The Great Fertility Collapse (with Jesus Fernandez-Villaverde)

Introduction to EconTalk and Guest

0:00Welcome to EconTalk, conversations for the curious, part of the Library of Economics and Liberty. I'm your host, Russ Roberts of Shalem College in Jerusalem and Stanford University's Hoover Institution. Go to econtalk.org where you can subscribe, comment on this episode, and find links and other information related to today's conversation. You'll also find our archives with every episode we've done going back to 2006. Our email address is mail at econtalk.org. We'd love to hear from you. Today is September 10th, 2026, and my guest is

0:40Jesus Fernandez Villarverde, 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 co-authored with Patrick Norick, 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.

Defining Total Fertility Rate

1:15So 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 Econ Talks. We'll make sure that we get you up to speed before we get you to some of the more complex ideas. So what is, 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.

1:47That's not true in general. It could be true in specific cases. But what is it, what is the total fertility rate? 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 U.S. right now is 1.57, what it means is that women will have, on average, 1.57 children over their lifetimes.

2:27But 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, since childbearing years are, 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,

3:06even 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's 30, say, will have the same experience when she's 31, 32, et cetera, that women of that age are now. Is that a correct way to summarize it? Exactly. So there is a similar concept called completed fertility rate. And completed fertility rate is we look, we are in 2026 now. So we look at women who are 46 today, and we ask how many

3:44children did they actually have over their lifetime? Now, the problem of completed fertility rate is that it comes with a big lack, by definition. A lack, yeah. A lack. 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? And if we go

4:18to the historical record, it turns out to be the case, they are not that different. Historically. Historically. No, it's fair enough. It's fair enough. But historically, they are not that different. Yeah. One of the things I learned from this, 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, it should kind of, as I said, it's kind

Replacement Level and Demography Basics

4:51of shocking. 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? But why, we'll then talk about why it's probably not exactly right. 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

5:26women in the next generation. So 100 women in this generation, 100 women in the next generation. So how many children do 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.

5:56Testosterone 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

6:33fertility age. They will die in infant times. They will die as teenagers. They will die in the middle of their 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, 98 move, sorry, 100 move to be mothers themselves, which on average will have 210 children. And that way you keep 100 again and again and again.

7:06So that's why 200 comes. And so 2.1 is what 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 five. 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

7:37second. 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. Exactly. So first, you have selective abortions. So in countries like China and India, a lot of girls are aborted. So you have that the sex birth, sex ratio at birth is much higher is 110, 115. So when

8:10we say male to female, 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, you know, 5.5 million versus 4.5 million. The second thing is in developing economies, a lot of the girls do not reach their fertility age because they're fertile age because they died before. Okay. And when you put these two things together, you can easily get that

8:45replacement rates are much higher at 2.3, 2.4. In some sub-Saharan countries can be as high as 2.5. I want to emphasize, Raz, I'm not inventing this. I promise that if you take any undergraduate textbook in demography, this is chapter two. This is as mainstream conventional statement as you can get. For some reason, most people do not seem to have reached to chapter two of Introduction to Demographics 101. Yeah. So I promise this is conventional. Great. Now,

Global Fertility Falling Below Replacement

9:20what 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. Yeah. So when you take account of the effects I was mentioning you before, the fertility, sorry, the replacement rate for the whole planet is around

9:502.2. 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 history as a 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

10:28yet. So the population has grown of that family has grown from 2 to 3. That's momentum. It's when the parents pass away that the population goes down to 1. OK? So that's exactly where the planet is right now. A lot of the grandparents have not passed away. They 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

11:00peak and then start declining. And but the point is, we don't have enough grandchildren already. Yeah, it's kind of a we're going to talk soon about whether this is good or bad. You may have you listener listeners out there may have some thoughts about this is great news or scary news, depending on 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,

11:35which is, I think, the world's second most populous country, records 3.3 million more deaths than births a year. Yes. I did not did not expect that. I think you point out we had 138 million births per year in 2012. That was for the world, correct? Yes. Now that number is down to 124 million, which is why we're at 2.18. And population that will, as you say, because of momentum continue to

12:08rise until you estimate, it has to be an estimate, 2055. Exactly. So 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

12:41and things can change. So I want to be very, very humble about it. But given what I have observed as of 10.40 a.m. on September 10, 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. And regardless of whether

13:14you think this is good or bad, I think that most people hugely underestimate the change that this is going to imply in our society. 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,

13:44that 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. Because the United Nations forecasts population, and in passing in another presentation you made, you mentioned that you are skeptical of those forecasts. And 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.

Skepticism of United Nations Forecasts

14:22They're crazy. They don't make any sense. It's a fascinating, that's a fascinating problem in and of itself. But explain why you don't trust them. 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, and they actually tell you how many children were born in country X in 2023 or in 2022, in the

14:53past. 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 good statistics. But we are not talking about those countries. We are talking about Denmark. Okay.

15:24Denmark, for good or for bad, you know, 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. And the most striking example that I have is Colombia, where the United Nations is overestimating birds by like 60%. And I talk with people at Colombia, Colombia has great statisticians and great demographers. And I asked them, are you guys missing 60% of birds? And they say

15:59there is no chance on earth or hell that we are missing 60% of birds. Second thing, if you actually look, 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

16:34I'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 10 decades, for the last decade. And before you realize I have corrected my, my forecast. So by now they have already taken out 1 billion people from their forecast. I mean, 1 billion people from a forecast is a lot of people. In seven years, they have taken out 1 billion people in seven years.

17:04And remember, and I promise 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, is the total population. So to take out 1 billion from the total, you need to take out a lot of birds. 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 an statistical assumption. It may be true, but this is just that you have

17:39cooked that up into the forecast. They basically have a statistical method where fertility by construction is going to recover. 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. And there, it's just a built-in statistical assumption that it's going to get back to the average,

18:12which is implausible. Exactly. And look, what it bothers me is the follows. It's not as much that you have an assumption. Look, I have been, I'm an economist. I'm in the business often on making forecasts. And, you know, we are often wrong as a profession. I think that the important, the important issue is to be very open about what you are 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

18:45there at the top of the paper, at the top of the report. And then, you know, everyone can judge it. The problem is that to figure it out what is going on, you need to go to Appendix C11, full note 17, third paragraph. And that's what I don't like. Okay? I don't like the fact that you are 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 in economic economics. And sometimes I get crazy papers. And sometimes I

19:15accept 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. Yeah. The papers that I always reject are the papers that do something crazy, but the assumption is hidden in full note 27. That I don't like. 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.

19:50You 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. And we are having a smaller number

20:24of 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 Jesus has looked at it immensely more, most countries in the West are well below two. I don't think there's, other than Israel, which you mentioned in passing, I don't think there's a so-called developed country that is close to two, forget 2.1. And many of them are under one and a half. Am I right?

21:01And many are below one. Gary Becker, along with Robert Barrow, 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 higher, so-called higher quality.

21:33This is a word that creeps out the non-economists, but as economists, we just say, well, 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,

22:10as 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.

The Reversal of Income and Fertility

22:36Okay. So, what has happened, you're absolutely right. You know, the Barrow-Baker model, I was educated on the Barrow-Baker model. Chapter one of my PhD dissertation is the Barrow-Baker model with some twist. Okay. So, for 30 years, I have been a proud car-carrying member of the Barrow-Baker union. Now, in fact, what has happened is that fertility in rich countries has gone down, as Barrow-Baker will have forecast. So, good for Barrow-Baker. But what is amazing is that

23:12middle-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. And 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,

23:43that's already the case, that richer countries have higher fertility than poorer countries. So, their fertility rate has fallen, but it's fallen more in the middle-level countries. Exactly. And that's what Barrow-Baker cannot account for. And give us a couple examples of what would be a so-called middle-level country versus a rich country. Okay. Mexico, fertility rate 1.51. The United States, fertility rate 1.57. Now, I know that many of

24:14your listeners are going to have the following thought. Oh, fertility rate in the U.S. is high because we have a lot of people with funny accents like you, Jesus, 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 is you are at Penn. This is supposed to be a good

24:47university. Go out and ask how many faculty knows that the fertility rate of non-Hispanic white women in the U.S. is higher than the fertility of Mexico. Let me give you another example. I'm going to give you two countries. Ross, you need to tell me which one do you think has a higher fertility? Japan or Colombia? Now, Japan is a famous example of a country that has been struggling with its

25:19population. 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. Yeah, but of course, this was a leading question. I know. I'm not trying to get a good grade. You are being a good sport. Exactly. I'm not trying to get a good grade. I'm just trying to help the conversation. Colombia. Colombia has lower fertility.

25:52And that's what is surprising. The surprising thing is not that fertility went down in Japan. Barrow 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. Guatemala, you know, 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,

26:30around 3.7, which is the, you know, 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 U.S. before the year 2030. Let me put it in this way. If Jesus 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

27:04rate than the U.S. 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 U.S. Porer people in the U.S. will have more children, richer people in the U.S. will have fewer children. That has flipped. And that has flipped.

27:36And, you know, if I can make the yoke for a second, the yoke I always make in my talks to the big public is that the ultimate status symbol for a finance bureau is a Rivian 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

28:10another 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 U.S. population, despite the fact that there were huge inflows of immigration from other groups in the 19th century from whites from Europe, later in the 20th century from people from Latin America

28:44and 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 U.S., African-Americans tend to be associated with lower income. That's a very easy way to tell it in the data. So 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.

29:22And that's really what the Barrow-Baker model struggles a lot to understand. But forget the model. What we're looking at is a reversal of an empirical regularity, which is why I used the stylized fact phrase. There was a very – forget the utility functions and the math of Barrow and Becker. The bottom line for a long, long time was that once you got rich, your families got smaller and your population would slow – its population growth would slow down.

29:55And that 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. Yeah. So I can tell you from the top of my head, and you know, I apologize if I get the second decimal wrong.

30:28In 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 anyone above 1.8. So not even close to – So they're going to get smaller in terms of the number of people who live there unless something remarkably different happens.

Modernity and the Cost of Large Families

31:00So 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. Yes. So in the paper with Patrick, we write three words that we should write more often.

31:36We don't know. So we – okay? 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.

32:08It 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 – That have children. Most families that have children. That's exactly where I'm going. That's exactly where I'm going. And what we try to argue in the paper is, is if as a society your default is two, you are going to end up with 1.4.

32:41Why? 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 are 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 two, you end up with 1.4. And that's something that I really think most people have not internalized.

33:12So 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 that they are – 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.

33:42So if you want to get to replacement rate, you need a lot of families with three. And that's where we are not seen 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

34:14where, in some sense, things that we have been building for decades are coming to fruition. 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. And 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. It's – as we were mentioning earlier, Israel is well above replacement, right? Not just among the religious population where people assume they have large hands, which they do on average,

34:48but even among secular Israelis.

34:53But I'm an economist, so I know that four is rare. Why would it be the case, obviously, in 1950 when TFR was – total fertility rate was five for the world. And what might it have been in the United States in 1950? Around 2.5, 2.6. Okay, so above replacement, right? There are poor populations 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 – in the paper, by the way, and it's a very readable paper for non –

35:25the things you want to understand if you're not an economist, but you don't need to – you can skip those parts. You talk about some of the other theories. We're 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 the – whether that could contribute or not or how decisive it is. But your claim, which 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.

36:04We 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 has spread everywhere, even in countries with low income per capita, fertility has also fallen everywhere. What was different in 1950? Why weren't three children expensive in the United States, excuse me, cheap in 1950 that so many people had three children?

36:42So, 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, you know, I'm a middle-class person in a small town in Minnesota. You know, my three kids can graduate from high school, get a job in a local factory, and make a very serious middle-class income.

37:16So, I basically think about my kids, you know, 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.

37:51Think about an economist.

37:55You go to college when you are 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 PhD, you are 24. Then the PhD 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 are 30, maybe after one year of postdoc, you are 31. And that's the moment where you start thinking about building a family. You are already 31.

38:26The 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 says an assistant professor in economics, say someone who went to law school, say someone who did an MBA, etc. So, you are basically saying, hey, on one hand, it takes me a lot of time to get to the young market. It takes me a lot of time to settle down as a middle-income family or an upper-middle-income family.

39:00And 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 kids becomes extremely expensive. On the other hand, if I don't have kids, I have a welfare state. Now, in the U.S., 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. You know, being a childish person is not a big deal.

39:31And something that I don't emphasize in the paper, because we ran out of space, this also has a multiplicative effect. So, 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.

40:05So, that's basically what we are trying to say. Real life, modern life, it makes it 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.

40:39My 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, you know, a third kid is a little bit tricky. And that's what gives us there. So, it's not, you know, 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, you know, a nice dinner with your wife or your spouse.

41:13And you say, you know, honey, should we have a third kid? And then your spouse enumerates the 17 reasons why having a third kid now is a bit tricky. And then you decide not to have the third kid. Or you struggle, you need more time because you're not fertile immediately and not effective immediately and so on. But your story, you know, for better or for worse, there aren't that many PhD 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.

41:47Yeah. She does not have a PhD. Her children don't – she doesn't imagine necessarily that her children are going to need a PhD or a law degree or an MBA. But she's even having – she's having fewer children than that graduate student is going to have is what you're arguing.

Changing Gender Norms and Marriage Rates

42:05So what's going on there? Okay. So what I think is going on there is the 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 close to you in society as a single woman. That's not the case anymore. Closed to you. Closed to you. That's not the case anymore. Being a single woman in the early 1950s in Middletown America was not particularly pleasant.

42:38So you – Which is why most 25-year-old women in middle America in 1950 were married. The age of marriage was early 20s. 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 a single woman when you are 25. So, you know, 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. Sure.

43:09Okay? Yeah. And it basically means – so 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 and you still suffer some problems, but it's a completely different ballgame. Because, because?

43:40No, let me give you a very simple example. I remember I went to give a seminar at Harvard maybe a couple of years ago. And, you know, when you take the very early flight the next day. So I was waiting at 4 a.m. 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 a.m. With the reasonable expectation that nothing is going to happen to you.

44:14Unfortunately, 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. And 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 a.m. doesn't feel she wants to get married, good for her.

44:51And 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 walk, 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.

45:22And, you know, I want to talk, I want you to just put a footnote in for sub-Saharan Africa because I don't want to leave that. 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 0, 1, 2, 3, et cetera. It's an integer problem, a phenomenon, not a problem, a phenomenon.

45:56And as a result, it's a large leap sometimes from 2 to 3 or 0 to 1 for sure. And you can't have partial. It's not an easy, it's not possible. And that's what I was saying before, going from 2 to 3 is a big deal. So I think, you know, one way to help listeners organize your thinking, ones 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.

46:29So 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 0, 1, 2, 3. So as you shift the number of people from 1 to 0, or 3 to 2, or 2 to 1, 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 0.

46:59Is it obviously something you want to pay attention to to try to understand, or the proportion that only have 1? 2, 3 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. And when you're talking about marriage, you know, 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.

47:30Yeah, 30, yeah. And then the proportion who have never married has risen dramatically in Western countries, the United States being one, right? Accurate? Exactly. Yeah, exactly. And 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.

48:02Give one example of economic policy that had an impact that you maybe are interested in. Try to buy a starter house in the U.S. right now. It used to be the case that you will buy a cheap three-bedroom house in a relatively nice sober for next to nothing. Well, no, next to nothing, but in 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. And it basically says, look, and again, this is not about the dynamic programming.

48:35You know, you are on a date with your girlfriend or your boyfriend, and you are, you know, solving the Bellman equation. This is, honey, should we get married this fall or wait for the next spring? And your partner is saying, well, we need another $25,000 for the down payment. So let's wait. 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.

49:07There 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. Okay, so let's move to the harder question.

Sub-Saharan Africa and Global Trends

49:25Why should we care? So our economies will get smaller, but we don't really care about – it's not an Olympics of who has the biggest economy. We care about our standard of living or 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?

50:03And you can say something about Sub-Saharan Africa. Sorry, before you answer that question. Okay. So let's go to Sub-Saharan Africa. Okay, so everything I have to say 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.

50:38And I'm talking about the Israel – In Israel. In Israel. In Israel. And I'm talking about the Israel frontiers of 1949. Okay, I don't want to get over here in any type of big political discussion, but I'm talking about the Muslim woman in Haifa, for instance. Okay? 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.

51:08And 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 an example to point that basically fertility among Jews in Israel now is – among Jews in Israel, excuse me, is higher than among Muslims. Now, let's go back to Sub-Saharan Africa.

51:40Data in Sub-Saharan Africa is extremely bad. All the numbers of the United Nations belong to the Enron School of Accounting. They are 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.

52:17So, in Congo, in the last 10 years, it has gone from 5.1, which is, you know, the kind of the wall in 1960, to 3.5, which is not that high anymore. By doing a very naive extrapolation, and I emphasize the word naive, three times, naive, naive, naive, this means that Congo will be below replacement rate by the year 2040, which in demographic terms is now.

52:52Kenya, the Nairobi metropolitan area of Kenya, is already below replacement rate. These things always happen first in big cities, and then spread to the rest of the country.

53:04Dakar and all that metropolitan area in Senegal is already probably below replacement rate.

53:13My 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 then there is a very good chance that most of Africa will be below replacement rate by the year 2050 or so.

53:44And 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.

53:56And to go back to our earlier conversation about income and causal mechanisms, normally I would have said, well, this is good news. Because they're getting richer and they're having smaller families, but that's not what you're saying. And it points out that, you know, we talked about income as one dramatic, 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.

54:29There'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's going to get a little bit smaller, maybe very smaller in the next 30, 40, 50 years. Let's now go to the question of why should we care? Okay, so as you say, there are going to be good things and there are going to be bad things.

Welfare States and Fiscal Pressures

55:00Okay, 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 60s, 70s, and the 80s because of the big population boom. And those cities are not very livable. Okay, they don't have, you know, they have all the... They're not wet anymore? No, they are not very nice places to live because you just have to build shanty towns and, you know, kind of a lot of residential neighborhoods that are not very nice.

55:34So you have now the room, once your population is not growing anymore, to upgrade a lot of those neighborhoods. Okay, 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.

56:14And those welfare states cannot handle the big demographic change ahead of us. So 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 beans. Everything that goes to retirees, which is basically Social Security payments and the equivalent of Medicare, but in Spain, and everything else.

56:49Everything 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 8 million people because we have brought a lot of immigrants.

57:03Everything 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 high-speed train is not in a very good state. A lot of the day-to-day activities of the government cannot be financed. 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.

57:34The 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't tell you what is going to happen every place on 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.

58:07There 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-party finances.

58:38And 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. And 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 blocks tend to vote for their own.

59:12But 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's policies to change in dramatic ways.

59:49Second, public debt. The public debt matters the size of total GDP. And, you know, you have countries like Spain with over 100% debt over GDP. And 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.

1:00:15Okay? 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 worried someone may invade them.

1:00:33Unfortunately, we are moving into a very dangerous world with a lot of bad actors. And you need to finance your national defense.

1:00:45You did not mention the environment. Presumably, there will be less pressure on the environment. Yes, I have a little bit of mixed feelings about it. And let me tell you why. So, yes, if you do a very simple decomposition, the answer is yes. And 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%.

1:01:19And 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.

1:01:52So, when you flood those, the consequences, the policy implications of those models are also flawed. But anyway, so yes, it's going to be 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.

1:02:23Life 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 a 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?

1:03:00They are going to say, no, no, look, look, look, look, look, look, baby, look. We want to sell the boot 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.

Innovation and Long-Term Scenarios

1:03:33Yeah.

Innovation and Long-Term Scenarios

1:03:34I want to close with a tribute to Julian Simon. Yeah. Julian Simon's book, The Ultimate Resource, which I recommend to listeners. We haven't talked much about that over the years on this show. But you point out in a recent paper that in 1960, South Korea had a little over a million births. 1960, a million births in South Korea. In 2023, that number is 230,000.

1:04:05So, it's a quarter, roughly, of what it was. So, there's fewer South Koreans in 20 years who go to college and could come up with something creative. Julian Simon's view of the world was that population growth was basically good. He had some caveats, of course. But he viewed that the great ultimate resource was our creativity as human beings. And when you have fewer people, there's going to be in the right-hand tail fewer people. The question is how fat that tail is.

1:04:36You're right about that. But innovation and creativity will be less, presumably, in a smaller world. Unless we get along better in a smaller world, which would maybe make it easier to sit around and write symphonies. I don't know. We've got AI coming. Who knows? But talk a little bit about, if you want to, about that phenomenon. Yeah. So, basically, the idea is, you know, how many Einsteins you are going to have in a population.

1:05:06Well, to some degree, it depends on how many children you have. And when you have a much smaller population, you are going to have a lower chance of having a top person. So, for the undergrads, I use a slightly more mundane example, which is, why is Italy's soccer team so bad lately? Well, because there are just so much fewer Italians. So, if you are trying to select the best 22 soccer players when you have 300,000 Italians being born every year, you are going to have a much worse team than when you used to have 1 million Italians being born every year.

1:05:44So, your soccer team is just going to be much worse on average. Well, substitute soccer players for top scientists, top artists, top creative people in any dimension that you want to have. Now, you are absolutely right that we can try to move the needle in other aspects. For instance, I'm a big lover of classical music. One of the things that surprises me the most is the incredible amount of top performers that come from Iceland, which, you know, coming back to Iceland, there are only 350,000.

1:06:17So, it means that you can do something. You can say, look, let's do whoever we are going to have, and we are going to work a lot with that group of people. But at the end of the day, no matter how hard you try, yes, you are going to have a situation where we are just not that many of us. And I think that's a miss. And the second point I want to emphasize, I think that people don't get this right. And let me tell you what I mean by that. They say, oh, we are 8 billion people, we are going to follow to 7 billion. It's okay, we are going to be 2 billion people less.

1:06:49No, no, no, no. Remember, as long as we are below replacement rate, let's continue going down. It's not that we stop at 7. So, I have this exercise where with the current, it's not a scenario, it's not a forecast. I want to emphasize the word scenario because it means if behavior doesn't change. So, this is just a pure thought experiment. But in this thought experiment, Thailand right now is around 62 million people. At the current fertility rate, in 200 years, Thailand will be 600,000 people.

1:07:25So, we are talking about going from 62 million to 600,000. Just think about the amount of societal rearrangements that we need to go from 62 million to 600,000. But in 400 years, Thailand falls below the bare minimum biological threshold for survival. You are not going to have enough genetic variation within the population to keep the population alive. So, basically, we are talking that in 400 years, at the current fertility rate, Thailand disappears.

1:08:00And I think that a lot of people, when I tell them fertility is below replacement rate, they say, Oh, good, that means we are going to have a couple less million people living in New York. Great, that means there will be less traffic in Holland Tunnel. No, no, no, no. At 1.57, it means that eventually the United States becomes an empty country. Now, it's a scenario. A lot of things are going to counterbalance. So, I'm not saying that we are – and I really don't want to be on the side that says we are running into extinction because I don't think that's the case.

1:08:30But I don't think that people get the point. This is not going down a little bit and stabilizing. At the current scenario, it's continuous drop. And the last thing we'll close with this is that you talk in the paper about in markets, there are feedback loops that offset changes. And you suggest that there aren't so many obvious ones for population. I think there are. I think the cultural changes of modernity are going to be challenged when these processes start to have these large effects. So, they're blunt, again.

1:09:02That's not the smoothness of price adjustment. But I do think that the world will react to this in not a small way. It'll be some big changes. That may be true. I mean, let me give you a concrete example. In the Commonwealth of Pennsylvania, where I live, it's already very difficult to win a statewide election if the Amish do not support you. Because the Amish has been growing so much that now they are a pivotal voting bloc. At the current speed, I always make the yoke that if Pennsylvania continues being a swing state,

1:09:41it may be the case that the Amish Bishop Conference is the one who effectively elects the next president of the United States in 2060 because they will determine, you know, on which side Pennsylvania will go. Now, it's kind of a joke, but it makes the point. Yes, you are going to have a—we didn't talk much, and I'm sorry, I know I'm going over time a little bit, but we didn't talk much, for instance, about the difference between the fertility rates of religious and secular people. The fertility of religious people has not fallen.

1:10:11So you can have a society that becomes much more religious. Now, that depends also on the persistence of religiosity. Just because I'm very religious doesn't imply that my kids need to be religious. But if persistence is high enough, maybe what will happen is that in 200 years, we will have a much more religious United States or a much more religious planet, and that will push back fertility to a replacement rate. But who knows? It may be the case. You know, I put positive probability.

Closing Remarks

1:10:42Let's see what happens. My guest today has been Jesus Fernanda Villeverde. Jesus, thanks for being part of EconTalk. Thank you for inviting me. It was a real pleasure. This is EconTalk, part of the Library of Economics and Liberty. For more EconTalk, go to econtalk.org, where you can also comment on today's podcast and find links and readings related to today's conversation. The sound engineer for EconTalk is Rich Goyette.

1:11:14I'm your host, Russ Roberts. Thanks for listening. Talk to you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday. We'll see you on Monday.