Comments on: Is raising a child poorly the ultimate externality?

By: Adam Ozimek

Adam Ozimek — Mon, 23 May 2011 13:25:44 +0000

Somewhat a fiscal externality from the tax system, but I’m also thinking about wider costs that disruptive, criminal, or otherwise trouble-making people cause. Stealing a car, beating people up, talking during movies, disrupting classrooms, littering, stuff like this. What’s the economic damage done by a kid who is disruptive in the classroom in kindergarten through 11th grade, then drops out and goes on to be a petty thief and just generally an asshole?

I agree parents will be inelastic at the likely margins that they could be taxed, and that’s why I’m skeptical of the policies in the post above. Part of the problem is that you literally can’t tax them a significant chunk of the damage their kids will do because the damage can be so large that they couldn’t even pay an efficient tax. I don’t think this is necessarily an externality with a practical policy solution.

I don’t think a benchmark is necessary. In the abstract you want to pay parents do apply more parenting effort, or change their parenting effort along some dimension, if doing so creates more value to society than doing so costs them. This means subsidizing good parenting and taxing bad parenting. But that’s not to say that there are any real policy prescriptions that flow from this, there are a lot of practical problems with it. But I do think the externality’s are probably extremely large, and the possible (if abstractly) pareto improving gains are possibly huge.

By: Eric Crampton

Eric Crampton — Mon, 23 May 2011 01:18:00 +0000

Then it’s a fiscal externality, right? Where bad parenting leads to costs on others via the tax system?

The bulk of that effect will be a transfer unless parenting effort is rather elastic with respect to ability to fob stuff off on the state. Some bit will be inefficiency, but the rest will be pecuniary.

More importantly you have to set a benchmark. If you set average parenting as benchmark and bad parenting as imposing fiscal burdens, then good parenting provides fiscal benefits – raising kids who contribute more net taxes. Do we subsidize them? If we set “best possible” parenting as benchmark, everyone pays tax?

By: Adam Ozimek

Adam Ozimek — Sun, 22 May 2011 13:52:47 +0000

I don’t mean to imply an externality born by the children, but by society. I agree externalities between parent and child are tough.

By: Eric Crampton

Eric Crampton — Sun, 22 May 2011 05:09:22 +0000

I wonder how you’d define externality here. Suppose a cost of poor parenting is borne by the child but that the parent would have aborted the kid had she known ex ante that so high a standard would have been required and that the kid prefers having been born. Imposing the standard by fiat then seems a cost imposed by the child on the parent.

Further, if there is a standard downward deviations from which count as negative externalities, what about positive deviations? Does the child then incur positive liabilities to the parent?

This whole area is a mess. Externality theory never applies without big problems for within family issues.