“The most important benefit of population size and growth is the increase it brings to the stock of useful knowledge. Minds matter economically as much as, or more than, hands or mouths. Progress is limited largely by the availability of trained workers. The more people who enter our population by birth or immigration, the faster will be the rate of progress of our material and cultural civilization.”
Population and Progress
With respect to population growth: A dozen competent statistical studies, starting in 1967 with an analysis by Nobel prizewinner Simon Kuznets, agree that there is no negative statistical relationship between economic growth and population growth. There is strong reason to believe that more people have a positive effect in the long run.
Population growth does not lower the standard of living – all the evidence agrees. And the evidence supports the view that population growth raises it in the long run.
Incidentally, it was those statistical studies that converted me in about 1968 from working in favor of population control to the point of view that I hold today. I certainly did not come to my current view for any political or religious or ideological reason.
The basic method is to gather data on each country’s rate of population growth and its rate of economic growth, and then to examine whether — looking at all the data in the sample together — the countries with high population growth rates have economic growth rates lower than average, and countries with low population growth rates have economic growth rates higher than average.
All the studies agree in concluding that this is not so; there is no correlation between economic growth and population growth in the intermediate run.
Of course one can adduce cases of countries that seemingly are exceptions to the pattern. It is the genius of statistical inference, however, to enable us to draw valid generalizations from samples that contain such wide variations in behavior. The exceptions can be useful in alerting us to possible avenues for further analysis, but as long as they are only exceptions, they do not prove that the generalization is not meaningful or useful.
The research-wise person may wonder whether population density is a more meaningful variable than population growth. And indeed, such studies have been done. And again, the statistical evidence directly contradicts the common-sense conventional wisdom. If you make a chart with population density on the horizontal axis and either the income level or the rate of change of income on the vertical axis, you will see that higher density is associated with better rather than poorer economic results.
Check for yourself: Fly over Hong Kong — just a few decades ago a place seemingly without prospects because of insoluble resource problems — and you will marvel at the astounding collection of modern high-rise apartments and office buildings. Take a ride on its excellent smooth-flowing highways for an hour or two, and you will realize that a very dense concentration of human beings does not prevent comfortable existence and exciting economic expansion — as long as the economic system gives individuals the freedom to exercise their talents and to take advantage of opportunities.
And the experience of Singapore demonstrates that Hong Kong is not unique. Two such examples do not prove the case, of course. But these dramatic illustrations are backed by the evidence from the aggregate sample of countries, and hence do not mislead us. (Hong Kong is a special thrill for me because I first saw it in 1955 when I went ashore from a U. S. Navy destroyer.
At the time I felt great pity for the thousands who slept every night on the sidewalks or on small boats. It then seemed clear to me, as it must have to almost every observer, that it would be impossible for Hong Kong to surmount its problems — huge masses of impoverished people without jobs, total lack of exploitable natural resources, more refugees pouring across the border each day. But upon returning in 1983, I saw bustling crowds of healthy, vital people full of hope and energy. No cause for pity now.)
The most important benefit of population size and growth is the increase it brings to the stock of useful knowledge. Minds matter economically as much as, or more than, hands or mouths. Progress is limited largely by the availability of trained workers. The more people who enter our population by birth or immigration, the faster will be the rate of progress of our material and cultural civilization.
Here we need a qualification that tends to get overlooked:
I do not say that all is well everywhere, and I do not predict that all will be rosy in the future. Children are hungry and sick; people live out lives of physical or intellectual poverty, and lack of opportunity; war or some new pollution may finish us off. What I am saying is that for most relevant economic matters I have checked, the aggregate trends are improving rather than deteriorating.
Also, I don’t say that a better future happens automatically or without effort. It will happen because women and men will struggle with problems with muscle and mind, and will probably overcome, as people have overcome in the past — if the social and economic system gives them opportunity to do so.
The Explanation of These Amazing Trends
Now we need some theory to explain how it can be that economic welfare grows along with population, rather than humanity being reduced to misery and poverty as population grows.
The Malthusian theory of increasing scarcity, based on supposedly-fixed resources – the theory that the doomsayers rely upon – runs exactly contrary to the data over the long sweep of history. Therefore it makes sense to prefer another theory.
The theory that fits the facts very well is this: More people, and increased income, cause problems in the short run. Short-run scarcity raises prices. This presents opportunity, and prompts the search for solutions. In a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen.
To put it differently, in the short-run, more consumers mean less of the fixed available stock of goods to be divided among more people. And more workers laboring with the same fixed current stock of capital mean that there will be less output per worker. The latter effect, known as “the law of diminishing returns,” is the essence of Malthus’s theory as he first set it out.
Fallacy of Fixity
But if the resources with which people work are not fixed over the period being analyzed, then the Malthusian logic of diminishing returns does not apply. And the plain fact is that, given some time to adjust to shortages, the resource base does not remain fixed. People create more resources of all kinds.
When we take a long-run view, the picture is different, and considerably more complex, than the simple short-run view of more people implying lower average income. In the very long run, more people almost surely imply more available resources and a higher income for everyone.
I suggest you test this idea against your own knowledge: Do you think that our standard of living would be as high as it is now if the population had never grown from about four million human beings perhaps ten thousand years ago? I don’t think we’d now have electric light or gas heat or autos or penicillin or travel to the moon or our present life expectancy of over seventy years at birth in rich countries, in comparison to the life expectancy of 20 to 25 years at birth in earlier eras, if population had not grown to its present numbers.
Consider this example of the process by which people wind up with increasing availability rather than decreasing availability of resources. England was full of alarm in the l600’s at an impending shortage of energy due to the deforestation of the country for firewood. People feared a scarcity of fuel for both heating and for the iron industry. This impending scarcity led to the development of coal.
Then in the mid-l800’s the English came to worry about an impending coal crisis. The great English economist, Jevons, calculated that a shortage of coal would bring England’s industry to a standstill by 1900; he carefully assessed that oil could never make a decisive difference. Triggered by the impending scarcity of coal (and of whale oil, whose story comes next) ingenious profit-minded people developed oil into a more desirable fuel than coal ever was. And in l990 we find England exporting both coal and oil.
Another element in the story: Because of increased demand due to population growth and increased income, the price of whale oil for lamps jumped in the l840’s, and the U.S. Civil War pushed it even higher, leading to a whale oil “crisis.” This provided incentive for enterprising people to discover and produce substitutes. First came oil from rapeseed, olives, linseed, and camphene oil from pine trees. Then inventors learned how to get coal oil from coal. Other ingenious persons produced kerosene from the rock oil that seeped to the surface, a product so desirable that its price then rose from $.75 a gallon to $2.00.
This high price stimulated enterprisers to focus on the supply of oil, and finally Edwin L. Drake brought in his famous well in Titusville, Pennsylvania. Learning how to refine the oil took a while. But in a few years there were hundreds of small refiners in the U.S., and soon the bottom fell out of the whale oil market, the price falling from $2.50 or more at its peak around l866 to well below a dollar. And in 1993 we see Great Britain exporting both coal and oil.
Here we should note that it was not the English government that developed coal or oil, because governments are not effective
developers of new technology. Rather, it was individual entrepreneurs who sensed the need, saw opportunity, used all kinds of available information and ideas, made lots of false starts which were very costly to many of those individuals but not to others, and eventually arrived at coal as a viable fuel — because there were enough independent individuals investigating the matter for at least some of them to arrive at sound ideas and methods. And this happened in the context of a competitive enterprise system that worked to produce what was needed by the public. And the entire process of impending shortage and new solution left us better off than if the shortage problem had never arisen.
The Role of Economic Freedom
Here we must address another crucial element in the economics of resources and population — the extent to which the political-social-economic system provides personal freedom from government coercion. Skilled persons require an appropriate social and economic framework that provides incentives for working hard and taking risks, enabling their talents to flower and come to fruition. The key elements of such a framework are economic liberty, respect for property, and fair and sensible rules of the market that are enforced equally for all.
The world’s problem is not too many people, but lack of political and economic freedom. Powerful evidence comes from an extraordinary natural experiment that occurred starting in the 1940s with three pairs of countries that have the same culture and history, and had much the same standard of living when they split apart after World War II — East and West Germany, North and South Korea, Taiwan and China. In each case the centrally planned communist country began with less population “pressure”, as measured by density per square kilometer, than did the market-directed economy. And the communist and non-communist countries also started with much the same birth rates.
The market-directed economies have performed much better economically than the centrally-planned economies. The economic-political system clearly was the dominant force in the results of the three comparisons. This powerful explanation of economic development cuts the ground from under population growth as a likely explanation of the speed of nations’ economic development….
Summary and Conclusion
In the short run, all resources are limited. An example of such a finite resource is the amount of space allotted to me.
The longer run, however, is a different story. The standard of living has risen along with the size of the world’s population since the beginning of recorded time. There is no convincing economic reason why these trends toward a better life should not continue indefinitely.
The key theoretical idea is this: The growth of population and of income create actual and expected shortages, and hence lead to price run-ups. A price increase represents an opportunity that attracts profit-minded entrepreneurs to seek new ways to satisfy the shortages. Some fail, at cost to themselves.
A few succeed, and the final result is that we end up better off than if the original shortage problems had never arisen. That is, we need our problems though this does not imply that we should purposely create additional problems for ourselves. I hope that you will now agree that the long-run outlook is for a more abundant material life rather than for increased scarcity, in the United States and in the world as a whole. Of course such progress does not come about automatically. And my message certainly is not one of complacency. In this I agree with the doomsayers – that our world needs the best efforts of all humanity to improve our lot.
I part company with them in that they expect us to come to a bad end despite the efforts we make, whereas I expect a continuation of humanity’s history of successful efforts. And I believe that their message is self-fulfilling, because if you expect your efforts to fail because of inexorable natural limits, then you are likely to feel resigned; and therefore to literally resign. But if you recognize the possibility – in fact the probability – of success, you can tap large reservoirs of energy and enthusiasm.
Adding more people causes problems, but people are also the means to solve these problems. The main fuel to speed the world’s progress is our stock of knowledge, and the brakes are a) our lack of imagination, and b) unsound social regulations of these activities. The ultimate resource is people – especially skilled, spirited, and hopeful young people endowed with liberty – who will exert their wills and imaginations for their own benefit, and so inevitably they will benefit not only themselves but the rest of us as well.
Schultz, Theodore W., “The Declining Economic Importance of Land,” Economic Journal, LXI, December, 1951, pp. 725-740.
National Research Council, Committee on Population, and Working Group on Population Growth and Economic Development, Population Growth and Economic Development: Policy Questions (Washington, D.C.: National Academy Press, 1986), p. 2.