Jeffery Degner’s recent book makes the case that monetary policy reshapes time preference, and with it, decisions about family formation.

Many discussions of the ongoing decline in fertility end up treading on the grounds of “family policy” when discussing remedies (or, if one believes there are too many people on Earth, incentives) to fertility decline. Commonly debated items include subsidized childcare, income tax credits, housing reform, divorce laws, welfare policy, and the possible trade-offs of “quantity” and “quality” when investing in children. What is rarely, if ever, included is the role of monetary policy.

Fertility decisions are primarily based on lifelong considerations. Because monetary policy mostly affects the short-run, even large unexpected monetary expansions or contractions are unlikely to matter much for such long-run fertility decisions. In extreme cases, an unexpected monetary expansion can cause a real wealth reduction that affects timing. If extreme enough, the delay may push older possible parents out of their prime years for having children. In other extreme cases (think hyperinflation) we can expect some effects. But both examples are extreme cases.

Available estimates of the role of monetary policy on fertility in non-extreme cases show something, but it is a small something (although not negligible). Thus, the role of monetary policy seems properly sidelined in countries like the United States.

A recent book by Jeffrey Degner* argues that these results understate the true damage. In Inflation and the Family, Degner argues that monetary institutions (which could include state-issued monies as well as competitively issued ones under a free banking regime) end up shaping people’s time preferences. Our habits (greater indebtedness, increased inequality, and greater moral hazard) are influenced by the economic environment. “Time preferences” refers to how people value present consumption relative to future consumption or, more broadly, how willing they are to defer gratification. Related habits include the age at first marriage, the number of children, and the spacing between children, among other factors. Ultimately, he argues that political control of the money supply gives politicians incentives to overissue money, fueling an “inflation culture” which depresses fertility.

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