per capita. Iceland cannot even finance one aircraft carrier task force. So, no one cares about finance, about Iceland, and everyone in Iceland is worries on what may invade them. Unfortunately, we are moving into a very dangerous world with a lot of bad actors, and you need to finance your national defense. Russ Roberts: You did not mention the environment. Presumably, there will be less pressure on the environment? Jesús Fernández-Villaverde: Yes. I have a little bit of mixed feelings about it. Let me tell you why. So, yes, if you do a very simple decomposition, the answer is yes. Let me tell you what I have in mind. So, look at the increase in CO2 emission in the planet since around 1990. CO2 emission per capita has only gone up 9%. And, in fact, it has been going down since 2011. See, that means that all the increase in CO2 emission since 2011 and pretty much all the increase in emissions since 1990 is population growth. So, as long as the population starts going down, the CO2 scenarios are very different. And by the way, that's one of the reasons why it's so important for the United Nations to get the numbers right because all these integrated assessment models of climate change use the population estimates from the United Nations. So, when you follow those, the consequences, the policy implications of those models are also flawed. But, anyway, so, yes, on that aspect, it's going to be good. What worries me a little bit is that the environment is also what economists call a luxury good. We care a lot about the environment when we are rich. Where does the modern environmental movement start in the world? In California. You are living in Santa Barbara, life is great, you have a lot of money. Suddenly, being sure that there is not an oil spill in your beautiful beach is very important to you. You can be in a beautiful beach in a very poor country in Africa. Your concern is, 'Can I get something to eat today?' So, as lot of countries are going to be in a very tight fiscal position, it's going to be very, very difficult to go to the voters and say, 'By the way, why don't we fund this new aggressive program to protect the tropical forest?' They're going to say, 'No, no. Log, log, log, log. Log, baby, log. We want to sell the wood because we need to pay for these pensions. We need to pay for these social security payments.' So, yes, there is a scenario where a smaller population is better for the environment, but there is also a political economic scenario where it's actually not that great for the environment. And, I have always been a big believer that the best policy to protect the environment is economic growth because, when people get rich, they care a lot about how pretty your garden is. [More to come, 1:03:33] |
For the first time in human history, we're not having enough children to keep the world's population from falling. And fertility is collapsing fastest not in rich nations but in places like Colombia, Thailand, and Guatemala, upending decades of economic wisdom. Economist Jesus Fernandez-Villaverde tells EconTalk's Russ Roberts that falling fertility has accelerated sharply over the past decade and defies easy explanation. Declining religiosity, smartphones and social media, soaring housing costs, and changing gender norms are popular, but unconfirmed, theories. Fernandez-Villaverde offers his own speculative answer, that modern life makes a third child costly and childlessness easy, but admits the puzzle is unsolved. What's clearer is why it matters: as retirees become the dominant voting bloc, spending on pensions and health care crowds out roads, schools, and defense. Shrinking economies make public debt harder to service, and fewer births mean fewer scientists, artists, and inventors.