August 18, 2013
Does the World Need More People?
Does the World Need More People? Posner
To answer my own question: I am dubious.
It is true that a country can get into economic trouble if the number of elderly people, who invariably impose heavy costs on a country's health care system, becomes very large relative to the number of persons of working age, because then the financial burden on the working population can become extremely heavy. The reverse, however, is also true: too high a ratio of young to old can be destabilizing. The experience of many of the poor nations of the world has been that a large youth population creates severe unemployment problems and can lead to violent unrest, as in a number of Middle Eastern countries in the last few years—the naively heralded "Arab Spring" having quickly become a nightmare of violence, political disorder, and regional instability.
It's amazing that a poor, largely arid country like Egypt should have a population of 84 million. That cannot be a good thing. Much of Egypt's current problems stem from inability to grow enough food to feed its population, and insufficient productivity to buy abroad all the food its huge population needs.
A growing population implies a growing number of children—not just persons of working age—and children impose heavy opportunity costs on parents (unless child labor is permitted, which however is likely to prevent children from becoming educated) and are costly to educate. A fast-rising population can not only create heavy youth unemployment but also strain public services (such as public educational institutions). And all this is in addition to the environmental impact of increased population, for example on global warming, species extinctions, and traffic congestion.
If children were a "superior" good in the economist's sense—that is, a good that is purchased in greater quantity when people's incomes rise—one would expect the birthrate in wealthy countries to be high and rising, but the opposite in most such countries is true. Maybe children are actually an "inferior" good, valued most by poor people either because the children of the poor work to augment family income or because the family lacks the resources for such child substitutes as expensive cars, clothes, homes, entertainment, and travel. Increasingly in the wealthy countries both spouses work, increasing the opportunity costs to both parents of raising children.
A better and certainly cheaper answer to the problem of declining population in countries like Germany and Japan—wealthy countries (though not all countries with declining populations are wealthy—Russia is not, for example)—is immigration. There are some two and a half billion people in China, India, and South Korea alone. Their average IQ seems similar to (maybe even higher than) that of the inhabitants of the United States and the other wealthy countries, including those wealthy countries whose populations are declining (a category that excludes the United States). This implies a very large number of East Asians with IQs well above 100. (Assuming that IQ is normally distributed, an average IQ of 100 means that 2.5 percent of the population has an IQ of at least 130—and 2.5 percent of 2.5 billion is 62.5 million.) Obviously not all want to emigrate, but many are quite open to the possibility. The problem is that few wealthy countries, other than the United States and the other English-speaking countries, are welcoming to immigrants. They have immigrants—Germany for example has many citizens of Turkish origin; Japan has many Koreans. But these countries tend to be insular, ethnocentric, downright hostile to immigrants, and their immigrant populations—not just the first generation, either—have difficulty assimilating, unlike immigrants to the United States, which still really is a melting pot. If those countries can't solve the assimilation problem, thereby making themselves more attractive to high-quality immigrants, their populations will continue to decline, because the countries probably can't afford the subsidies necessary to halt the decline.
There is no necessary connection between population and economic growth. The sharp decline of Europe's population because of the Black Death is thought to have increased per capita incomes significantly by reducing the ratio of people to arable land, resulting in improved nutrition. A larger population can, as Becker points out, increase the rate of technological progress by increasing the number of geniuses and other very creative people. But so can assortative mating, which has become much more common in the advanced countries as a result of falling discrimination and Internet dating search. At some point there may be diminishing returns to the increasing number of computer engineers.
Paying people to have children sounds odd though it can be defended on economic grounds if the additional children yield a net economic benefit. (So for that matter could paying elderly people to forgo end of life medical expenses likewise be defended on economic grounds, depending on how large the subsidy would have to be and how it would be financed.) I am skeptical that such a defense can be established. Too little is known about the economic effects of continued growth of a world population that has now surpassed seven billion.
Low Birth Rates: Causes, Consequences, and Remedies-Becker
Not long ago a vocal concern was about high fertility in the world and a rapidly growing population. Remember the currently quiet zero population growth (ZPG) movement? The tide has turned since the worry now is about too few births and a falling population.
The reason for this shift in attitude is that over 80 countries have fewer births than required to replace the number of individuals who die each year. They need a large flow of immigrants each year just to prevent their populations from peaking and then declining. These low birth countries contain over 40% of the world's population, including every country in Western Europe, China, Japan, Russia, Poland, and Canada, to name just a few. Birth rates in many other countries, including the United States, Mexico, and Iran, are only a little above the level necessary to replace the number of deaths.
Scholars measure the level of fertility by the total fertility rate (TFR), which equals the average number of children born to women over their lifetimes. Countries with TFRs below the replacement level of about 2.1 fall into the low fertility camp. Essentially no countries were in this camp in 1970, but in each succeeding decade many additional countries fell below replacement levels. Moreover, and this is important, in not a single country has the TFR ever risen above replacement once it fell below.
As late as the beginning of this century, demographers and others were predicting a rapid growth in world population to over 11 billion by the year 2050. The rapid emergence of low fertility in so many countries has already made these forecasts obsolete. Populations forecasts now assume much lower future fertility levels, but even the present consensus that world population will be about 9 1/2 billion by mid-century may be too high as fertility continues to fall rapidly in poorer countries.
There is growing discussion in many low fertility countries about the negative consequences of having fewer young persons, and the prospects, already a reality in Germany, Japan, Russia, and a few other countries with low immigration levels, of declining populations. In richer countries, retirement incomes and medical care of the elderly are largely financed by taxes on the younger working population. Low birth rates eventually lead to fewer men and women of working ages, and hence a smaller tax base to finance social security payments, unless the fewer children born have sufficiently greater amounts invested in their education and other human capital.
Although potential difficulties in financing social security benefits are receiving the most attention, other negative effects of low birth rates may be of equal or greater importance. Low fertility reduces the rate of scientific and other innovations since innovations mainly come from younger individuals. Younger individuals are also generally more adaptable, which is why new industries, like high tech startups, generally attract younger workers who are not yet committed to older and declining industries.
The great majority of countries have had growing populations during the past 250 years as world population grew at unprecedented rates. Yet ever since Malthus wrote his great work on the harmful effects of population growth on incomes, group after group have opposed high fertility and growing populations as bad for the world's food supply, standard of living, and environment, including local and global pollution.
However, these possible negative effects of larger populations have to be weighed against the sizable benefits from more people. These benefits include a larger number of young persons who, as mentioned earlier, are more likely to innovate, such as coming up with more efficient ways to grow food, and pay for the benefits to retired men and women. A bigger population also increases the demand for new drugs, software, social networking, and other innovations that have increasing returns to the scale of demand.
To be sure, if higher birth rates lead to lesser education and other human capital investments in each child, they may result in lower, not higher, per capita incomes. Malthus fear of lower per capita incomes explains his strong opposition to high birth rates. However, the rapid growth in world population during past 250 years has been accompanied by unprecedented high per capita incomes all over the world. Whatever the Malthusian negative effects of greater population, they have been dominated by factors that raised per capita incomes, including the benefits of increasing returns and other advantages from having a larger population.
China is seriously considering either greatly modifying or completely abandoning its "one child" policy because of its effects on the number of young persons, and population decline. France a while back instituted a generous and expensive system of financial support to families that have 2 or more births. Germany, Japan, South Korea, Russia, and other countries are discussing and sometimes implementing similar child support programs.
Whether a subsidy is justified depends on whether the benefits from more births and a larger population, including the benefits to the families having children, exceed the cost of encouraging births, such as the budgetary costs to governments of a child support program, potentially greater environmental damage, and the like. Even if, as I firmly believe, that on the whole greater population in the modern world has more benefits than costs, one has to recognize that programs to stimulate births are expensive, aside from simply ending birth suppression policies, as in China's one child regulatory policy,
For example, to cut the gap in half between Germany's actual TFR of about 1.4 and a replacement level of fertility of 2.1 requires a 25% increase in the number of births. Yet such a large increase in fertility has not been achieved by any past fertility subsidy programs, even expensive ones, presumably because children are so costly to raise in the money, time, and energy of parents. A more modest 10-15 percent growth in fertility might be achievable with generous and expensive programs, as in France. Perhaps a full benefit cost analysis would show that such a program is warranted, but the jury on this is still out.