Populationa growth and economic performance

The increase in productivity that result from the larger scale of industry, and from the additional knowledge contributed by additional people, are very important in analyzing the population and economic development. 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 yrs. Though an increment of population initially has a small negative effect upon economic welfare, after a few decades the effect becomes positive, and large.

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 they invent. Immigrants 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.

Additional children influence the lower developed countries economy by inducing people to work longer hours and invest more, as well as by causing an improvement in the social infrastructure, such as better roads and communication systems. Additional population also induces economies of scales in other ways. The upshot us that although additional children cause additional costs in the short run, a moderate rate of population growth in poor countries is more likely to lead to a higher standard of living in the long run rather than either zero population growth or a high rate of population growth.

Population and environment

Although there may be some short-run increase in pollution due to population increases, the additional pollution is relatively small. And in the long run, pollution is likely to be significantly less due to population growth.

Along with higher income and its consequent greater supply of pollutant comes a greater demand for cleanup, plus an increased capacity to pay for it and greater technical ability to execute the cleanup.

Population and land

Though more land per person was available in the past than at present, people did not farm all the land available to them for 2 reasons:
(1) people were physically unable to farm larger areas than they actually farmed
(2) farmers in the past had little motive for farming more land

Reduction in the amount of land available to the farmer causes little hardship if previously he was not farming at all the land that was available. When farmers need more land they make more land. People create land--agricultural land--by investing their sweat, blood, money, and ingenuity in it.

Data show that the absolute number of farm workers is going down, and consequently the absolute amount of land per farm worker is going up. 

Job "destruction" is a confusing label for the very essence of economic progress--making a given amount of goods with fewer people. 

In the poorer agricultural countries the creation of new land has been the source of most of the long-run increase in agricultural output which has kept up with population growth. As the available land for crops becomes more and more costly to transform into cropland, farmers will instead crop their existing land more intensively. The use of traditional farmland is no longer the only way to produce food.

The idea that population growth breeds war has been used to justified national policies to "control birth rate". But it doesn't apply in modern society. Additional territory nowadays generally has no value to a nation.

Economies of scales

The phenomenon called learning by doing is surely a key factor in the improvement of productivity in particular industries and in the economy as a whole. The idea: the more units produced in a plant or an industry, the more efficiently they are produced, as people learn and develop better methods.

Population

Population growth clearly leads to an improved transportation system, which in turn stimulates economic development and further population growth.

The most important economic effect of population size and growth is the contribution of additional people to our stock of useful knowledge.

It is impossible for the arts and sciences to arise, at first, among many people unless that people enjoy the blessing of a free government...An unlimited despotism...effectually puts a stop to all improvements, and keeps men from attaining...knowledge.---David Hume

The competition fostered by independence allowed people considerable freedom from monarchs and bureaucracy. This afforded them economic opp to use their talents, make advances, and profit from their efforts.

There are two kinds of inventions:
(1) invention-pull: those that are adopted as soon as they are proven successful in that they increase production with no more labor

(2) population-push: those at first require more labor, and hence will not be adopted until demand from additional population warrants the adoption.

Productivity increases faster when population is larger.

A larger population influences the production of knowledge through both supply and demand mechanisms.

Supply side: a larger population implies a larger amount of knowledge being created, all else being equal, as a result of there being more people to have new ideas.

Demand side: more people means there are higher demand for consumption in the short run. Prices rise, and induce entrepreneurs and inventors to step to get profit.

Demographic

Population has not been constant or steady over the long sweep of time.

The tool-using and tool-making revolution kicked off the rapid rise in population around 1 million B.C.E. The aid of various implements "gave the food gather and hunter access to the widest range of environments." But when the productivity gains from the use of primitive tools had been exploited, the rate of population growth fell, and population size again settled down near a plateau.

The next rapid jump in population started perhaps ten thousand years ago, when people began to keep herds and cultivate the earth, rather than simply foraging for wild plants and game.

These two facts imply that the present rapid population growth, starting 300 or 350 yrs ago, may abate when the benefits of the new industrial and agricultural and other technical knowledge that followed the early scientific and industrial revolutions begin to peter out.

In the long-run view population size adjusts to productive conditions rather than being an uncontrolled monster. Constant geometric growth does not characterize human population history. Population growth to some extent represents economic success and human triumph, rather than social failure. 

Population size and growth are influenced by political and economic and cultural forces, and not only by starvation and plague due to changes in natural conditions.

The main cause of the rapid increase in population during the past two centuries is the decrease in the world's population rate.

Three ways to organize waste disposal

(1) commanding
(2) guiding by tax and subsidy
(3) leaving it to individual and the market

A good way for garbage:
Each homeowner contacts with any one of the private haulers who works in the area. They gauge their charges according to how much garbage homeowners put out, the standard rate being augmented by special charges for special hauling. Homeowners can change the haulers at the end of each month if they are not satisfied with the service. The haulers make a deal with a private landfill operator.

Two drawbacks to recycling:
(1) it costs taxpayers more money (opp cost)
(2) it usually injects an element of coercion which is antagonistic both to human values as well as to the efficient working of a free-market system.

Externalities

The key short-run issue is government policy with respect to energy. The programs called by environmentalists combine support for "alternative" sources of energy such as wind and solar, taxation of fossil fuels to reduce their use, and raising all possible obstacles to the use of nuclear power.

Energy accounting has great intellectual charms but of course if society were to follow an energy-economizing rule, we could not have modern life,

Why do people worry so much about wastes

(1) Lack understanding of how an economic system responds to an incerased shortage of some resource:

People tend to underestimate the likelihood that people and organizations will make characteristically human adjustments to daily life and society.

(2) Lack of technical knowledge or imagination

Many people who do not already know a technical answer to a given problem don't try to discover the possible solutions, and not do they imagine that others can dream up solutions. A "technical fix" is the entire story of civilization. The combination of technical imagination plus a free-enterprising system constitutes the crucial mechanism for dealing with waste. 

(3) The moral feeling about recycling

Conservation

We can clarify conservation issues by distinguishing among the following:
(1) unique resources, which are one-of-a-kind or close to it, and which we value for aesthetic purposes (Mona Lisa, MJ's basketball game)
(2) One-of-a-kind resources that we value as historical artifacts, (original U.S. Declaration of Independence)
(3) Resources that can be reproduced or recycled or substituted for, and that we value for their material uses (wood pulp, trees, copper, oil, and food)

Category 3 are resources for which we can calculate whether it is cheaper to conserve for future use, or use now and obtain the services they provide. A question is whether as individuals and as a society we should try to use less of these materials than we are willing to pay for. Answer:apart from considerations of national security and international bargaining power, there is no economic rationale for special efforts to avoid using the resources. 

You should turn off the light if the money cost of he electrical energy is greater than the felt cost to you of taking a few steps to the light switch and flicking your wrist. It is rational for us to avoid waste if the value to us of the resource saved is more than the cost to us of achieving the saving.

There is much confusion between physical and economic conservation. To "save water" by not flushing the toilets is not rational economics.

Worst-case thinking may be appropriate for safety engineers, but it is not appropriate for most everyday planning.

The conservationists do not believe that consumers will react rationally to changes in resource availabilities and prices.

Where costs do not settle the issue, the decision about what is conserved, and how much, is a matter of tastes of values.

Recycling is one thing when it is economically worthwhile for the person who is doing the recycling but another thing when it is done purely for symbolic purposes. People voluntarily recycle valuable resources and throw away less valuable items that take more effort to recycle than they are worth. Coercive recycling is actually more wasteful than throwing things away. It wastes valuable labor and materials that could be put to better use--creating new life, new resources, and a cleaner environment. 

Pollution

The worst pollutions of the past were diseases caused by microorganisms, and spread by contaminated drinking water and by airborne germs and insects. In the rich countries we have been so successful in sanitary operations and preventive medicine that infectious diseases are no longer even thought of when pollution is discussed, though in poor countries these diseases still are mass killers.

The next worst pollutions of past and present are dust particulates from burning fossil fuels.

Finally, there are the trivial pollutions and downright false alarms.

Economics theory views natural resources and pollution as the opposite sides of the same coin. The key conceptual difference between a natural resource and pollution is that the goods we call "natural resources" are largely produced by private firms, which have a strong motive--profit--for providing what consumers want. In contrast, the good we call "absence of environmental pollution" is largely produced by public agencies through regulation, tax incentives, fines, and licensing.

Another difference between natural resources and pollution is that natural-resource transactions are mostly limited in impact to the buyer and the seller, whereas one person's pollution is "external" and may touch everybody else.

Economists conceptualize the reduction of pollution as a social good that can be achieved technologically but costs resources.

The combination of affluence and improved tech tends toward greater cleanliness.
After thousands of years of almost no improvement, in the past two hundred years in the rich countries there has been a long upward climb in life expectancy; in poor countries, life expectancy has increased extraordinarily sharply during the latter half of the century.

Serious deterioration in some aspects of environmental quality did take place between 1840 and 1940... Since 1940, however, the quality of the environment has in some respects markedly improved. Rivers have been cleaned of their grossest floating materials.

Water, lumber

Usable water is like other resources in being a product of human labor and ingenuity. People "create" usable water, and there are large opportunities to discover and utilize new sources.

Water for residential use will never be a long-run problem in itself because even at the cost of the most expensive means of production--desalination--the cost of water used by households is small relative to households budgets in rich countries. The desalinated price may be much less as tech improves and the price of energy falls. Furthermore, homes reduce their use of water as the price goes up.

The most important fact for consumer water supply is that most water is used in agriculture. The reason that there are cases of absolute shortage and rationing is that price is not allowed to respond to market conditions, but rather is fixed at a low subsidized price in many agricultural areas. Another difficulty is that agricultural and municipal rights to use water from rivers are complex legal structures that often do not fit modern needs.

Many trees are planted in order to be cut down--especially for paper. Indeed, 87 percent of all paper in the United States is produced from trees planted and grown for that purpose by the paper industry.

Why does the public believe that forests in Europe are declining when they are actually increasing? Part of the explanation is that researchers invalidly infer general effects from partial biological data.

More lumber is purposely planted. Higher productivity enables an increasing number of trees grow on a shrinking area. Conservation efforts due to higher prices, and research on wood and wood substitutes.

Food production

The record of food production entirely contradicts the scary forecasts.

A long and broad view of food production found continuous improvement with no end in sight. Any country that gives farmers a free market in food and labor, secure property rights in the land, and a political system that ensures these freedoms in the future will soon be flush with food, with an ever-diminishing proportion of its work force required to produce the food.

The rise in food output was so great as to cause grain to become cheaper despite the large increase in demand.  (agricultural knowledge gained from research and development induced by the increased demand, the increased ability of farmers to get their produce to market on improved transportation systems.

Superficially it might seem that farmers benefit from the overall government program because of the subsidies. But close analysis shows that most of the subsidies finally come to rest in the hands, not of the cultivators, but of the owner of the land in the form of proceeds from land sales at price made high by the value the subsidies confer.

Another set of beneficiaries of government programs are the government officials.

Modern technological capacities in league with modern transportation capacities, harnessed to farmers' ingenuity when offered a chance to make money, have vastly reduced the likelihood of a major disturbance in our food supplies. 

The most important fact about the world's agricultural land is that less and less of it is needed as the decade pass. The reduced economic importance of land is shown by the long-run diminution in the proportion of total tangible assets that farmland has represented in various countries.

The definition of "arable" changes as tech develops and the demand for land changes. Hence, any calculation of "arable" land should be seen for what it is-- a rough temporary assessment that may be useful for a while but has no permanent validity.

The combination of increased productivity per acre of good land, and increased use of equipment adapted to flat land, has made it unprofitable to farm some land that formerly was cultivated.

Though the stock of usable land seems fixed at any moment, it is constantly being increased by the clearing of new fields or the reclamation of wasteland. Land also is constantly being enhanced by increasing the number of crops grown per year on each unit of land, and by increasing the yield per crop with better farming methods and with chemical fertilizer. And land is created anew where there was none.

Grand theory

What are the key patterns that maintained us and increased our numbers?
Humans are, on net balance, builders rather than destroyers. The evidence is that the civilization which our ancestors have bequeathed to us contains more created works than the civilization they were bequeathed.

If one notices only the using-up and destructive activities of humankind, without understanding that constructive patterns of behavior must have been the dominant part of our individual-cum-social nature in order for us to have survived to this point, then it is not surprising that one would arrive at the conclusion that resources will grow scarcer in the future.

High fertility leads to increased chances of survival of the group. High fertility leads to resource problems which then lead to solutions to the problems which usually leave humanity better off in the long run than if the problems had never risen.

The concept of the second law of thermodynamics underlies a vision of the human condition as inexorably sliding toward the worse in the long run. The concept of entropy is unquestionably valid and relevant for a closed container in the lab. It may also be relevant for any larger entity that can reasonably be considered a closed system. But the earth is not a closed system because both energy (from sun) and matter (cosmic dirt, asteroids, debris from many planets) constantly rain down on the earth. With respect to energy there is no practical boundary surrounding any unit of interest to us, and without such a boundary, the notion of entropy in the large is entirely irrelevant to us.

Infinite natural resources

Natural resources cannot be measured and thus they are infinite. The supply of natural resources is not finite in any economic sense, which is one reason why their cost can continue to fall indefinitely.

Increased scarcity causes the development of its own remedy. This is the key process in the supply of natural resources throughout history.

Improved efficiency of copper use not only reduces resource use in the present, but effectively increases the entire stock of unused resources as well.

Principle: more people, and increased income. cause resources to become more scarce in the short run. Heightened scarcity causes price to rise. The higher prices present opportunities and prompt inventors and enterpreneurs to search for solutions.Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems hadn't risen. 

Discoveries of improved methods and of substitute products are not just luck. They happen in response to an increase in scarcity--a rise in cost. Even after a discovery is made, there is good chance that it will not be put into operation until there is need for it due to rising cost. Scarcity and technological advance are not two unrelated competitors in a Malthusian race; rather, each influences the other. 

A conceptual quantity is not finite or infinite in itself.

The concept of diminishing rate of return applies to situations where one element is fixed in quantity and where the type of technology is also fixed. But neither of these factors applies to mineral extraction in the long run. Whether the cost rises or falls in the long run depends on the extent to which advances in tech and discoveries of new lodes counteract the tendency toward increasing cost in the absence of the new technology.

Why engineering forecast fuck up

The approach of the engineering analysts who rely on physical principles is as follows. They estimate quantities and "qualities" of resources in the earth, assess the present methods of extraction, and predict which methods of extraction will be used in the future. With those estimates they then calculate the amounts of resources that will be available in future years, at various costs of extraction (in the better forecasts) or just at the present cost (in the less-thoughtful forecasts). At the root of this material-technical view of natural resources is the assumption that a certain quantity of a given mineral "exists" in the earth and that one can, at least in principle, answer the question: How much (say) copper is there?

 Too often we view natural resources as we view the operation of a single copper mine: Dig some ore, and less is left.

There is one resource that has shown a trend of increasing scarcity rather than increasing abundance, human beings. Yes, there are more people on earth now than ever before. But if we measure the scarcity of people the same way that we measure the scarcity of other economic goods--by how much we must pay to obtain their services--we see the wages and salaries have been going up all over the world. This increase in the price of people's services is a clear indication that people are becoming more scarce even though there are more of us.

Material-technical forecasts of resource exhaustion often go wrong for two reasons. (1) No matter how closely defined, the physical quantity of a resource in the Earth is not known at any time, because resources are sought and found only as they needed. (2) Even if the physical quantities of particular closely defined natural resources were known, such measurements would not be economically meaning, because we have the capacity to develop additional ways to meet our needs. Thus, the existing "inventory" of natural resources is operationally misleading; physical measurements do not define what we will be able to use as future supplies.

Reserves are but a small part of the resources of any given commodity. Reserves and resources are part of a dynamic system and they cannot be inventoried like cans of tomatoes on a grocer's shelf. New scientific discoveries, new tech, and new commercial demands or restrictions are constantly affecting amounts of reserves and resources. Reserves and resources don't exist until commercial demand puts a value on a material in the market.

Scarcity

The appropriate measures of scarcity - the costs of natural resources in human labor, and their prices relative to wages and to other goods - all suggest that natural resources have been becoming less scarce over the long run, right up to the present.

The real population problem, then, is not that there are too many people or that too many babies are being born. The problem is that others must support each additional person before that person contributes in turn to the well-being of others.

A baby is a durable good in which someone must invest heavily long before the grown adult begins to provide returns on the investment.

There is an intuitive difference between how we get Hula-Hoops and copper. Copper comes from the earth, whereas a Hula-Hoop does not seem to be a "natural" resource.

Hula-Hoops and dental care and radios seem different from copper because most of the cost of a radio, a Hula-Hoop, or dental care arises from human labor and skill, and only a small part arises from the raw material.

Over the course of history, up to this very moment, copper and other minerals havebeen getting less scarce, rather than more scarce as the depletion theory implies they should.

At the end of this confrontation between theory and fact, we shall be compelled to reject the simple Malthusian depletion theory, and to offer a new theory.The revised theory will suggest that natural resources are not finite in any meaningful economic sense.

Price, together with related measures such as cost of production and share of income, is the appropriate operational test of scarcity at any given moment.

Some people believe that we are now at a long-run turning point, and the past is not a guide to the future. Therefore we ask: How should one judge whether a historical trend is a sound basis for a forecast? Specifically, how can we judge whether the data from the many decades in the past showing declines in raw-material costs are a good basis for prediction? Prediction is always a leap of faith; there is no scientific guarantee that the sun will come up tomorrow. The correctness of an assumption that what happened in the past will similarly happen in the future rests on your wise judgment and knowledge of your subject matter.

A prediction based on past data is sound if it is sensible to assume that the past and the future belong to the same statistical universe, that is, if you can expect conditions that held in the past to remain the same in the future.

The most important elements in raw-material price trends have been (1) the rate of movement from richer to poorer ores and mining locations - that is, the phenomenon of "exhaustion", and (2) the continued development of technology, which has more than made up for exhaustion. Hence if the past differs from the future, the bias islikely to be in the direction of understating the rate at which technology will develop, and therefore underestimating the rate at which costs will fall.