Is Population Growth Good or Bad?BECKER

In a previous entry I gave an optimistic view about the possibilities of sustainable growth, while Posner was more pessimistic. He argued in part that continuing population growth in the world might make economic progress not sustainable for many nations. Since I am positive about the effects of larger population, we decided to return to population for this week’s discussion. Japan is a good starting point since its population fell in 2004 as a result of several decades of low birth rates and almost no net immigration. Is Japan or the rest of the world better off because its population fell rather than continued to increase? Without large net immigration, countries with about half the world's population, including essentially all of Europe, China, Japan, and many other Asian nations, will experience declines in population during the next decade or so because they have birth rates that are substantially below replacement levels. Will these countries be better off with lower population, and would the world benefit if their populations declined? I believe the answer is no, that particularly in modern knowledge-based economies, on balance population growth helps rather than hurts income growth and general welfare. Most of the worry about negative effects of population growth is based directly or indirectly on the ideas of Thomas Malthus that were first expressed in a pamphlet published in 1798. What is ignored in the modern neoMalthusian discussions is that there is an enormous difference between the effects of larger population on income per person in the traditional rural economy of Malthus' time, and its effects in a modern knowledge-based economy exemplified by the United States, Western Europe, and Japan. Higher population may reduce per capita income in traditional agriculture because of diminishing returns to more farm workers (although see my discussion of Africa at the end), but it has the opposite effect in a modern economy. The reason for this reversal from the Malthusian fear of population is that the production of knowledge is generally subject to increasing, not decreasing, returns; that is, larger populations stimulate greater investments in knowledge that tend to raise per capita welfare. For example in the case of new drugs, manufacturers have greater incentive to invest in discovering treatments for common rather than rare diseases since by definition common diseases have larger markets. More generally, expenditures on innovations tend to be more profitable as population and the total demand for new products rises since it is then more possible to recoup the often very large initial costs of developing the products. Drug producers and other innovators charge much more than the cost of producing each unit in order to recoup these development costs. Adam Smith starts out his great book The Wealth of Nations with a discussion of why the division of labor, and hence economic progress, is limited by the extent of the market. By this he meant that the incentive to specialize on more narrow skills is larger when the market for these skills is bigger. He develops this theme with a famous discussion of specialization in a pin factory. Since the number of sellers and buyers who interact together determines market size, the Smith analysis would also say that economic progress is greater, given per capita incomes, when population is larger. In a world with six billion people, there might seem to be little room for additional specialization as population rises further. But great possibilities are still available for further gains from international specialization when population grows, as illustrated by the large and generally beneficial effects on the world economy as the large populations of China and India have entered into the world trading system. As world population grows further, the degree of international specialization across nations will increase further in ways that are hard to predict in advance. Another frequently claimed benefit of larger populations is that they produce geniuses like Einstein and Darwin, and other imaginative innovators, and that the discoveries of these rare individuals benefit everyone. I will not stress this effect since I agree with Posner in his comment on sustainable development that the number of evil geniuses, such as Hitler and Stalin, is also greater in larger populations, and their evil deeds also affect more or less everyone. Neo-Malthusians who fear larger populations typically stress the effects on pollution and on the demand for non-renewable resources, like oil and natural gas. Clearly, the demand for fossil fuels and other non--enewable resources grows with population as well as with economic development. However, during the past 150 years, the real price of fossil fuels like coal and oil fell rather than increased as world population exploded, and more and more economies prospered. More efficient use of fossil fuels and discoveries of new reserves of these fuels, and innovations that produce alternate sources of energy, like nuclear power, explain why prices of fossil fuels did not rise along with population and industrialization. Larger populations stimulated the search for new resources and new sources of energy because they increased the market for these discoveries (for the reasons I gave earlier about the positive effect of larger populations on incentives to innovate). That is, while larger populations may use more fossil fuels, they also stimulate the effective supply of these fuels and of substitutes. Obviously, given per capita incomes, larger populations also tend to produce greater pollution both locally and globally as more cars are driven, industrial output rises, and more homes burn fuels. It is well documented that local pollution eventually begins to fall rapidly as countries develop and their populations increase because of new discoveries that reduce pollution, and also because more of the incomes of richer countries is spent on controlling the output of pollutants. I believe the same will happen to the risk from global warming. Not only will countries impose greater restrictions on output of greenhouse gases, as in the emission trading system of the European Union, but probably even more important will be the development of new ways to absorb C02 and other gases from the atmosphere. For example, Wally Broecker, Professor of Geochemistry at Columbia University and a major researcher on the oceans and abrupt climate change, believes that it will be possible before long to effectively capture and store the CO2 in the atmosphere in cost-effective ways. If that happens the growth of CO2 in the atmosphere can be greatly slowed down and possibly even reversed. Posner also worries in his comment on development about the possible negative effects of an aging population. I am concerned about that too, but a growing share of the elderly population is a consequence mainly not of population growth, but of low birth rates that produce a slowing down, not speeding up, of population growth. The countries with the largest share of the elderly, countries like Japan and Germany, have very low birth rates that are not offset by enough immigration of young people. So the most effective way to reduce the share of the elderly while still having increases in life expectancy is to encourage rather than discourage greater population growth either through greater immigration or higher fertility. More traditional economies, like those found in sub-Sahara Africa, may still be subject to diminishing returns from greater population, although even here I have real doubts about the applicability of traditional Malthusian analysis. African populations have increased greatly during the past 25 years mainly because mortality has fallen substantially. This continent's population is expected to continue to grow rapidly even though fertility will continue to fall, especially as Aids is brought under greater control. If lower death rates mean better nutrition and better health, the productivity of each worker improves because they have more energy and stamina. The greater productivity of each worker could easily swamp any diminishing returns from greater labor input, so that per income per worker is likely to rise rather than fall as the number of workers increases due to better health. Of course, the poorer nations of Africa and elsewhere need to have governments that pursue sensible and generally pro-growth policies rather than their tragic catering to various special interest groups at the expense of growth. As India dramatically has demonstrated, the main obstacle to economic progress is not population growth, but bad economic policies. Once India began to get its economic house in order- this started with the reforms of the early 1990’s- India's economy took off while its population was growing rapidly and birth rates were high. Africa’s growing population will not be an obstacle to greater economic progress if it moves more quickly to having freer economies, greater competition, and lower levels of corruption. Indeed, with greater economic development, a growing population becomes an asset to a region and to the world for all the reasons I have given. Of course, it is possible that vast increases in the world's population to many times the present six billion persons may create serious problems. However, the forecasts are for no more than nine or ten billion persons by the year 2050, mainly because fertility falls sharply with economic development and increased education of women. I do believe that such an increase in population is far more likely to be a positive stimulus to the world's economic progress broadly defined than it is to retard such progress.

Comments

[Nick]

Life spans are indeed increasing - in other words, mortality is dropping for the older. This is a very good thing, as long as disability levels (mental and physical) also drop, which indeed they are, quite significantly. First, living longer is a good in itself (as long as we're not badly disabled), and second, the older are very productive (again, as long as they're not disabled, or put out to pasture).

The most effective way to deal with increased life spans, and more elderly, is improved medical research. If retirement ages have to rise (or be eliminated entirely), that's only a good thing. Who wants to retire and die?

[FN]

Nice points in general but a few criticisms.

I think your labelling of population growth as good in a knowledge-based economy and bad in an agrarian one does not explore the possibility that population density may be the key driver in helping an economy transition from one type of activity to another - i.e. from farming to more knowledge-intensive agribusiness and industry as was the case in most of Western Europe and Japan.

Note my use of the word "density" since I think you miss analyzing the importance of that as the key factor (not growth) for market size and specialization.

I say this because, for example, while many African countries have grown tremendously in the last 25 years most had some of the lowest population densities in the world and many still do.

Also, population density concentrated in cities has been a factor in the development of the United States even while the country as a whole does not have a large population.

With that said, I think fertility rates are falling even in the developing countries. I say this because I am from the developing world and it is obvious that quite a lot of people of my generation are having much fewer children than previously.

[Naveen]

I did like to qualify two factors that influence the question "Is population growth good or bad?"

One, nature of income of the population and two, nature of the government.

If you have an income generating class and a government that does its stated functions (comparatively, population will not be seen as a problem.

But an income generating class with a dysfunctional government will result in the poor (incomeless) being seen as a problem and increase of poor is seen as a problem.

In a society that doesn't generate much income and which has a dysfunctional government, population will come to be seen as the major problem.

In a society with less of income generation but more of good governance, welfare payments will come to be seen as the main issue.

[Quickbeam]

It should be obvious that the key factor
enabling the quadrupling of world population
over the 20th century is the use of fossil
fuel. The world is living on principal (solar
energy stored over many thousands of years)
rather than income (current solar energy).
It is far from obvious that a replacement can
be found; indeed the prudent assumption would
be that no replacement will be found.

The world could be an egalitarian paradise
for some population P/opt; at 6.5 billion
now, even with the fossil fuel subsidy, it is
an ecological disaster (hundreds of species
going extinct every day, climate change) and
a humanitarian disaster for perhaps 10% of
those 6.5 billion. Whatever the actual value
of P/opt, it is naive to assert that it is
anywhere close to current population. When
fossil fuel use is down to 25% of today's
levels, then we'll have a better perspective
to make such judgments.

[Jack M.]

I am so disappointed with Becker-Posner. I have lost all respect for their blog. As Charles Murray would point out, the mean IQ of the population that one would hypothetically increase would be a very important bit of information in answering whether an increase in population would be "good" or "bad". How sickening that Becker-Posner are more interested in sparing peoplesí feelings than addressing or even broaching this salient issue. No wonder the ìhardî sciences have progressed so mightily over the last 100 years while our ìsocialî sciences languish. (eg. our ìhardî sciences have provided fantastic technology that have miraculously solved hunger in high IQ nations; yet, hunger persists in low IQ nations because people like Becker and Posner refuse to offend anyone. Hunger is now a political/social problem and no longer a technological problem. With "intellects" that favor political correctness over truth, hunger will always be political/social problem... How sad.)

[Bob K.]

I say let nature, evolution and free markets decide the "equilibrium" population growth rate. Please governments and academics stop deciding what's best for the rest of the world.

Government intervention for the most part, including international aid organizations, make poverty worse in the long run, no matter how many regressions the bean counters run.

Academics with contempt for morals and ethics, e.g. those pushing the pro-choice agenda which cause an increase the rate of unwanted conceptions, corrode any foundation any third world society has available to build institutions and markets with integrity, so people can trust them and improve their condition thrugh them, without any help from some outside entity or guru.

[Ken Zimmerman]

Dr. Becker,

Your comments on population do a better job of showing the utter lunacy of "neoclassical" economics than I could ever do. Thank you.

And please no more invocations of Adam Smith unless you at least quote him fully and correctly.

[Reverend Bayes]

Ken:

How many Nobel Prizes have you won?

[Daniel C]

During the colonial period, the future United States suffered from a shortage of workers. On the dark side, some labor was imported in chains. On the bright side, innovation and thrift, along with foreign capital, helped create a nation of practical inventors. If we could have a do over, what path might the United States have taken instead?

What would the United States look like, if slaves were never allowed in the colonies? What if the American colonies had not used slavery to boost the population? Could the Southern States find labor saving technologies to reduce the need for labor, or could they pay high enough wages to attract immigrants, or would the South, and her vast natural resources, remain untapped for generations?

I really donít know the answer. I would assume that some combination of all three would have occurred: slower growth, some immigration, and some innovation. The exact mix is hard to calculate, for my limited skills.

So how do we predict what will happen in a modern China? Chinaís declining population may force a move away from labor-intensive activities. Which leads to an increased need for capital. Which leads to an increased need for efficient financial systems. Which leads to an increased need for skilled managers who can increase productivity to get rates of return to attract capital etc. The assumption is that modern China doesnít fully utilize the workers they have; a declining population may give China the clarity they need to treat workers as a valued asset. (Certainly given the shortage of women, they should see a change in their value.)

In contrast, Japan is a few generations ahead of China. They, I assume, have less waste to wring out of their system. A decline in population may result in lower living standards. Japan will have less to sell the rest of the world and in turn they will be able to buy less from the world.

Could Japan benefit from Chinaís growth? Canada benefits from its location next to the United States. What are the externalities of being close to an economic power? Could a knowledge-based economy, Japan, specialize in something that China will desire? Could this specialization allow a declining population to sell highly valued goods that can maintain overall living standards? Perhaps Japan will make medical advances treating their elderly population and then sell these advances. Both nations evolve, but they continue to grow.

So where does that story end. Some countries with a declining population may continue to grow if the increase in productivity per worker is greater then the loss of workers.

Professor Becker talks about the scale economies of specialization. One downside is when we see a specialization in crime. Perhaps one reason we see so much crime in urban areas is that criminals find it easier to make a living in heavily populated areas. Drug dealers have larger markets. Burglars have more choices and are able to avoid detection, etc. Communities fight back with crime fighting specialist, but I would assume that all these expenses, crime and crime fighting, are a negative externality of population growth.

I agree with Judge Posner that increased populations create negative externalities, but humans have flocked to urban centers for thousand of years. The positive externalities must be greater the negative externalities for a clear majority. Even with all the difficulties of governance, the trend moves us away from the Jeffersonian worldview.

Another negative externalities is pollution, but if we create market mechanisms to deal with the problem i.e. find an efficient way to charge polluters we may be able to fix the problem.

With regard to the drain on natural resources, I remember Milton Friedman talking about the very large expense of horses, the means of transportation before cars. The pollution created by horses, the fields that were needed to feed the horses, etc. were not trivial. While I grant that those were renewable, I am not sure what changes we may see in the next two hundred years, if markets are left free to innovate.

Perhaps the biggest negative externality is seen in Africa. I donít really understand Africa but it seems that increasing populations just translate into increasing hostilities. War seems to grow out of tribal interests coming in conflict with other tribal interests. The only specialization that I see is in a military that seeks to subject others to their control. Wealth is concentrated based on military might and corruption.

As for an aging population, I think there is a limit to how long humans will live. Absent an ability to build replacement parts for humans, I think 90-100 is an upper age range. More of us will reach that point, and medical advances will eventually keep us healthier and more active till the end, but I donít see many of us crossing 100 ever. Still I find great value in adding twenty healthy years to my life.

Still, what if there is a tipping point beyond which the cost of an aging population overwhelms the society? Given that the elderly also have the ability to transfer wealth to the next generation, but young and old tend to unite to protect family assets. Perhaps a misallocation of resources will go into elderly services, but then we are into a question of when do we let people die, what diseases are to expensive to fight, etc.

[monet]

why no mention of solow growth model?

[Ralph Lattimore]

I noted that you said that the best antidote to an ageing population is higher fertility rates. In fact, for the US (and Australia, my home country), the total fertility rate is reasonably high by developed country standards. You can use a standard demographic model to show that at those starting levels (and with current net migration rates), feasible increases in fertility rates make a negligible difference to future aged dependency rates, while reducing labour supply per capita during the steepest part of the transition to an older society. Ultimately, we could expect to have a roughly stable population in countries like the US, and in that instance, the aged dependency rate is almost entirely a product of improved longevity. By all means let's make more babies, but not to cure ageing!

[PC]

For more information on the ageing population see the Productivity Commission Report "Economic Implications of an Ageing Australia".
http://www.pc.gov.au/study/ageing/index.html

[N.E.Hatfield]

From what I can see, the Smithian analysis as opposed to the Malthusian analysis is predicated on a world view based on system structure, i.e. it is either open or it is closed. Smith's view is that it is open ended and infinite, whereas Malthus views it as being closed and finite. Such perspectives dictate the conclusions reached.

There is a third perspective available. That is, the system in which we operate is closed and finite, but through a radical rethinking of our methods of operation, a design science revolution if you will, humanity can overcome the finite limitations of the known world (as Malthus put it, "pray all you want, there is no more.")and produce enough for all. We have seen it occur in agricultural development in the last hundred years, not withstanding the logistical problems, which yet need to be overcome. Once again, a design science revolution is needed.

[Crystal]

The comment posted by Jack M. is clearly racist! There are no "low-IQ nations" vs. "high-IQ nations", and yeah I've read THE BELL CURVE and I'm sure that certain white people resent "the browning of the human population", but get over it! Countries with decreasing birth rates such as Germany and Japan simply MUST put aside their racism and allow mass immigration for the good of their economy! In the Middle East birth rates are extremely high, I believe something like 8 babies per woman, and Africa and Latin America also has decent birth rates, so the doors must be opened to allow for immigration from these high-fertility regions to the low-fertility nations. I wholeheartedly agree with Becker that population growth is sustainable and has a net positive effect on economic progress, and the only problem I see is when there is a bad distribution of population. I think America will be okay, because a quarter of the population is either Black or Hispanic, segments of the population with high fertility, but Europe/Asia is gonna have some major problems if they don't get more open-minded. I'm a African-American female, and I intend to do my duty of propagating the species, but I can't say the same for white & asian women.

[Reverend Bayes]

Crystal begins by stating, 'The comment posted by Jack M. is clearly racist!'

Then concludes with, 'I'm a African-American female, and I intend to do my duty of propagating the species, but I can't say the same for white & asian women.'

Sadly, I'm confused. Are you agreeing or disagreeing with Jack M.?

[Anonymous]

مركز تحميل

[Anonymous]

بنت الزلفي

[Anonymous]

Thank you, you always get to all new and used it
شات صوتي

[Anonymous]

Thank you, you always get to all new and used it
ÿ¥ÿßÿ™

ÿØÿ±ÿØÿ¥ÿ©

[Anonymous]

4439tx

[Anonymous]

ÿ¥ÿßÿ™ ŸÖÿµÿ±
--
دردشة مصرية

[Anonymous]

ÿØÿ±ÿØÿ¥ÿ©
___
صور

[Anonymous]

Perfect site, i like it!

[Anonymous]

Beautiful site!

[Anonymous]

Hello everyone. Where so many hours have been spent in convincing myself that I am right, is there not some reason to fear I may be wrong?
I am from Norway and learning to write in English, please tell me right I wrote the following sentence: "All euro banking finance jobs in london collected from all uk job sites."

Thanks for the help :o, Nyx.