AIDS, Population, and Policy--Posner Response

This is my response to the Becker posting on "Disease, Population, and "Wellbeing." A recent international conference of economists (“Copenhagen Consensus 2004”) tried to determine the best uses for the monies that international organizations and wealthy nations donate to poor ones. Contributing to the eradication of HIV-AIDS came out first on the list. Becker’s posting does not rank programs but does suggest that HIV-AIDS is a worthy object of “international assistance from philanthropic and other groups.” I disagree on two grounds. First, I do not think that foreign aid is a good use of public or private money. All the problems that foreign aid seeks to alleviate are within the power of the recipient countries to solve if they adopt sensible policies. If they do not adopt such policies, then foreign aid is likely to be stolen by the ruling elite, strengthening its hold over the country, or otherwise squandered. What we can do for poor countries is reduce tariff barriers to their exports. With money saved from eliminating foreign aid, we could compensate our industries that would be hurt by import competition from poor countries and thus reduce political opposition to tariff reform. HIV-AIDS is an especially good example of a problem that is not going to be solved by foreign aid. The spread of the disease is easily prevented by the use of condoms, which are cheap; any nation can afford both to inform its population concerning the risk factors for and the consequence of the disease and to make condoms available at zero cost to its sexually active inhabitants. Treatment of the disease once it is contracted is very costly and is a poor method of fighting it, since once a disease is curable, the incidence rises because the expected cost of catching the disease is lower. So, for example, when syphilis was discovered to be easily curable by penicillin, the incidence of the disease soared. Unlike an air- or waterborne disease, HIV-AIDS is easily avoidable by an inexpensive change of behavior, namely using condoms in sex, or by a more costly but still feasible change, namely by avoiding promiscuous sex. To the extent that these methods of avoiding the disease are infeasible in certain poor countries because of intractable social and economic problems, providing money for costly AIDS “cocktails” is a band-aid solution which, as I have just suggested, may actually make matters worse by reducing the incentive to avoid contracting the disease in the first place. Second, I am not as optimistic as Becker is about the positive benefits of increased population in poor countries. What is true is that the growth of population in such countries will prove self-correcting if they become prosperous, because wealthier nations have lower birth rates than poor ones for a variety of reasons, such as that educated women with good job opportunities have a higher opportunity cost of having children and that reducing the role of subsistence agriculture in an economy reduces the demand for children as farm workers and old-age support for their parents. But a population increase that is due to a reduction in the death rate need not be correlated with rising prosperity; indeed, by raising the ratio of population to land and other resources, a reduction in the death rate may reduce economic growth. While Becker is correct to point out that healthier people are more productive workers, on balance HIV-AIDS may, as argued in a recent paper by Alwyn Young, "The Gift of the Dying," increase per capita incomes in poor countries by causing wage rates to rise, since the epidemic has reduced the supply of labor. Hence the disease may have both a direct and indirect negative effect on population. Increased global population can create large negative externalities. (The present world population of about 6 billion is expected to reach between 9 and 14 billion by 2050.) Global warming has been shown in a paper by Anqing Shi to be influenced by population growth. Such growth results in increased burning of tropical forests and thus increased emissions of carbon dioxide, as well as leading to increased output of energy produced by fossil fuels, the burning of which is a major source of such emissions. Moreover, population interacts with economic growth to produce sharp increases in economic activity, resulting in heavy demand for energy. For example, at a population growth rate of 1 percent a year and a per capita income growth rate of 2 percent a year, WGP (world gross output, i.e., the total of all nations’ GNPs) will increase fourfold between now and 2050. There is, as Becker emphasizes, a positive side to population growth. A greater population enables additional specialization of labor, with resulting cost savings. It also increases the incentive for technological innovation, by increasing the size of the market for new intellectual property without a corresponding increase in cost. The cost of producing and distributing a new software program, for example, is essentially invariant to the size of the market, so the larger the market, the greater the net revenues to the producer and so the greater the incentive to create the software in the first place. But new technology is a source of risk as well as benefit, as I emphasize in my book Catastrophe: Risk and Response (Harvard University Press, 2004), so the effects of population growth in increasing the rate of technological advance cannot be considered an unalloyed blessing.

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