Population and GDP

2008-03-27

in Economics, Politics, The environment

The Economics Focus in this week’s Economist makes some excellent points. Most importantly, it demonstrates the degree to which looking at national rates of GDP growth independently from national rates of population growth produces a misleading impression of what is really happening.

America and Australia usually have the kind of economies that people understand to be growing rapidly – a fact often attributed to their dynamism, lack of enthusiasm for income redistribution, etc. By contrast, Germany and Japan tend to be lamented as low-growth laggards. If you consider the changes in GDP per capita, Japan grew more quickly than either Australia or the United States between 2002 and 2007. Because of relatively high rates of population growth, the American economy needs to ‘run just to stand still.’ The problem is even more acute in places with still higher rates of population growth.

Arguably, this offers one more reason to cheer falling populations as a sign of national maturity. While an aging population does put strain on pay-as-you-go pension and health care systems, that is a one-time cost of adjustment. Once it has been borne, a diminishing population means fewer resource constraints, a higher level of physical and financial capital per person, and a increased factor price for labour, yielding improved economic returns for workers.

For both environmental and economic reasons, we may thus have good reason to hope for fewer members in each subsequent generation.

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{ 9 comments… read them below or add one }

. March 28, 2008 at 2:36 pm

When researchers ask parents what they enjoy, it turns out that they prefer almost anything to looking after their children. Eating, shopping, exercising, cooking, praying and watching television were all rated more pleasurable than watching the brats, even if they don’t bite. As Mr Brooks puts it: “There are many things in a parent’s life that bring great joy. For example, spending time away from [one’s] children.”

Despite this, American parents are much more likely to be happy than non-parents. This is for two reasons, argues Mr Brooks, an economist at Syracuse University. Even if children are irksome now, they lend meaning to life in the long term. And the kind of people who are happy are also more likely to have children. Which leads on to Mr Brooks’s most controversial finding: in America, conservatives are happier than liberals.

Kerrie March 28, 2008 at 6:36 pm

Milan:

*gasp*! Are you suggesting we should stop pleading, guilt-tripping, and creating incentives for white women to reproduce? Didn’t you know population control/reduction is only for those other races?

tlaing March 28, 2008 at 10:04 pm

Do you mean workers can extract a higher surplus value in mature economies? Or is it rather that they are simply more developed, have more needs, and thus command a higher base wage to reproduce them as that kind of worker? That seems more likely – as economies become more mature, unskilled jobs are deported and people work on average in more skilled jobs – and it costs more to reproduce skilled workers as skilled workers (they need to have families and pay for school, etc..). Of course this isn’t part of the calculation how much to pay workers, its the abstract value of labour that gets worked out more or less fairly in the real messy world of labour relations.

Milan March 29, 2008 at 7:09 am

Tristan,

All I mean is that if you have an economy where raw materials, capital, and labour are the major inputs, a contraction in the supply of labour will increase the relative price for that good.

Shrink the labour pool, and wages will rise relative to other costs. That said, it is possible that the overall loss of productivity associated with too much contraction would offset the welfare gains for workers.

Milan March 29, 2008 at 1:19 pm

Kerrie,

Are you suggesting we should stop pleading, guilt-tripping, and creating incentives for white women to reproduce? Didn’t you know population control/reduction is only for those other races?

Race wasn’t what I was thinking about when I wrote the above: more long-term national macroeconomics and ecological impact.

One walks on dangerous ground when one advocates any kind of mandatory reduction in fertility. That said, I see the following things as perfectly valid:

1) Scrapping tax and other incentives for people to have children. Once they do have children, however, programs meant to improve the welfare of the latter are probably still required.

2) Trying to convince people – through reasoned argument and by example – to limit their fertility.

Kerrie March 29, 2008 at 2:12 pm

I was being sarcastic. I know it wasn’t your point. My point is that I rarely come across arguments that support negative population growth in First World countries, and I frequently come across arguments for lowering fertility-some of which may be valid and some of which are clearly “coloured” by racism.

Milan March 29, 2008 at 2:16 pm

Because of relatively high rates of population growth, the American economy needs to ‘run just to stand still.’ The problem is even more acute in places with still higher rates of population growth.

When I wrote this, I was thinking primarily about developing countries. As we talked about before, it takes a whole lot of economic growth to produce decent jobs for all and rising per-capita wealth when the average woman has seven children.

Contraception for all, and a moving away from the assumption that more people is better, are both messages that are valid in every state.

Anon March 29, 2008 at 2:20 pm

In an evolutionary way, doctrines that preach high fertility tend to out-compete those that encourage restraint. Consider the examples of Protestantism and Mormonism in the United States. No points for guessing which approach is growing in popularity and number of adherents.

. February 6, 2017 at 1:40 pm

Unprecedented: Japan’s population has declined by 1 million in 5 years

The decline in the Japanese population — a million people over five years — is the first population decline since Japan began its census in 1920.

Land of the Falling Son

According to a census, Japan’s population shrank by nearly 1 million people in the past five years.

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