In another thread about deadbeat dads a startling notion came to me. I promised to create a thread on the idea instead of continuing to hijack that one. This is that thread.
I’ve tried to make my most glaring assumptions explicit, but there are a ton of assumptions I’ve not mentioned. Even with the simplifying assumptions this post is already very long for what, after all, might turn out to be a non-debate. Most of the implicit assumptions are about additional costs, like STDs, but some are more hidden like the cost of abortion (including dollar-estimated health risks). I hope the ones I’ve made are good enough to get the ball rolling without complaint by granting me my laziness, and the one’s I’ve not included are incidental to the overall point of the debate which is summarized at the end. For some of the assumptions I’ve made, specifically (1) and (3) as listed below, I have some justification but I’ve left it out of this post.
Even if not mentioned, all data comes from Wikipedia, but I’ve tried to be clear.
The Cost of Sex
Let’s get the incentives in sex right.
I’m going to propose the following: women have no help from society with respect to the cost of child-rearing. There’s no child-support laws. There’s no tax deductions. We assign absolute priority over the child to her, and leave the bargaining over costs to interested parties. Society says, “We cannot set priorities for women. The free market thing to do is let women be in charge of their own destinies. They are aware of the costs they face better than some legislator. We promise only to enforce any contracts she makes.” How noble, eh? (You may wish to reserve your judgment on the level of sarcasm there until the end.)
What the woman wants to do is buy baby insurance; that is, if she gets pregnant, the insurance contract pays out the costs she will face. Men might want this insurance, too. The problem is that there’s no open market for baby insurance, and there cannot be. Insurance agents have no way of distinguishing the people genuinely interested in avoiding pregnancy from the people who are interested in having a child but looking for a way to lessen their costs. Even if the agent did, the agent has no way to distinguish responsible birth control users from people who, policy in hand, throw caution to the wind. The market just can’t exist.
So, the woman is going to have to bargain with the man up front. She wishes him to cover the expected cost of pregnancy up front. (That this is unfair is dealt with soon. Bargaining goes in two directions.)
First, let us make some simplifying assumptions. They are not excellent simplifying assumptions, but they tidy up an already messy calculation, as we shall see.
[ol][li]Women bear all the costs of child rearing without help from society.[/li][li]The woman loses no income due to childbirth.[/li][li]Society exactly covers the costs of pregnancy and childbirth.[/li][li]There are no “lifetime earnings” decreases.[/li][li]The woman sees no benefit from having a child.[/li][li]The woman will be a working mom from which all costs of childrearing are paid.[/li][li]Men cannot bargain for custodial rights.[/li][/ol]
Assumptions in hand, let’s proceed.
First, the woman will calculate the expected change in income. To do this, she has to make two estimates. The first estimate is how much she will make after having a child, caring for it the way she feels it should be cared for. This is her “new income” I[sub]N[/sub]. The second estimate is what portion of I[sub]N[/sub] will go towards the child. This rate is R[sub]child[/sub]. Therefore the first-pass cost to her, with original income I[sub]O[/sub],
ΔI = I[sub]O[/sub] - (1 - R[sub]child[/sub]) x I[sub]N[/sub].
If I[sub]O[/sub] = I[sub]N[/sub] then this is just the cost of childrearing directly, that is, income times the portion of wages spent on the child.
If she expects her real wages to increase by R[sub]WI[/sub] each year in either case, and she expects to care for the child for 18 years, then the total wage adjustment is
R[sub]wage[/sub] = SUM (from n=0 to 17) (1+R[sub]WI[/sub])[sup]n[/sup]
Meaning her total cost is ΔI x R[sub]wage[/sub].
The man who she’s about to have sex with is not interested in paying this amount to her. And she, of course, knows this. Since she doesn’t want to be pregnant, and he is interested in decreasing costs, they are both going to insist he wears a condom with a 2% failure rate (see wikipedia) and it is in her interest to ensure it is a good condom, since she has no legal hold over him. She is also going to be on the pill which, if she weren’t already, the man would insist she would be to decrease costs. Typical pill use has an 8% failure rate (wikipedia), but also carries some health risks, so she will adjust the rate up a bit to 10% to account for this. Therefore, the chance of birth control failure
R[sub]BCf[/sub] = R[sub]c[/sub] x R[sub]p[/sub]
Her expected costs will be discounted by this amount.
The man is not interested in this price at all. After all, he says, I will sign a contract to cover half the expenses. Wikipedia indicates about 50% of fathers under our current system pay all they are expected to, and about 75% of fathers pay something. Therefore she generously takes the geometric mean of this and prepares a discount of a 61% chance (truth rate of R[sub]T[/sub]) of paying 50% of the costs.
ΔI[sub]contract[/sub] = I[sub]O[/sub] - R[sub]T[/sub] x 0.5 x (1 - R[sub]child[/sub]) x I[sub]N[/sub]
(Note she might insist he pay 50% of ΔI. I am assuming he is only going to cover the cost of the childrearing, not 50% of the mother’s cost. If you wish it to be the other way, consider that the mother then has a perverse incentive to earn as little as possible; this way, she has the incentive to shower as much monetary-love as she can stand.)
Unfortunately, the man will have none of it. He reads wikipedia, too, and wikipedia suggests that 26% of known pregnancies are aborted, 3.3% of childbirths are given up for adoption, and 15% of pregnancies result in a miscarriage. He therefore sees her incentive to cheat as
R[sub]cheat[/sub] = 1- R[sub]ab[/sub] - R[sub]ad[/sub] - R[sub]mc[/sub]
and he adjusts the abortion and adoption percentages upwards slightly, abortion by 3% and adoption by 10%, to compensate for her incentive to cheat. (The miscarriage rate doesn’t move.) He of course phrases it much more politely, eager to have sex. (R[sub]cheat[/sub] = 0.427)
The woman is bringing in $20,000 net and anticipates that because of her mostly crappy job she won’t see a significant change in income while being a mother, making I[sub]O[/sub] = I[sub]N[/sub]. She plans on giving 50% of her earnings to any child she has. She expects her real income to increase by only 1% per year (that is, inflation-adjusted income).
Still, the man insists, even if you are receptive to pregnancy, about which he will only give a 50% chance, her chances are still only about 20% of getting pregnant. She discounts accordingly. He makes no mention of the morning-after pill, being a megadose of hormones he is uncomfortable insisting this option be available.
She opens up the little python script I wrote to calculate this mess and comes up with the dollar amount she expects to receive prior to the sex act of $26.68 (plus pill and condom expenses). ($6.67 if our swaggering stud insists on the morning after pill after all.)
An old classmate of hers, a well above average income earner, is bringing in $40,000 and expects her income to drop to $35,000 if she were a working mom and has to charge $54.56 per sex act.
A McDonalds worker making $8/hour paying no taxes, expecting to make $8 an hour after childbirth, with the 1% real wage increase (hah! she wishes), is charging $22.20. Think her incentives are wrong? If she doesn’t insist on a condom, she’s got to charge $1109.83. If she’s not on the pill either, she’s got to charge ten times that, or $11098.31. If she uses a condom and the pill, but abortions are illegal and there is no chance of one, she needs to charge $1863.58.
(If anyone would like some more numbers under these assumptions, please let me know. You may also email me at gmail under my screename.)
The debate
So much for the lecture portion of our thread.
I have been pitching this to people I know IRL for some time, and there is only one objection I hear again and again: “This turns women into prostitutes!” Perhaps cheap ones, at that. You are welcome to raise that issue with me, but first what I ask you to consider is whose interests is it in to make prostitution illegal? If we’re trying to get the incentives right, this is an important question. Men may be jerks, but perhaps not for the reasons we all think!
It’s a ridiculous proposal, isn’t it? Isn’t it? I’m practically Jonathan Swift shoving fat little children down the throats of the wealthy, aren’t I?
We want to encourage birth control. We want to encourage men to accept responsibility not for a portion of their income but the genuine cost of having a child. We want women to have control over their bodies. Doesn’t this plan get all the incentives right? Doesn’t it encourage people to act responsibly? Would the free market work in this case? I’m especially interested from the free marketeers in this regard.
While my proposal perhaps is too extreme to be put into practice, does the thought experiment tell us that the abstinence crowd doesn’t realize the true cost of sex? Does this show us that abstinence programs simply cannot be expected to work, when we account for the cost of sex with the right incentives?-- After all, I have completely ignored the benefit of having sex; it’s wicked fun. Does the calculation I’ve shown really drive home the need for good sex ed? Would you use it to convince your son or daughter?
Finally, does this emphasize the importance of access to abortions? Or, for the flip side, does this help people realize the cost of outlawing abortion? (For even if outlawing abortion is a benefit, it does have a cost.)
Ultimately the man is going to demand the pill or something similar and they will agree on a condom and the only real question is whether he’s going to sign a contract to bear half the costs (and in which way).
Let’s suppose I agree with you, though: who should determine what is “minimally optimal”? And wouldn’t it be in a woman’s interest to show a man how good of a mother she would be, at least monetarily? I mean, let’s face it, people who have sex sometimes happen to stick together for life. So my calculation might be low for this reason.