CHAPTER 33
           THE BIG ECONOMIC PICTURE: POPULATION GROWTH 
                   AND LIVING STANDARDS IN MDCs

No one today can deny that the United States has the 
grossest national production in the world. (Paul Ehrlich, 
quoted in Goodall, 1975, p. 13).

We've already had too much economic growth in the United 
States.  Economic growth in rich countries like ours is 
the disease, not the cure.  (Paul Ehrlich, quoted in Ray, 
1990, p. 168).


CHAPTER 33:  TABLE OF CONTENTS
The Theory of Population and Income
The Consumption Effect
The Production Effect
The Public Facilities Effect
Age-Distribution Effects
Other Theoretical Effects
The Evidence Versus the Malthusian Theory
A More Realistic Model for MDCs
The Model's Projections
At the Cost of the Poorer Countries?
Summary
Afternote 1:  William Shakespeare, Procreation, and the Economics 
	of Development
Afternote 2:  How Immigrants Affect Our Standard of Living

   The Malthusian theory of population growth - accepted until the 1980s by most 
economists, and by the public accepted still -  says one thing.  The data say something 
else entirely. This chapter discusses the theory, presents the facts, and then reconciles 
fact and expanded theory for the more-developed countries (MDCs). Chapter 34 does the 
same for the less-developed countries (LDCs). This chapter and the next are tougher 
reading than most of the others, but I hope you will bear with them. (Read them when your 
mind is fresh, perhaps.)

               THE THEORY OF POPULATION AND INCOME

   Classical economic theory apparently shows irrefutably that population growth must 
reduce the standard of living.  The heart of all economic theory of population from 
Malthus to The Limits to Growth can be stated in a single sentence: The more people using 
a stock of resources, the lower the income per person, all else equal.  This proposition 
derives from the "law" of diminishing returns: Two people cannot use the same tool at the 
same time, or farm the same piece of land, without reducing the output per worker. A 
related idea is that two people cannot nourish themselves as well as one person from a 
given stock of food. And when one considers the age distribution resulting from a higher 
birthrate, the effect is reinforced by a larger proportion of children, and thus a lower 
proportion of workers, in the larger population. Let us spell out these Malthusian ideas.

The Consumption Effect

   Simply adding more people to a population affects consumption directly. If there is 
only one pie, the pieces will be smaller if it is divided among more eaters. The 
experience of hippies in San Francisco in 1967 illustrates this problem amusingly.

     Most hippies take the question of survival for 
granted,      but it's becoming increasingly obvious as 
the neighborhood fills with penniless heads, that there 
is simply not enough food and lodging to go around. A 
partial solution may come from a group called the 
"Diggers," who have been called the "worker-priests" of 
the hippy movement and the "invisible government" of the 
Hashbury.  The Diggers are young and aggressively 
pragmatic; they have set up free lodging centers, free 
soup kitchens and free clothing distribution centers. 
They comb the neighborhood soliciting donations of 
everything from money to stale bread to camping 
equipment.
For a while, the Diggers were able to serve three meals, however meager, each afternoon 
in Golden Gate Park.  But as the word got around, more and more hippies showed up to eat, 
and the Diggers were forced to roam far afield to get food.  Occasionally there were 
problems, as when Digger Chieftain Emmett Grogan, 23, called a local butcher a "Fascist 
pig and a coward" when he refused to donate meat scraps. The butcher whacked Grogan with 
the flat side of his meat cleaver.
   This consumption effect occurs most sharply within a 
family. When there are more children, each one gets a 
smaller part of the family's earnings, if earnings remain 
the same.  We see the effect in Thomas Hardy's Mayor of 
Casterbridge.

     [Mr. Longways]: True; your mother was a very good 
woman - I can mind her. She were rewarded by the 
Agricultural      Society for having begot the greatest 
number of healthy      children without parish 
assistance, and other virtuous      marvels.
     [Mrs. Cuxsom]: `Twas that that kept us so low upon 
ground      - that great hungry family.

     [Mr. Longways]: 'Ay. Where the pigs be many the wash runs thin.

The Production Effect

   Adding people also affects consumption indirectly, through the effect on production 
per worker. Consider a country that at a given time possesses a given amount of land and 
a given quantity of factories and other industrial capital. If the country comes to have 
a larger labor force, production per worker will be lower because each worker comes to 
have, on the average, less land or tools to work with. Hence average production per 
worker will be lower with a larger labor force and fixed capital. This is the classical 
argument of diminishing returns.

The Public Facilities Effect

   If a given population is instantly enlarged by, say, 10 percent in all age groups, 
there will be 10 percent more people wanting to use the village well or the city hospital 
or the public beach. An increase in the demand for such freely-provided public services 
inevitably results in an increase in the number of people who are denied service, a 
decrease in the amount of service per person, or an additional expenditure by the 
government to increase the amount of public facilities. If the 10 percent population 
increase also results in a 10 percent increase in the number of people working, and if 
the productivity of the added people is as great, on the average, as that of the original 
population, then the added population will have no effect on per capita income. But such 
a compensating increase in production is not likely. If more children are born, the 
demand for public facilities - especially schools - will occur before the children grow 
up, find work, and become productive; and even immigrating adults use at least the 
customhouse before starting work. And after the additional children join the labor force, 
they are likely to lower the average worker's productivity at first because of the "law" 
of diminishing returns discussed earlier, and hence the added workers will not be able to 
contribute as much in taxes to support public facilities as the average person formerly 
did. These effects were discussed in chapter 25 (as were the data that called into 
question these theoretical propositions).
   As a result of the increased demand, the average level of public services received is 
likely to be lower; the average person will receive less education and less health care 
than if the population remains fixed. And some tax moneys that might have gone into 
harbors or communication systems may go instead to the education and health care of the 
added people.

***
   In classical theory, then, sheer numbers of people depress per capita income in two 
ways: More consumers divide any given amount of output; and each worker produces less 
because there is less capital, private and public, per worker.

Age-Distribution Effects

   As we saw in chapter 23, a faster-growing population implies a larger proportion of 
children, which means that a larger proportion of the population is too young to work.  
The smaller proportion of workers must mean a smaller output per capita, all else equal. 
Therefore, the effect of sheer numbers of people, and the age distribution that occurs in 
the process of getting to the higher numbers, both work in the same direction, causing a 
smaller per capita product. 
   When one also takes women's labor into account, the effect of having a higher 
proportion of children is even greater. The more children that are born per woman, the 
less chance she has to work outside the home. For example, in the 1920s and 1930s, when 
most Israeli kibbutzim were near bare subsistence, strong pressure was often brought upon 
couples not to have more than two children, in order to enable women to do more 
"productive" work.  And the same is true in China now.  (But in the U.S., at least, this 
effect is not as great as one might expect. Calculations show that each baby after the 
first keeps an average woman out the labor force for only about half a year.)
   There is a counterbalancing effect from the father's work. A wide variety of studies 
show that an additional child causes fathers to work additional hours, the equivalent of 
two to six extra weeks of work a year. In the long run this yearly 4 to 10 percent 
increase in work for an additional child may fully (or more than fully) balance the 
temporary loss of labor-force time by the mother. (One might say that an additional child 
"forces" a father to work, which might be called a "bad" outcome. But if he chooses to 
have the additional child at the cost of working more, it is reasonable to say that he 
prefers that alternative of having more children and more work to fewer children and less 
work. This is quite the same as working more hours to have a nicer home or to pay for 
additional education. Who is to say which choice is "bad" or wrong?)
   Age distribution affects income distribution, too. In the discussion of social 
security and saving in chapter 23, we saw that a larger proportion of younger persons 
implies that more earners will one day support each retired person, which means a better 
pension for each retired person and a smaller burden on each working-age person.

Other Theoretical Effects

   The dilution of capital through reduced saving, and through reduced education per 
person, are other elements of the standard economic theory of population growth (though 
chapters 25 and 27 show them to be far smaller drawbacks than commonly thought, and 
perhaps no drawback at all). The only positive theoretical effect is that of larger 
markets and larger-scale production, known to economists as "economies of scale" or of 
"scope," which chapter 27 discussed.

            THE EVIDENCE VERSUS THE MALTHUSIAN THEORY

   The Malthusian supply-side effect of diminishing output from additional workers, and 
the demand-side effect of less to go around among a larger number of consumers, have 
until the 1980s dominated the conventional economic theory of population growth. And the 
implication is clear: Additional people must reduce the standard of living, all else 
equal.
   But a very solid body of evidence does not confirm that body of theory. The data 
suggest that population growth almost certainly does not hinder - and perhaps aids - 
economic growth. One piece of historical evidence is the concurrent explosion of both 
population and economic development in Europe from 1650 onward - a positive rather than 
negative association.  Other benign evidence is found in the rates of population growth 
and output per capita as compared in figure 33-1, which includes contemporary MDCs for 
which data is available for the past century.  No strong relationship appears. Such 
studies can go wrong unless they are done with competence.  Therefore, it is relevant 
that the first such study was done by Simon Kuznets, who won a Nobel prize for his work 
with economic data, and who is widely regarded as the greatest economic-demographic 
historian of the last few centuries.  
   FIGURE 33-1. The Non-Relationship between Population Growth    
   and the Growth of Living Standards [***replace with, or add,    
   Maddison]
   Studies of the more-recent rates of population growth and economic growth are another 
source of evidence. Many comparisons have by now been made among various countries (MDCs 
and LDCs) by almost a score of skilled researchers, using a variety of methods, and there 
is agreement among them that population growth does not hinder economic growth.   These 
overlapping empirical studies do not show that fast population growth increases per 
capita income. But they certainly imply that population growth does not decrease economic 
growth.
   To bolster these aggregate data on the overall relationship between population growth 
and economic growth, there have also been many studies of the relevant elements of the 
economy - education, savings, investment, and the like.  These studies amplify and 
strength the conclusion drawn from the aggregate data that population growth is not a 
drag on development. 
   These data, which contradict the simple Malthusian theory, have naturally evoked 
explanations. One such explanation is that population growth is a "challenge" that evokes 
the "response" of increased efforts from individuals and societies. There certainly is 
evidence that people make special efforts when they perceive a special need; this is seen 
in the second jobs, more hours of work, and other adjustments people make when they have 
relatively many children. (I summarize much of this evidence in my 1986 book on effort.)
   Another reason why population growth does not retard economic growth is that a high 
proportion of youths in the labor force has advantages: (1) A younger worker produces 
relatively more than she or he consumes, in contrast to an older worker, largely because 
of increases in pay with seniority whether or not there is increased productivity with 
seniority. (2) Each generation enters the labor force with more education than the 
previous generation; hence a larger proportion of youth implies an increase in the 
average education of the labor force, all else being equal. (3) Younger workers save a 
larger proportion of their income than do older workers.
   Furthermore, population growth creates additional opportunities and facilitates 
adaptive changes in the economic and social structures of MDCs, in several ways: (1) A 
necessary reduction in the size of an organization or work force is always painful. But 
when the population and the economy are growing, a facility or work force that needs 
reduction can be reduced in relative size by leaving it the same absolute size, which is 
less painful. (2) Cessation of population growth makes it more difficult to staff new 
departments to adjust to changing conditions. In universities, for example, when there is 
an overall growth in enrollments, new fields can be staffed by new faculty without 
cutting back on existing faculty; when there is no overall growth, new fields cannot be 
staffed without fighting the entrenched faculty, who do not wish to give up the positions 
they hold. (3) Cessation of growth also means that there are fewer new appointments to be 
made overall.  In American and European universities since the 1970s this lack of growth 
has struck particularly hard at the numbers of young professors who can be appointed, 
which has been demoralizing to aspirants for the Ph.D. And it has caused screams of 
anguish from senior professors who can no longer easily obtain offers elsewhere, which 
they can use as levers to get their salaries raised. (4) Where new occupational needs 
arise, they can be filled more easily if there are more youths who might learn these 
occupations. Hence, population growth facilitates adjustments in the sizes of industries 
and in occupational structure. (5) When the total economy is growing relatively fast, 
savings can more easily be found for new investments without having to shift investment 
out of old capital. This is the physical counterpart to the human-capital phenomena 
discussed in points (1) and (2) above. (6) Investment is less risky when population is 
growing more rapidly. If housing is overbuilt or excess capacity is created in an 
industry, a growing population will take up the slack and remedy the error, whereas 
without population growth there is no source of remedy for the miscalculation. Hence a 
growing population makes expansion investment and new entrepreneurial ventures more 
attractive by reducing risk - as well as by increasing total demand, of course.
   A faster-growing population also increases the internal mobility of the labor force. 
The greater mobility follows from a larger number of job opportunities and a larger 
number of people in the young age groups, who tend to be more mobile. Internal mobility 
greatly enhances the efficient allocation of resources - that is, the best matching of 
people to jobs. As Kuznets wrote, "We cannot exaggerate the importance of internal 
mobility and of the underlying conditions...in the modern economy to allocate and channel 
human resources." But when population growth is declining, the economy can get stuck with 
a hard-to-adjust oversupply of people in various occupations. 

                 A MORE REALISTIC MODEL FOR MDCs

   We have seen that population size and growth have a variety of economic effects, some 
negative and others positive. Economists worth their keep must take account of the size 
and importance of the relevant forces.  Furthermore, if several influences operate 
concurrently, we must concern ourselves with the overall effect rather than with only a 
single effect of any one variable at a time.  In such a case we can obtain a satisfactory 
overall assessment only by constructing an integrated model of the economy, and then 
comparing the incomes produced under various conditions of population growth.
   When building such a dynamic model, we must compromise between the greater complexity 
of a more realistic model and the greater distortion of a more abstract one. Furthermore, 
different models are required for countries with different economic and demographic 
conditions. More specifically, we must have separate models for MDCs and LDCs.  The model 
that follows is for MDCs; a model for LDCs is presented in the next chapter.
   Whether mathematical or verbal, simple or complex, computerized or not, earlier models 
of the effect of additional people on the standard of living in MDCs - including those 
from Malthus to The Limits to Growth - share the common root of first-edition Malthus: 
Adding people who must work and live with the original fixed supply of land and capital 
implies less income for each person.
   If, however, we add to the simple Malthusian model another fundamental fact of 
economic growth - the increase in productivity due to additional people's inventive and 
adaptive capacities - we arrive at a very different result. The analysis whose results 
are presented below does just that. This model is outlined in figure 33-2, where the 
elements of the usual neo-Malthusian model for MDCs are shown in solid lines and where 
the novel knowledge-creation elements are shown in dotted lines. That is, this model 
embodies not only the standard capital-dilution effects but also the contribution of 
additional people to technological advance through the creation of knowledge and through 
economies of larger scale. The latter elements have been omitted from population models 
in the past, but they are crucial to a balanced understanding of the problem.
FIGURE 33-2.  Model of Population and Economic Growth 
   Three factors may be seen as acting upon the creation of new technological knowledge: 
(1) the total number of persons in the labor force (or in research and development), who 
may produce valuable improvements; (2) the total production in a year - the gross 
national income - with which improvements may be financed; and (3) the per capita income 
level, which influences the average amount of education a worker receives and hence 
affects the individual's capacities to make technological discoveries.
   The time horizon is roughly 50 to 150 years, short enough to rule out major changes in 
the natural resources situation. But it is sufficiently long so that the delayed effects 
of knowledge are ble to play their role. 
   Though the model refers to the U.S., it is more appropriate to think of this analysis 
as applying to the developed world as a whole, because the MDCs are scientifically and 
technologically interdependent. This wider point of view skirts the possibility that one 
country might ride on the coattails of technological advance created by other countries 
(which cannot be done well anyway). 
   You may feel uneasy with the lack of precision in the analysis of how population size 
and growth affect the creation of new technological knowledge, as discussed in chapter 
26.  But to simply leave out the effect altogether is to implicitly (and unreasonably) 
estimate that the effect is zero (which is what the earlier models do).  Certainly the 
effect of population size on knowledge is greater than zero.  Where else but from 
people's minds, past and present, can advances in knowledge come from? Physical capital 
alone cannot generate ideas - perhaps in the future computers might - though physical 
capital does enhance "learning by doing."
   To put it differently, additional workers certainly are not the only cause of 
increased productivity. But over any period longer than the business cycle, the size of 
the labor force is a major influence upon total output. And if we hold constant the stock 
of physical capital and the original level of technological practice, then population 
size is the only remaining influence upon total output. Hence, the appropriate argument 
is about how to estimate this factor, and which estimates to use, rather than whether to 
include it at all.
   This model does not treat human beings only as "human capital", a commodity 
essentially plastic and inert like physical capital. Rather, it treats people as people - 
responding to their economic needs with physical and mental efforts, and the creative 
spark. Imagination and creativity are not concepts commonly included in economic models, 
nor are they ever above the surface even here. But let us recognize their importance 
unselfconsciously, and be willing to give them their due.

The Model's Projections

   Streams of income per worker were compared for a wide variety of population-growth 
structures, including both one-time increases in population size and different rates of 
population growth such as zero, 1 percent and 2 percent yearly. And the comparisons were 
made under a variety of economic assumptions about savings rates, and about the ways that 
additional people and various income levels affect changes in productivity. The most 
important result is that, under every set of conditions, demographic structures with more 
rapid population growth come to have higher per-worker income than less rapid population-
growth structures within 30 to 80 years after the birth of the additional child. Most 
often this happens after about 35 years - that is, about 15 years after the additional 
person enters the labor force (see figure 33-3). 
   FIGURE 33-3. Output per Worker with Various Rates of Population Growth 
   It is true that 30 to 80 years is a long way off, and therefore may seem less 
important than the shorter run. But we should remember that our long run will be someone 
else's short run, just as our short run was someone else's long run. Some measure of 
unselfishness should impel us to keep this in mind as we make our decisions about 
population policy. And it may help to know that the short-run cost differences between 
the various demographic structures are small by any absolute measure, and also small 
relative to other variables that are subject to governmental policies. 
   For purposes of population policy, however, we can reduce the comparisons of the 
different population-growth structures to a simple form - the tradeoff between present 
and future consumption. This simple tradeoff applies to population change just as to such 
long-lived social projects as dams and environmental changes. That is, a key issue in any 
overall judgment about population growth is the relative importance we attach to 
consuming something now versus saving and investing part of it so as to consume even more 
later on - a major theme of the book.
   The effect of additional children upon the standard of living (putting aside the 
pleasure that children give to their parents) is undoubtedly negative in the short run. 
In the years while children consume but do not produce, additional children mean less 
food and less education for each person, or additional effort on the part of the parental 
generation to fulfill the needs of the additional children. During this early period, 
then, children are an investment; their effect upon the standard of living is negative. 
And if attention is confined to this early period, then additional children count as a 
negative economic force.
   But if, on the other hand, we give weight to the more distant future, then the overall 
effect of the additional children may be positive. The positive effects will last much 
longer then the negative effects - indefinitely, in fact - and hence can outweigh the 
short-run effects even though it is natural to care less about a given period of time in 
the far future than about an equal period beginning now.
   The device used by economists to summarize this stream of future effects is the 
"discount rate." A low discount rate indicates that one gives relatively more weight to 
the future than does a high discount rate, though a future benefit or cost always gets 
somewhat less weight than a present benefit or cost. The futurity discount is very 
similar in concept to an interest rate, and the choice of appropriate discount rate is 
similar to the decision about the rate of interest one would be willing to accept in 
borrowing or lending money. If, for example, we set a discount rate of 5 percent per year 
we mean that, for every year longer we have to wait for a payoff, we require the payoff 
to be at least 5 percent more than the amount we invested the year before, or else we 
would not make the investment. If we invest $1.00 now, we would require $1.05 a year from 
now. If investing does not look that promising, we would rather spend our dollar now than 
forgo a dollar's worth of consumption until later. If we expect more than $1.05 back, the 
deal seems worthwhile if the appropriate discount rate is 5 percent.
   The model finds that even up to substantial rates of discount - at least 5 percent, to 
be contrasted with the real inflation-adjusted discount rate of 2-3 percent that seems to 
prevail in Western society over the long run - faster population growth has a higher 
"present value" than slower population growth. That is, social investment in population 
growth would be far more profitable than marginal social investments of other kinds. This 
finding may be contrasted with the standard conclusion that a lower rate of population 
growth is better at all rates of discount.
   You might check the conclusions drawn from this model with your intuition about 
whether all the people in the U.S. would be better off today if there had been half as 
many people in 1800 or 1850 or 1900 or 1950 as there actually were. It is plain that our 
ancestors bestowed benefits upon us through the knowledge they created and the economies 
of scale they left us, and if there had been fewer of those ancestors the legacy would 
have been smaller. It is worth keeping this in mind when speculating about whether life 
today and in the future would be better if there were fewer people alive today.
   Population models such as the one presented here were not accepted before the 1980s 
because of the preeminence of physical capital in the thinking of economists then. But 
there has been recognition in recent years of the fundamental importance of knowledge, 
education, and the quality of the labor force in the productive process.  The empirical 
studies that show the absence of a negative effect of population growth on economic 
development, also have affected the thinking of economists. As a result, the sort of 
model described here - allowing for the contribution of additional people to technology 
and human capital- is much more congenial to economists than at the time of the first 
edition of this book. 
   Despite the prevailing attitude against population growth, there never has been any 
scientifically valid evidence that population growth has a negative effect on the 
standard of living.  The President's Commission on Population Growth and the American 
Future of the early 1970s sought hard to find such evidence. The Commission's creators 
clearly hoped and expected that it would bring in a report that called strongly for 
fertility reduction. Indeed, as then-President Nixon put it in a message to Congress, 
"Population growth is a world problem which no country can ignore."  But despite its 
anti-natalist origin, the worst the Commission could say was, "We have looked for and 
have not found any convincing economic argument for continued national population 
growth."
   It is also interesting to note the changes in views of the economists on that 
Commission. Allen Kelley was responsible for the central review-paper on economic aspects 
of population change, and Richard Easterlin had the task of evaluating Kelley's study. 
This was the evolution of their views, as described by Easterlin:

     It is instructive, I think, to note Kelley's own statement on the change in his 
views as a result of this research.  Whereas he started out in the expectation that an 
anti-natal government policy was justifiable on economic and ecological grounds, he ended 
up in a much more neutral position.  In this respect, Kelley's experience is 
representative, I think, of that of many of us who have tried to look into the arguments 
and evidence about the "population problem."
     
   Many people in the U.S. and Europe - school administrators, university teachers, 
social security planners, and publishing houses, for example - have by now seen the face 
of zero population growth, and many have not liked what they have seen.  Slower 
population growth and diminished demand have not brought the expected benefits, 
especially in education. By 1980, the lower schools were suffering from diminished 
enrollment. Instead of school systems feeling flush with resources in times of declining 
enrollments, a newspaper story headlined "Empty-Desk Blues" told of increasing budget 
problems in the schools despite the declining demand.  And at the time of writing in 
1992, the universities are complaining of "shrinking classes" and diminished pools of 
talent - even so few students that they must close. "Indicators of serious trouble", 
complained a newspaper that for long has asked for lower population growth (the editorial 
even complains that the situation is making students "jumpier" than before!).  Low 
population growth brings a cut in real salaries for many, and a lack of the excitement 
that growth usually brings for all.  In the 1960s Singapore gave people financial 
incentives to have fewer children. But after observing the results, Singapore turned 
completely around in the 1980s and gave incentives (though only to the middle class) to 
have more children.  There are other reasons, too, for budget problems in schools. School 
systems in the U.S. face both rising costs and voter opposition to higher tax rates.  
Nevertheless, it is illogical and ironic that less demographic pressure should be 
associated with worsened budget squeezes in the schools.  In contrast, when enrollments 
grow, communities somehow have found the way to support education well; witness the 
unprecedented and huge influx of ex-servicemen into U. S. colleges after World War II.   
   Adam Smith had it right: "The progressive state is in reality the cheerful and the 
hearty state to all the different orders of the society the stationary is dull the 
declining melancholy." 


               AT THE COST OF THE POORER COUNTRIES?

   Does the increase in the MDC standard of living as a 
result of population growth come at the expense of the 
poorer countries? Many assert that a country is 
"overpopulated" if it is not self-sufficient in food and 
other raw materials, and then leap to the judgment that 
poor countries are thereby being exploited.  Consider 
these paragraphs, for example, by Paul Ehrlich.

Few Europeans seem to realize that they must draw heavily 
on the rest of the world for the resources necessary to 
maintain their affluence.  Few also seem to realize that, 
with a few exceptions, European nations could not feed 
themselves without importing food (or fertilizer, or the 
petroleum to run farm machinery, etc.)...
Even an island nation like Great Britain seems relatively      oblivious to her extreme 
degree of overpopulation.....       The fact of Great Britain's almost total dependence 
on the rest of the world is only dimly perceived, and the continuance of today's world 
trade system is simply taken for granted.

But Ehrlich himself (in his sort of rhetoric) "fails to realize" that exchange is a 
fundamental and necessary element of human civilization, and that it is quite misleading 
to think of one trade partner "supporting" another.  Saudi Arabia no more "supports" the 
Netherlands by exporting oil than the Netherlands "supports" Saudi Arabia by exporting 
electronic goods. If you are a white-collar worker, you support a farmer with what you 
produce just as much as the farmer supports you. To divide the exchange in half and call 
one direction "supportive" and the other    "exploitive" can only be misleading.  Any 
attempt to make each of us self-sufficient pushes us back toward the short, sickly, 
hungry, impoverished life of subsistence agriculture.
   Yet another misleading idea underlies the belief that the so-called dependence of 
densely-settled on sparsely-settled areas is a sign of overpopulation. This view 
implicitly assumes that national borders are the only ones that matter. If one is 
thinking of war, that certainly is true. But in the peacetime that I assume we are 
discussing, Chicago is at least as "dependent" on downstate Illinois for soybeans as is 
Tokyo, yet no one thinks that Chicago is overpopulated because it is not self-sufficient 
in soybeans. To make the sort of distinction Erhlich makes between the U.S. and Japan - 
to call the latter "overpopulated" because it gets its soybeans from abroad - is an 
archaic nationalistic theory of   economics called "mercantilism," a theory that was 
demolished by Adam Smith in 1776. The more general charge that MDCs "exploit" the LDCs 
and "rape" them of the resources that they should be saving for their own use was 
dispatched in chapter 28.


                             SUMMARY

   The earlier and still-popular models of population growth's effects in MDCs - all 
founded on the Malthusian idea of diminishing returns - are directly contradicted by the 
empirical data. These models say that adding more people causes a lower standard of 
living; the data show no such thing. This chapter describes a theoretical population 
model that is more consistent with the facts.
   The increases in productivity that result from the larger scale of industry, and from 
the additional knowledge contributed by additional people, are here added to a simple 
economic model of a more-developed country.  The model works with a range of assumptions 
that I trust are realistic. The results indicate that developed countries with faster 
rates of population growth initially fall behind in per capita income, but only very 
slightly.  Later they do better than those with lower rates of population growth, usually 
in 30 to 80 years. That is, for the first 30 to 80   years after the birth of an 
additional child - 35 years is perhaps the most common period in the models - per capita 
income is very slightly lower because of the additional child. But after that period, per 
capita income is higher with the additional child, and the advantage of the faster 
population growth comes to be very considerable. Thus, though an increment of population 
initially has a small negative effect upon economic welfare, after a few decades the 
effect becomes positive, and large.
   Most telling of all (but hard to tell non-technically), computations that combine the 
longer-term and the shorter-term population effects in a standard present-value framework 
of investment analysis indicate that even at costs of capital that are quite high 
relative to the social cost of capital, faster population growth has a higher present 
value than does slower population growth in almost all model variations.  That is, higher 
population growth in MDCs is an attractive social investment as compared with other 
social-investment possibilities.
   To achieve a reasonable understanding of the effects of population growth, we must 
extend our horizon beyond the near-term years and weigh together the effects of the long 
run and the short run. When this is done, population growth in the MDC world is seen to 
be beneficial, rather than being the burden it appears to be in earlier Malthusian models 
which have only a short-run perspective.

AFTERNOTE 1
WILLIAM SHAKESPEARE, PROCREATION, AND THE ECONOMICS OF DEVELOPMENT

   In the span of 14 lines and however long it took to write them, William Shakespeare 
arrived at the heart of the demographic-economic vision for which moderns such as I have 
had to struggle long and hard, and which is embodied in this chapter.  Of course it may 
be romantic, contrary to fact, and even counter-productive to think that Shakespeare 
arrived at this vision in a blinding flash.  Perhaps he, too, struggled for it through 
many years before he compressed it into a few rhymes.  But without doubt he got there 
without the help of the great predecessors who built the steps and lighted the way for us 
moderns, and without the data collected over two centuries that now provide the sub-
strate for the idea.     
   Of course Shakespeare's Sonnet 1 does not comprise a theory of the human enterprises's 
demographic-economic development.  Yet the sonnet takes up themes and expresses a vision 
uncannily parallel to the present theory of that subject.  My aim here is to use the 
sonnet to illuminate that theory--to see the theory more clearly and show it to be more 
persuasive than it might otherwise appear.
   The "good" that Shakespeare wishes to advance is poetic truth, indistinguishable from 
beauty.  This is the parallel to the natural resources and standard of living which are 
the subject of contemporary study of economic development.  More about this shortly.  
   Let us examine Sonnet l.  (That number may be more than a coincidence, just as it is 
not a coincidence that Genesis comes at the beginning of the Bible.) 

                            Sonnet 1

          From fairest creatures we desire increase,
          That thereby beauty's rose might never die, 
          But as the riper should by time decease,
          His tender heir might bear his memory;
          But thou, contracted to thine own bright eyes,
          Feed'st thy light's flame with self-substantial fuel,
          Making a famine where abundance lies,
          Thyself thy foe, to thy sweet self too cruel.
          Thou that art now the world's fresh ornament 
          And only herald to the gaudy spring,
          Within thine own bud buriest thy content
          And, tender churl, mak'st waste in niggarding.
          Pity the world, or else this glutton be,
          To eat the world's due, by the grave and thee.

   Shakespeare begins by assuming that "From fairest creatures we desire increase"--that 
is, that there should be more of such creatures.  By "creatures" Shakespeare means 
people, our human species.  That Shakespeare has such a demographic-like process in mind 
is clear from his third and fourth lines--death preceded by birth and renewal.  And we 
may suppose that Shakespeare is interested in the human race as a whole, not only in its 
most beautiful specimens.  In The Tempest (v, i, 181), we read "How beauteous mankind 
is!"
   If Shakespeare is indeed talking about people as if humans have a place different than 
other creatures in the scheme of things, the sonnet immediately takes its leave of those 
in our society today who believe that "other species have rights, too" (see chapter 39). 
These persons assert that when there is a conflict or trade-off between the increase of 
people and the increase of other species, the former must be constrained for the sake of 
the latter.  These thoughts do not square with Shakespeare's ordering of the species. 
   The Sonnet's first line suggests that Shakespeare desires increase in the number of 
fair creatures for their own sake, just as many people look with satisfaction upon a 
populous, prosperous community.  This sets him apart from many people in our age, for 
whom the increase of the human population is not a value in itself. 
   I do not suggest that Shakespeare was calling for an indiscriminate increase in 
people.  Indeed, he mentions only the fairest,  which we might interpret as the most 
talented.  But perhaps if asked, Shakespeare would have agreed that talent is spread 
widely, and that most people create a bit more than they use or destroy.  And perhaps he 
would also have agreed that because it is difficult to predict where the bud of talent 
may sprout -- he himself being a most powerful example -- the best way to increase the 
number of the fair is to increase the total number of people. 

   In his second line, Shakespeare gives us yet another reason for desiring increase: 
survival of humankind.  Many persons today consider this idea "primitive" and logically 
unwarranted. Rather, the stabilization and zero growth of the population is seen as a 
value.  

   Even for many among those who care about survival of humankind, survival of the race 
as a whole is subordinate to increase of their own ethnic or religious sub-group. And 
this preference is often sentimental rather than a matter of seeking larger numbers to 
help them prevail in political conflict.  In contrast, Shakespeare's only special 
pleading is in favor of people who are "beautiful" and creative.  

   Let us turn now to Shakespeare's description of the mechanism of the advance of 
civilization, the most remarkable aspect of this sonnet.  For Shakespeare, progress 
rather than just stability is within our powers and possibilities; this is implicit when 
he writes of increase and abundance rather than merely maintenance and subsistence.  Here 
is no pinched and dismal Malthusian vision of humanity's place on the globe, but rather 
an expansive and optimistic outlook of human dominion. 

   But then Shakespeare warns that we humans may forego our opportunities by narcissistic 
preoccupation with our own luxurious living -- by taking from the common pot of humanity 
without putting back into it.  "[C]ontracted to thine own bright eyes", Shakespeare tells 
us, humanity can make "a famine where abundance lies" by feeding our own "light's flame 
with self-substantial fuel".  That is, we can fail to employ our capital, the true nature 
of which is the human drive to create and improve and advance.  Instead, humanity may 
devote its energies to consumption and self-satisfaction, thereby burying within one's 
"own bud" our "content."  I was taken aback by the combination of beauty and 
understanding of life with which these few lines are suffused.  The lines surpass in both 
respects other writings on the subject, scientific and artistic. 

   Here we must pause to discuss the nature of the "good" that might either be created in 
"abundance", or be made so scarce as to cause a "famine".  Shakespeare certainly did not 
envision a process of economic development such as engages contemporary analysis of the 
subject, wherein we wish to increase the supply of consumer and investment goods, as well 
as natural resources, in order to live longer and better.  Rather, Shakespeare cared 
about the world's stock of poetic truths such as he struggled to give us.  And poetic 
truth is of course interrelated with -- perhaps is identical to -- the esthetic aspect of 
life which Shakespeare calls "beauty", and which may be physical or artistic or 
spiritual.  G. Wilson Knight argues forcefully that in the sonnets there is an 
interpenetration of the ideas of time (both past and future), material beauty, poetry, 
immortality, truth, nature, and art.  A key idea is that the immortal "substance" of 
poetic beauty is "distilled" from the mere "show" of human beauty, "A liquid prisoner 
pent in walls of glass" (Sonnets 5, 6).  This transmutation of physical beauty into 
poetic truth provides the best of reasons for Shakespeare to write poems about a 
particular beautiful young man.  And indeed, Knight writes that "The poet knows well that 
his poetry is more than his ordinary self.  It is `the very part was consecrate to thee', 
his own `spirit', `the better part of me', to be contrasted with the element of `earth' 
which is `the dregs of life', bound for death ([Sonnet] 74).  This `better part'...is a 
refined state of being, like the refinement of distilled essences."  
   From an economic point of view, the good that we may call truth-and-beauty is 
conceptually no different than raw materials such as grain, or processed goods such as 
services and manufactured products.  As information and knowledge constitute an ever-
larger part of our economy with every passing year, and tangible goods (especially 
natural-resource materials, including energy) become an ever-smaller share of inputs, 
there should be less and less difficulty in agreeing that truth-and-beauty -- call it 
art, if you like -- is a good which may be construed theoretically in ways similar to the 
ways we construe other economic goods.  A key respect in which truth-and-beauty is like 
knowledge, and thereby like the supply of natural resources that flows from knowledge, is 
that our stocks of both sorts of intellectual goods are not depleted by use, but instead 
continue forever to enhance human life.  

   Then Shakespeare proceeds to tell us that we may waste our chances, not only by 
gluttony and self-devotion, but also by attending to conservation rather than creation.  
He tells us that a society "mak'st waste by niggarding."  This is a striking vision of 
the nature of civilization.  It may be seen as parallel to the following sequence: 
Increase in population size, and rise in the standard of living, force upon us new 
problems.  These emerging problems lead to the search for solutions (though great 
developments may also arise in a more spontaneous fashion).  And the solutions arrived at 
leave us better-off materially, and perhaps with more efficient social organizations, 
than if the problems had never arisen in the first place.  (Hence we need our problems 
because eventually we benefit from them.)  

   The resonance of the sonnet suggests that Shakespeare would have been sympathetic to 
this process. He would have felt at home, I think, with the notion that humanity not only 
needs to have problems solved, but also needs to impose bigger and better problems upon 
ourselves as a challenge to our creative powers -- for the benefit of the human spirit as 
well as for the eventual benefit of our descendants. 

   So I say with Shakespeare,  "Pity the world, or else this glutton be, to eat the 
world's due, by the grave and thee". 


                         **************


   It is interesting to contrast Shakespeare's view of the course of civilization and 
productive economy with that of Bernard Mandeville, who lived not much later.  Mandeville 
also expressed himself in rhyme but he clearly was a social scientist by inspiration 
rather than a poet.  (See the lengthy prose notes following the short rhyming pages of 
The Fable of the Bees.)  Mandeville saw improvement and advance as inevitable, brought 
about by the same selfish qualities that Shakespeare lamented, qualities which Mandeville 
might also not have admired or enjoyed but nevertheless saw as a constant element in 
human nature.  And Shakespeare referred (King Henry V, Act 1, Scene 2) to the same 
mysterious phenomenon of social organization and spontaneous cooperation among insects 
that Mandeville described in The Fable of the Bees; it may already have been a common 
insight in English culture by them.  It is pleasant to imagine a meeting of the two men, 
each describing his vision and with the other instantly seeing the point and joining the 
other's vision to his own in a grand amalgamation. 



AFTERNOTE 2
How Immigrants Affect Our Standard of Living

   Immigration, illegal and legal, has touched a sore spot in American public opinion for 
150 years and more.  The reasons opponents of immigration give are mostly economic - 
jobs, welfare, and housing. But in fact, American citizens can do well while doing good 
by admitting refugees. Rather than being a matter of charity, we can expect our incomes 
to be higher rather than lower in future years if we admit more Cubans, Haitians, Indo-
Chinese, Mexicans, Italians, Filipinos, and other ethnic immigrants.
   The first edition discussed the economic effects of immigration, but since then I have 
written an entire book on this subject, and it no longer makes sense to tackle the 
subject here in brief.  Instead, here is a thumb-nail summary:
   Immigrants pay much more in taxes than the cost of the welfare services and schooling 
that they use.  In fact, the average immigrant family uses less welfare services and pays 
more taxes than the average native family!  This is because immigrants are not old, 
tired, and without skills.  Rather, they are on average in the early prime of their work 
lives.  And they are about as well educated as the native labor force, with a much larger 
proportion of professional and technical persons such as doctors and engineers. 
   Immigrants directly raise productivity with the new scientific and technical ideas 
that they invent. They also improve productivity indirectly by way of their earnings, 
which when spent increase the overall volume of goods and services produced, which in 
turn causes industries throughout the economy to learn how to produce more efficiently. 
   Immigrants have no observable negative effect upon unemployment, many recent studies 
agree. This is mainly  because they not only take jobs, but with their earnings which 
they then spend, they make as many jobs as they take. Furthermore, they make additional 
new jobs with the new businesses that they open.
   Immigration promotes progress toward all of the U. S. national goals at once -- a 
stronger economy, heightened productivity, increased international competitiveness, 
better international relations.  
page # \ultres\ tchar33 February 15, 1994