Following on from Richard Wellings’
post on the welfare state and saving, perhaps I can comment on the welfare state and babies. Pay-as-you-go pensions systems rely on children to make payments to the elderly. We get such systems in the private sector – operated within families and based on bonds of trust. Throughout much of history – and indeed throughout much of the world today – families have children to provide for them in old age. In countries with poor property rights regimes, this is a sound decision (putting aside for a moment, non-economic reasons for having children). It creates a unit of solidarity within which economic risks can be shared and, crucially, which can facilitate inter-generational transfers.