December 27, 2004 to December 30, 2004
Disease, Population, and Economic Progress
Disease, Population, and Economic Progress
Disease, Population, and Economic Progress-Becker Premature deaths from malaria, sleeping sickness, AIDS, and other diseases are still common in most parts of sub-Sahara Africa and other very poor nations. Modern day Malthusians who believe population growth holds back economic prosperity believe that high death rates from disease, awful as that is, raise the earnings of the living by slowing the growth in population. They point to various historical episodes, especially to the economic revival in Europe following the population devastation caused by the Black Death in the 14th century.
Malthusian theory has considerable relevance in understanding economies in earlier times when traditional agriculture was the main sector. But population's role in the modern world is very different because prosperity of families and countries depend on their investments in human capital, especially education and health, sensible government policies, and economies that are open to trade with other nations.
India provides a good illustration. India remained very poor from its independence in 1947 until the late 1980's. Some claimed that its slow rate of growth in per capita income was largely explained by a rapid growth in population that absorbed much of the increase in aggregate income. In response to this belief, some Indian women were forcibly sterilized to cut down their birth rates.
Fortunately, a small number of economists and politicians recognized that India's real problem was not population, but terrible economic policies that overregulated labor and product markets, blocked domestic investments by native entrepreneurs, and discouraged imports of goods and foreign investments. Reductions in tariffs and import quotas, and greater encouragement to private investments introduced in 1991 by the then Finance Minister, Dr. Manmohan Singh (who is now Prime Minister), quickly produced a take off in India's economy. Income has since been growing by over 6% per year, "despite" an increase in its population by more than 200 million persons that raised India's total population to over one billion people.
India's problems prior to its economic reforms are magnified in much of Africa. In addition to misguided economic policies, widespread disease has lowered life expectancies and reduced health and energy levels, so that most young people have little incentive to become literate and continue their schooling beyond a few years. The heavy incidence of disease also has lowered productivity even in the traditional activities that engage most workers.
So I have little doubt that the rampant disease in Africa and other poor nations is a "curse to the living", even though it helps keep population from growing faster. Greater spending on health by the governments of these nations, and international assistance from philanthropic and other groups, would reduce the incidence of malaria, AIDS, and other major diseases, and would raise per capita incomes along with the number of people. Incomes would grow because healthier persons invest more in education and other human capital, and they are more productive and energetic. Quantitative studies confirm that the heavy disease burden in Africa has reduced investments in education and lowered their rates of income growth.
Economic reforms that worked in other regions and cultures would also work in Africa. Their economic situation would be much better if they followed the examples set by India, China, and other nations, and reduced regulations and tariffs, encouraged domestic and foreign private investment, and provided a more receptive and stable economic environment. Reduced incidence of disease and better economic policies would raise population, but would raise incomes much faster, so that more people would live better lives.
My views about the effects of population in the modern world are very non-Malthusian in other ways as well. I believe that bigger populations become an asset rather than a liability to economic growth as societies become more knowledge-oriented through investments in education and training, and through new technologies. In the modern environment, a larger population raises productivity by inducing greater specialization in skills and occupations, and also by providing larger markets for different goods, including various drugs to treat diseases.
While this claim about the beneficial economic effects of larger populations may be controversial, there can be little doubt that widespread disease in Africa and other poor nations is a major drag on their economic progress, whatever the effects on the number of survivors. Malaria and other horrible diseases are a disaster for the living as well as a tragedy for those dying.
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.
Response on Disease and Population-Becker
Reply on Disease and Population-Becker Some comments provide additional evidence that disease imposes a major burden on the living in poor nations of Africa and elsewhere. For example, disease interacts with nutrition, and poor nutrition causes diminished cognitive and physical capacities. The Malthusian model completely misses these harmful consequences of disease that far outweigh any beneficial effects a lower population might have on the incomes of the survivors.
I continue to be skeptical that population has been a major problem for India's development. The last 15 years shows that with even reasonable economic reforms, per capita incomes can grow rapidly while population also does. In addition, it is well known that as nations develop economically, fertility before long begins to decline rapidly-that has already begun in India- as parents switch from having many ill-educated children to many fewer and much better educated children.
Africa and many other poor nations have a brain drain because ambitious and skilled individuals have limited opportunities in their own countries. As South Korea, Taiwan, China, and now India have shown, if a country begins to develop economically after introducing sensible policies and opportunities for the educated and entrepreneurially inclined, fewer skilled men and women leave, and many of the best begin to come back to start businesses and engage in other productive activities. Prior to the 1991 reforms, Indians were very successful business people and professionals in all countries but India!
One modern neo-Malthusian argument relates to global warming-the subject of an earlier discussion by Posner and me. A larger population may put more greenhouse gases into the atmosphere, but it also provides a larger market for new technologies that help control the output of CO2 and other gases. In addition, a larger population also increases the number of potential inventors who might help solve warming and other challenges. So whatever one's views on the importance of global warming, a larger population is more likely to help than hurt.
Response to Comments on "AIDS, Population, and Policy"--Posner
There were a number of interesting comments. Most focus either on the merits of foreign aid or on the costs of avoiding HIV-AIDS, and I will confine my response to these two issues.
- I agree that my statement that foreign aid is an inappropriate use of public funds requires qualification in several respects. First, it can be a way of buying allies, and from that standpoint the fact that the money is diverted to the political or economic elite of the recipient country need not be an objection. Second, it can be a way of conferring utility on Americans who have ethnic or religious or family or other ties to people in the recipient countries. Third, it can be a subsidy to U.S. industry if the aid is conditioned on the recipients" using the money to buy U.S. goods; in such a case the net transfer to the recipient nation may be small. Fourth, as in the case of the Indian Ocean tsunami, it can be a form of social insurance. It is also possible that such aid can confer utility on the populations of the donor countries because the plight of the victims of the tsunami triggers altruistic sentiments in those populations, and that emergency assistance, being temporary, is somewhat less likely to be appropriated by the ruling elites of the recipient countries.
Perhaps most foreign aid can be assigned to one or more of these four categories, and only the third seems especially questionable from the standpoint of economic welfare. But when people criticize the wealthy nations, especially the United States, for being chintzy when it comes to foreign aid, they usually are not thinking about any of the above categories of foreign aid; rather, they want general wealth transfers to poor countries. And that is what I criticize, since the basic problem of poor countries is not that they are poor, but that they are badly managed; and being badly managed they are unlikely to benefit from handouts. Our present level of foreign aid may be adequate to satisfy the four types of demand for such aid that I have sketched.
- Several comments raise a good question: if condoms are so cheap, why is HIV-AIDS so prevalent in Africa and certain other poor countries? The answer is that the use of condoms may involve substantial nonpecuniary costs, such as diminution of sexual satisfaction or violation of local mores. Alternatives to condoms, such as abstinence or, more realistically, reduction in the number of sexual partners or abolition of practices such as clitoridectomy and infibulation that increase susceptibility to sexually transmitted diseases, including HIV-AIDS, may also involve heavy "cultural costs." However, these obstacles cannot be overcome or diminished by the expenditure of substantial monies on buying expensive HIV-AIDS "cocktails" for the affected population. Nor do I agree that because AIDS is at present treatable rather than curable by these "cocktails," no rational person would increase his exposure to the risk of HIV-AIDS merely because he knew that he could obtain treatment that would prolong his life if he contracted the disease. Given that the full costs, sketched above, of avoiding risky sex may be high, it is plausible that even a slight reduction in the benefits of such avoidance could affect the amount of risky sex.
It is true that we spend a lot of public money treating people for diseases that they could have avoided by changing their behavior. These are probably not economically sensible expenditures, because they operate to externalize the costs of risky behavior. Subsidizing AIDS treatments in poor countries invites the same criticism.