There was an intriguing short letter in the Financial Times this morning, urging that more attention be paid to the problem of a low birth rate and the adverse demography of an ageing society. The writer evidently believes the welfare system should be encouraging people to have more children, rather than penalising them for large families. He cites a 1947 book, [amazon_link id=”B00195GT00″ target=”_blank” ]The Population of Britain[/amazon_link] by Eva Hubback.
[amazon_image id=”B00195GT00″ link=”true” target=”_blank” size=”medium” ]The Population of Great Britain[/amazon_image]
Looking her up, Wikpipedia tells me Eva Hubback was a suffragist, head of economics at Newnham and Girton during the First World War, and advocate of birth control and eugenics. However, her book clearly advocates the national benefits of population growth. This is an intriguing combination of beliefs, very much of its time.
It has long seemed to me that economics doesn’t pay enough attention to demography. Obviously, people studying pensions and the fiscal implications do put the ageing trend at centre stage, and relative demographic trends crop up in work on international migration. But demography is surely fundamental for growth as well. One question is whether an older (on average) population will be as productive and innovative as a younger one. And if so, what does this imply for, say, predictions of Chinese economic power?
Another is simply the numbers game. Endogenous growth models imply that the growth rate is increasing in population, at an accelerating rate because of their increasing returns feature. Ideas live in people’s heads, and the combinatorial arithmetic makes more people generate many more ideas. This is something modern economists (although clearly not Eva Hubback) seem to gloss over with mild embarrassment.
The best book I’ve read including demography, although in a broader context than economic growth, was Emmanuel Todd’s 2001 [amazon_link id=”1845290585″ target=”_blank” ]After the Empire[/amazon_link]. He was looking ahead to the multipolar world. But I’d be interested to hear other recommendations.
[amazon_image id=”1845290585″ link=”true” target=”_blank” size=”medium” ]After the Empire[/amazon_image]
As someone who takes the long view of history and I mean rather beyond the last football season, down the eras there have been a number of “corrections” in the growth of human numbers. We may be overdue for the next one which like financial crashes or earthquakes etc. could mean the longer we wait the more radical it may be. More to the point in the developed countries we have come to assume that older age means “retirement”. Looking at pre 1911 Census Returns tells me that before you either had the wealth or the savings, or you were with family and if fit helped with the housework, or if you could then it meant work. In 1861 my forebear in Leith was still heaving coal at 89. In the last few decades we have not just pushed the older ones out of work but increasingly have awarded ourselves early retirement. Unluckly the figures do not stack up. What Hubback did not cater for was the change in the expectation of life. Also it was a time when most people left school early rather than the longer delays of today. Again the figures do not stack up. Then there are the interesting questions of viable food supply, water supply and energy supplies. When our hunter gatherers ran out of these they simply moved on to where they were available and it is thought that they moved a lot more than assumed in the past. Something is going to give and perhaps a few things. If human history is any guide it will all end in tears and worse.
You haven’t cheered me up…..
It is only to be expected that economists ignore demography, because for the whole period that the discipline has developed, advanced-country populations have been growing. (IMHO this underlying growth has allowed some stupid ideas to persist in the profession. Bad-but-not-quite-catastrophic monetary and fiscal policy will eventually be overwhelmed by the effects of population growth, upon which the claim is made: “see? It worked”.) But now we are in uncharted territory, as far as economics is concerned.
Edward Hugh would be pleased to have some support for the idea that demography matters – he has been pretty much a lone voice on this for tha last several years.
The skills/productivity and innovation issues are important. Work is no longer about muscle power, but that does not mean age isn’t a problem. Skills depreciate with changes in production methods and technology. How useful are habits of management and service delivery learned forty years ago? How useful are sixty-five-year-old eyesight and hearing and forty-five-year-old educations for modern work, which is mostly about using new tools to deal with new situations that crop up continually? Their value has depreciated, and they are not likely to provide fertile ground for innovation.
But another, potentially bigger, problem is likely to lie in cultural shifts. For example, the increasing abhorrence of risk that is likely to come with an older population. Old people mostly wish to preserve what they have rather than take on new risks. The danger is that when an anti-risk bias dominates society as a whole, Schumpeter’s “gale of creative destruction” becomes a moderate breeze, insufficient to knock over embalmed incumbents. Social mobility becomes social paralysis; and paradoxically, households end up shouldering more risk than ever. (We’re already seeing this, with student loans for example.)
There are probably other cultural changes coming that will take us by surprise-‘obvious’ in retrospect, but catching us unprepared. (Please don’t use the Talebism. It wasn’t fun the first time.)
Like Demetrius, I used to be worried by energy, water, and resource problems. Yes, there will be dislocation and conflict this century over these things, both within and between nations. But investigation showed me that there are no technical problems – we can easily make the transition to sustainable energy and resource use, *if* we have the collective will. The problems are entirely political.
If it all ends in tears, it will be because our leaders chose for it all to end in tears–they preferred death (mostly other people’s deaths, to be sure) to sharing some political power.
Does that make you feel better, Diane?
I’m not sure how cheered I am by that – an inherently alarming issue, perhaps! Coincidentally, Izabella Kaminska linked to this on Twitter this morning, saying: “I think this chart may be very significant with respect to why 2008 was such a crisis point.” pic.twitter.com/3MEX6estro
Actually, demography should be part of economic foundations. The reason? The Lucas critique, though poorly framed, is accurate enough. Most economic variables can’t be predicted because they are products of temporal politics and culture. But demographically-based variables are more robust.
I agree with you, but it’s rarely considered outside the specifics of pensions etc.
(By the way, it took me half a minute or so to realise you’re not the Brian Coyle who’s my brother. Would have been a shock if he’d started commenting on my blog…)
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