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Population: Why Growth is a Good Thing

This is a busy time of year in our house with Father’s Day, two of our kids’ birthdays, and our wedding anniversary. Our daughter Taylor Grace just turned 4, and our younger son David just turned 2 (Jacob, our oldest, will be 6 at the end of July). Is it good to have more people? Under what conditions? How might financial instruments and financial markets play a role?

A few years ago, I was listening to a sermon on the radio in which the pastor mentioned a part of the local school district’s Earth Day curriculum in which students were told that "overpopulation" is the major environmental problem. A quick Google search confirms that this is the case according to a lot of people. We cannot, it is maintained, feed a growing population, to say nothing of maintaining that population at a comfortable standard of living.

It seems reasonable as the Earth is comprised of a finite number of atoms. When we look more carefully, though, the argument that the world has too many people breaks down. So too does the argument that there are limits to economic growth. The cold and callous Ebenezer Scrooge suggested that those among the poor and destitute who would rather die than go to workhouses "had better do it, and decrease the surplus population." Scrooge is mistaken. When we have sound institutions—when we are not subject to extensive state suppression—a larger population is a blessing rather than a curse.

Rising populations do not fill me with the unfortunate, common, and mistaken fear that we will run out of natural resources or that we are doomed to lives of stagnation and bare subsistence. My kids' minds--and the minds of the billions of other people in the world--give me hope for a better tomorrow.

When my kids were born, they brought a few things into the world. They brought mouths to feed and hands with which to work, poorly at first but later we hope with greater dexterity, but those weren't the most important things they brought with them. They also brought what the economist Julian Simon called The Ultimate Resource: their minds. Rising populations do not fill me with the unfortunate, common, and mistaken fear that we will run out of natural resources or that we are doomed to lives of stagnation and bare subsistence. My kids' minds--and the minds of the billions of other people in the world--give me hope for a better tomorrow.

Minds are terrible things to waste. Many of the things around you, like the computer or mobile device on which you’re reading this article, represent concatenations of ideas emerging from multi-millennia conversations about how we can solve the problems that confront us. These conversations can be technological ("can I make a doodad that will make it easier for me to do this thing?"), scientific ("what is the nature of this stuff before me? What are the principles of reality that make the doodad work?"), commercial ("can I find a way to produce and sell the doodad? Would people actually pay enough to make production worthwhile?"), political ("how do we encourage cooperation and discourage predation?"), and financial ("where can I get the resources needed to produce these doodads? What collateral can I offer for loans? How can I insure against the possibility that things don’t work out the way I want?"). The more voices we have in these conversations, the more possible answers we can try. The more answers we can try, the more solutions we can find.

How can a rising population per se lead to higher standards of living? Or at least, why isn’t it inevitable that higher populations lead to falling standards of living as we start running out of resources to go around? First, as the economic historian Joel Mokyr notes in his book The Lever of Riches, citing research by Esther Boserup, Julian Simon, and Douglass North, a larger population means a finer division of labor and, therefore, higher productivity. It also allows us to deploy goods and services for which "there are fixed costs and indivisibilities, such as roads, schools, property-rights enforcement agencies, and so on, that can be deployed effectively only for relatively large populations" (Mokyr, p. 6). Second, more people means more brains, which means more ideas and more technological progress. Mokyr defines "technological progress" as "any change in the application of information to the production process in such a way as to increase efficiency, resulting either in the production of a given output with fewer resources (i.e., lower costs), or the production of better or new products."

More people means more ways to deploy existing knowledge and more ways to "change…the application of information to the production process." In a TED Talk titled "Abundance is our Future" (and related to his book with Steven Kotler simply titled Abundance), Peter Diamandis discusses trends in technology and argues that between 2010 and 2020, more than three billion people will become new internet users. This means a massive increase in the size of the social conversation, a big increase in the number of opportunities to invest our savings in a global market, and a big increase in the number of people with access to the technology and educational tools they need to develop new ways for us to harness information through prices and new ways for us to price and trade risk in financial markets. The new people coming online might not themselves be the ones who invent the new financial instruments, but as they learn basic math, statistics, and finance they can free up the time and energy of financial professionals in the western world to focus on developing new financial instruments and better ways of assessing investments. At the very least, larger, better-developed global markets for goods, services, and financial instruments provides investors with opportunities to carry ever-more-diversified asset portfolios.

As measured by the Fraser Institute’s Economic Freedom of the World Report, global economic freedom has increased substantially in the last 30-odd years. Economists who have studied the relationship between economic freedom and economic growth have found that economic freedom increases economic growth. As people around the world are taxed and regulated more lightly, as they have access to a better legal system and more secure private property rights, as they have access to sound money, and as they are freed to trade and invest internationally, a larger global population becomes a blessing rather than a curse. When we don’t have robust economic institutions and the freedom to experiment and innovate, the "new mouth to feed" effect can dominate the "new hands with which to work and new minds with which to think" effect. The opposite happens when we have these robust institutions and freedom to experiment and innovate: the "new mouth to feed" effect shrinks in importance relative to the effect of having more hands with which to work and more minds with which to think. When we have good economic, political, and social institutions, the negative effects of diminishing returns and population pressure yield to the power of The Ultimate Resource.

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Anonymous   |     |   Comment #1
I can't disagree more!  But don't just take my word, read Carolyn Kinder's report from the Yale New Haven Teachers Institute.  And may I quote her: "Instead of allowing poverty to persist, it is important to limit our number be-cause in dense populations too many lack adequate food, water, shelter, education and employment. High fertility, which has been traditionally associated with pros-perity, prestige, and security for the future, now jeopardizes chances for many to achieve health and security."
AbeKuyper   |     |   Comment #4
Sounds a lot like Engels: 

"There is, of course, the abstract possibility that the number of people will become so great that limits will have to be set to their increase. But if at some stage communist society finds itself obligated to regulate the production of human beings, just as it has already come to regulate the production of things, it will be precisely this society and this society alone which will carry this out without difficulty."

What sort of worldview uses an arbitrary measure of "health and security" to wage war against the dignity of life itself? A nihilist, Marxist one, for starters. China would love to have you and your social theory.
Anonymous   |     |   Comment #11
With all due respect, she's flat wrong. The problem isn't population per se, It's the quality of political institutions. Matt Ridley's "The Rational Optimist" is a 
Here's Ridley's website. Deirdre McCloskey, my co-author and winner of the 2013 Julian Simon Award from the Competitive Enterprise Institute, makes a convincing argument in her three-volume series on the "Bourgeois Era" that environmental pessimism (and population pessimism) are unwarranted. See especially chapter 45 of her 2010 book "Bourgeois Dignity." Here's her website.
Dave Everson
Dave Everson   |     |   Comment #24
Let's see: you post anonymously, your argument is "I disagree!", and you quote someone from the "Yale New Haven Teachers Institute" as some sort of authority.  Yeah, I'm convinced.
Anonymous   |     |   Comment #2
Ludwig von Mises?
Anonymous   |     |   Comment #3
All biological systems have a carrying capacity, something the author ignored completely. Optimism is never a substitute for reality.
Anonymous   |     |   Comment #5
Indeed. I don't see how the great minds of tomorrow can magically make the immediate changes we needed yesterday: will children's brains even develop properly in the filthiest parts of China, or will anyone's mind work right where there isn't enough clean water from lack of polar ice caps?
Art Carden
Art Carden   |     |   Comment #13
Perhaps, but we're not limited to the single Earth-bound biological system (consider what Planetary Resources is doing, and Tesla's Elon Musk wants to work to put people on Mars). It's also pretty clear that we're nowhere near the Earth's carrying capacity.
Anonymous   |     |   Comment #27
I think extreme poverty, a billion hungry people including a few million children dead due to hunger every year might disagree with the notion that an inordinately costly Mars fantasy will address their needs, now or ever. And, we may be near capacity when one considers the finite nature of petrochemicals...the basis for worldwide FOOD production.  
QED   |     |   Comment #6
Carden sounds like just another tired social liberal.  Pity.  He probably also believes in the AGW myth.  
Anonymous   |     |   Comment #10
I find it interesting that few authors ever mention the fact that worldwide population growth came about because of one major development: the manufacture and widespread use of petrochemical based fertilizers. Prior to the "green revolution", mass starvation was an accepted fact of life. There are many useful nuggets in this article but, again, the facts are that we have more people on welfare than ever before, fewer people are productive members of society and the "global conversation" gets dumber with each tweet. 
Anonymous   |     |   Comment #32
#6 You couldn't be further from reality. 
Read comment #12 by Carden and then look up Ludwig von Mises.
Anonymous   |     |   Comment #7
There must be a balance in jobs, income and prosperity. You can not just bring immigrants from  third world countries and proclaim the future is secured with the growth of population, like the democrats do, the balance is distorted and prosperity is nullified, why, the cultures imported may not be compatible with ours. Have anyone seen Mexicans leaving their language and culture behind or the central American immigrants, they form their own communities and refuse to assimilate with the real Americans and the society created on such bases, sooner or later will crumble and the growth the democrats counted on will backfire and destroy this country demographically and economically.
QED   |     |   Comment #9
Spot on.  Obama famously told "Joe the Plumber" back in 2008 that he wanted to "spread the wealth around".  Americans back then assumed Obama was talking about confiscating the wealth of productive people and doling it out to other, less productive, Americans.  Little did we realize Obama actually planned to steal away our wealth and dole it out to non-citizens, while simultaneously destroying the American culture, traditions, and language he so detests!    
Anonymous   |     |   Comment #15
I agree with your point, it is true, bringing immigrants and giving legalization to the illegals here will destroy this nation, because most of those immigrants are here for the benefits (to take) not to give. Most of them are uneducated, unskilled and never intend to learn English, the democrats depending on these people for the future of America are delusional. It is like importing millions of Draculas who need blood on daily bases and who will supply it, you and I and the whole nation will be draind to empty veins. We will become like them, poor and devoted of prosperity. Send a message to your rep in congress to stop this insanity of legalizing the law breakers.
Anonymous   |     |   Comment #16
Wow, your idea of reality is so sad.
Anonymous   |     |   Comment #18
#16, I just came from China and they have no growth of any population since the 1980's and they did not give me a day extra to stay there, acctually they told me to leave 1 day before my visa expired. Nobody is allowed without any purpose in the country and they have no problem with the illegals, they just chase them out the moment they catch them, there is no rights to a lawyer or judge if you are illegally in the country. China prosper because of 0% growth in population, the democrats here are brainwashing the Americans to believe in lies and dilution of the majority at the moment and when demographical change occurs, you will be saying WOW all they and night and without any results. You can sing "Yankee doodle" too and nobody will listen to your cries anymore, you have become minority.
Being ignorant is one thing, but to be delusional is something that will provide conduit to the destruction of this nation.
Anonymous   |     |   Comment #19
Where is business going to get the min. wage employees they insist having access to?   Immigration
paoli2   |     |   Comment #25
Bravo to China for caring about their own country first!!
The apathy in the US over what certain politicians are allowing to happen to our country is sickening!  Weren't we once supposed to have a PRESIDENT to lead us.  He is but unfortunately straight into financial Hell!  What he and his band are doing while the rest of us watch in a daze is despicable!  Those who don't think this is a reality, go back to sleep since you are his biggest helpers!
Anonymous   |     |   Comment #21
This is a reply to poster 16, if population growth is solution to the nation's economy, why the democrats insist on abortions and birth controls and stopping the pregnancy of the US citizens and why they want to bring millions of uneducated illegals at a tremendous cost to re-educate them and pay them housing and welfare for 10-20 years and how this society will get those money back from the free loaders invading us now?
Since you are wondering, please tell us what is wrong with us who stay upfront to fight these invaders and what is you cut in it and why you think you are right and the rest of us are wrong?
sup mang
sup mang   |     |   Comment #28
they don't insist on abortions & birth control.  the left insists on giving people ACCESS to abortions & birth control.  that's a BIG difference, bro.

pretty sure that we keep allowing "new blood" in because those people bring in new perspectives.  the gov't is hoping the long-term benefits of doing so eventually dwarf the short-to-intermediate costs.

will things work out that way? who knows?
Anonymous   |     |   Comment #23
Malthus predicted doom and gloom 200 years ago. His arithmetic growth and geometric growth argument was quite appealing...but wrong. Paul Ehrlich write The Population Bomb about fifty years ago. He sold millions of copies. You'll never go broke stoking the fears of Americans. If all this fear is justified, maybe we should never have had such an open door policy in the 19th and early 20th century. Oh, but wait, those immigrants looked a lot like the people objecting to immigration now. Methinks those are the types of people posters here would like to see more of.
paoli2   |     |   Comment #26
My father was an immigrant but a LEGAL one!  He didn't SNEAK in through an OPEN border trying to get pity by being a child.  He followed the rules (Yes! We actually HAD rules back then!) and had his sponsor and came in the LEGAL way!  He didn't SNEAK in on the backs of children who were supposed to be fleeing from brutality and bringing all kinds of diseases into his new country!
Anonymous   |     |   Comment #8
An article on this subject seems antithetical to the purpose of this web site. Rational for increases in population always lead to the social engineering of this population. Remember those who believed; if everyone, in an increasing population, were to own a home, this would lead to a robust economy. Instead it created the financial crisis, and a decade (and counting), of low interest rates.
kontrairean   |     |   Comment #29
we tested a theory.  it went badly.  but, on the positive side, we now have information about mortgages that we did before.

if we get too many people, perhaps we'll see more experiments done on the biological systems we don't even think to question, since mass casualties (from failed experiments) would be tolerable.

after all, it would be pretty awesome if we could somehow find ways of escaping our biology, surviving without food, water, sleep, etc.

I'm pretty jazzed about the potential to rid ourselves of the tyrannies of tradition....aren't you?
Anonymous   |     |   Comment #17
The democrats will say all kinds of lies just to give amnesty to tens of millions illegals here and in return will destroy this nation.
If unlimited immigration or natural growth is good, how come China has stop the growth at 0% for decades now and they are the best country to find work and most of the millionaires and billionaires are made in China and their standard of living will surpass ours very soon since they stopped the natural growth and immigration is held at only few thousands per year and they do not allow any foreigner in the country without having any business there.
The democrats live in state of utopia and are so stubborn about bringing unlimited number of illegals in the country. Do they think that they will need permanent health care, welfare, education and housing in return for what, a statsistical number shuffle in the budget and to show an imaginary growth of non existent wealth.
Anonymous   |     |   Comment #31
The 50,000 children that have come in in the past few months will cost close to $1,000,000,000 to educate each year. The direct and hidden education costs are truly amazing. Conservative estimates are that more than 200K have entered illegally in the past year; many will collect assistance. Taxpayers and taxpayers alone will pick up the tab. The truth is many of the most ardent supporters of the administration will suffer the greatest, especially the urban poor as limited resources are redirected. The children we read about have been brutalized by their sending parents, the Mexican drug cartels, the Mexican government and, last but not least, US politicians. It's child abuse, plain and simple.
Anonymous   |     |   Comment #20
Tickle me to laugh, if population growth is panasia for poor economy, just look at the third world countries, Mexico's population doubled in the last 20 years, misery index and unemployment are sky high, look at Indonesia, Philippines, India, Nigeria just to mention few, they can not even feed their people with the population growth.
Here the democrats are pondering illegals to be amnestied  and all of our economical problems will be solved.
You have to be a nuts to fall for such lies, increasing in population brings increases in welfare benefits and reducing the tax base, because the illegals here have no skills, proper education or can speak English and most of them are here to benefit and not contribute.
If any of you thinks otherwise, you have been brainwashed by the democrats and you can never be a patriot or intelligent supportive citizen and will continue to write in the blogs and rant and attack the more free spirited posters without any purpose or will to help solve the problem.
kontrarean   |     |   Comment #30
yea, we see that it doesn't work in third-world countries.

but perhaps we need to find out how it plays out in a first-world country?

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