[music]
If you are an alien tuning in.
This is a baby...
Babies are cute.
Only second to this furry master of the human race.
But babies have an upper hand when it comes to cuteness; Biology.
In a way, we are 'selected' to think they are adorable.
This is why every time you put a baby and a cat together on YouTube, the site falls
under its own gravity to create a stable black hole.
But what are babies worth?
Economically speaking that is...
Welcome to this episode of The Fabler...
In the developed world, that figure is roughly about a quarter of a million.
Although we will never be royal, we need to head to the Buckingham Palace to break that
number down.
The Duchess of Cambridge, Kate Middleton is expecting her third baby
(or babies, in casethey are twins. =) )
So what would this most soon un-hypothetical baby will cost for the British taxpayer- For
a lifetime of private school fees, nannies, Butlers & flunkies, State sponsored travel,
limos and expensive clothes, hand-cut French fries and well for a supply of unlimited royal
jelly?
Well, not so m uch... tech..nically...
What should have been some pretty uncomplicated bit of maths is actually a bit harder than
it sounds.
So bear with me while I overly simplify this.
Since 2011 the queen gets an 'income' voted by the Parliament for her family to fulfil
royal duties.
This is the sovereign grant.
This is meant for things like attending or visiting foreign dignitaries.
For the year 2018, the sovereign grant amounts to a 120Million US Dollars!
(This figure is every year adjusted for inflation.)
And including all other expenses like security and maintaining the Orangery at the Kensington
Place, this figure easily climbs up to about a half a billion Dollars.
This is supplemented by her hereditary ownership of the Duchies of Lancaster and Cornwall,
and another undisclosed but substantial investment portfolios including shares, bonds and other
properties such as the 10million pounds trudged away in the Caribbean Islands which was brought
to attention by the Paradise Papers.
The guestimates for the queens total worth goes for about 1billion USD.
So.. each taxpayer pays somewhere around a dollar a year to maintain the ever-increasing
royal family.
And that value does not increase with a royal birth... again tech..nically.
Some would argue that from an economics perspective, this is brilliant value for money.
Consider this, the baby that will mount the British Isles, Prince George Alexander Louis
of Cambridge, is projected to generate more than 1 billion US dollars' worth of economic
activity by just being born.
This is from expenditure such as people buying champagne to celebrate his birth to media
coverage to advertisements for that media coverage.
But the most important economic activity of Baby George is making other babies.
This is where the cute baby videos come in.
People tend to get inspired by an event such a royal birth and such an event could have
a net positive effect on the number of babies born in the country.
And the Developed World needs Babies!
Many countries in Europe, as well as many other developed countries, are going through
the last stages of demographic transition, where people have fewer & fewer babies...
and this is bad.
When fertility rates fall below 2.1, a country can no longer keep up its population without
a lot of immigration.
48% or half of the world population has reached this sub-replacement fertility rate.
This is a problem for governments.
As people live longer and longer and the active workforce decreases, countries face a dilemma
of more mouths to feed and fewer people making that food.
And this is why China recently reversed its one-child policy, in hopes of keeping up its
workforce to complete its demographic transition.
But, although governments think that babies are a good idea.
Citizens, think it's a bad idea.
This creates a paradox; as countries develop they tend to have fewer and fewer babies despite
what the economist Thomas Malthus theorised in the 19th century that with higher incomes,
populations will increase!
There are many complex interactions of reasons as to why populations are decreasing and why
this paradox exists; like the average cost of child upbringing going up, the invention
of contraception, changes in social expectations, urbanisation, Frequency of Sexual intercourse
to a long list of criteria I'm happily going to skip.
To sum up, babies, are, good for the overall economy, bad for the personal economy, macro
and micro.
So if you can add even a single baby to your country, your country would have gained one
more potential worker who would add value to the economy and increase the consumption
of the country.
So cuter the royal babies are.
Greater the consumption of that country.
You're welcome!
Wait, so how much does a baby worth?
Now, of course, that depends on who that baby is.
Famous babies technically are more valuable, like Prince George.
So let me introduce you to the economic principle of 'willingness to pay', a very handy tool
to calculate something or in this case someone's worth, from society's perspective.
Let's take a simple example.
You, the customer, want to calculate how much a car is worth.
You can, of course, ask the manufacturer and let the free market decide for you, but if
you change the car to an abstract commodity like the Wilderness of Yellow Stone Park,
there's not much free market to decide that for us.
One way to do this is to put a ticket counter at the entrance of the park and ask everyone
who enters how much money, time, and energy they are willing to Pay at most, to see the
awesomeness of the park.
Multiply that by the number of potential visits and you have a crude idea of what the park
is worth to us mortals.
I'm sure you can already see the holes in the method.
But it is a bit useful tool for economists in scenarios such as this.
So, in this case, the amount of money the parents or parent is willing to pay could
be observed by looking at how much somebody is already paying to raise a kid these days.
(By paying, I mean, paying for their clothes and stuff, god I should've known the problems
with this topic.)
So on average in the US it costs around 12, 500 Dollars to raise a baby in the first year
alone.
And that's not accounting for tuition or other added expenses.
just diapers and baby food and stuff.
On average a baby born today will cost a US citizen around a quarter of a million dollars
before he or she turns 18.
(This figure is about the same in the UK ~) And around 4 million babies are born in the
US every year.
That's about 1,000,000,000,000 dollars' worth of economic commitment from US parents to
the economic engine every single year.
That is great news!
For the US at least.
So there you have it, a quarter of a million, that's roughly what your baby worth in the
developed world.
Now, go do your country a service and like and subscribe for great economic karma.
I'll see ya next time
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