Monday, October 31, 2011

Global Population Growth

According to the UN, the world's population hit 7 billion today.  It is a number that is at the same time remarkable and scary.  It is remarkable because of what it says about humanity's seemingly endless ability to support a greater population through technological advancement, but scary because of the Malthusian implications of a slowdown in that advance.

At its most simple level, the economy boils down to three inputs: Land, Labor and Capital.  Below are some of the UN's projections for Labor supply over the next 40 years.  To those who value absolute growth above all else (rather than growth per capita), the picture doesn't look especially pretty.  The growth in the labor pool is likely to slow as families have fewer children, which means that the whole world will look more and more like Japan.

As discussed in a previous post, this doesn't mean that there can't be per capita growth though (driven by expanding productivity).  Policy makers just need to recognize what's happening in the economy and allow the price mechanism to function properly.

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