I usually start out with about three basic chain stitches. Then I loop around and start connecting to those with a single stitch. After about the first row of single stitches, I like to make it bigger. By bigger I mean that you loop the yarn around the needle one or more times. The bigger the stitch, the stretchier the hat.
After the first time around the hat, I also double up my stitches. That means that you stick your needle in the same place twice. I do this until I figure I've reached the width of a crown of the head, and then I double up every other time, and then not at all.
For babies heads, I use a canning bottle to figure how big the crown should be. Otherwise, you'll have to try the hat on the intended head a few times to decide when to get wider or narrower. It's ok to have it a little too big, because babies' heads grow quickly.