Politicians and economists often argue that an increase population is good for the economy.
Why? Are They Correct?
- Does a larger population mean a larger economy?
- Why do politicians and economists argue for population growth?
- Economy vs Citizens:
- Is a larger population good for the economy?
- Answer: yes, even if it is bad for individual citizens
- Is population growth good for the economy?
- Answer: yes, but at the expense of increasing inequality
- Is a larger population good for the economy?
- Governments, Billionaires and Multinationals: Farming Humans.
Does a larger population mean a larger economy?
All else being equal, in total yes. But large populations drive inequality, so not necessarily.
Looking at counties ranked by GDP, it is clear that it is not in the same order as a list of countries by population. This is because GDP per capita changes significantly between countries. Simplistically, the total economy is:
Total GDP = GDP per capita x total population
Clearly, if population increases without changing GDP per capita, then total GDP will increase. In reality, changing the population size will change, and typically decrease, GDP per capita. Total GDP is more complex than the simplistic formulae, and includes factors like ‘accessible natural resources‘. For example if farming is part of economy, adding more people will not proportionally add more farm land, unless that country still has unused land of the same quality as existing farm land. In the end, it can be difficult to add more people and retain the GDP per capita ratio, but every additional worker added, should result in some rise in total GDP.
So, moving a country to a larger total population should increase GDP of that country, even if the larger population lowers GDP per capita and reduces living standards. To use the image above as a metaphor, there should be some more additional money raining down, but there will be more people to get a share of that money, so the ratio of money to people would normally mean less money each.
Why do politicians and economists argue for population growth?
For the average citizen, living standards are determined by GDP per capita. This means for the average citizen, economic growth is only a good thing, if it also delivers personal economic growth. Unlike individuals, national and global organisations are mainly impacted only by total GDP, and have no motive for individuals to increase, or even maintain their individual wealth, provided the entire economy grows. Even if these organisations earn less wealth per individual, if there are sufficient extra individuals to earn from, then they can still earn more in total. Individual wealth is unimportant to these organisations, as their income is a fraction of the total of all wealth, so GDP per capita is unimportant.
In 2019, the Prime minister of Australia declared that a per capita recession was not an economic term worthy of recognition. Effectively declaring that the per capita GDP was unimportant, with total GDP being the only statistic that was important, at least to him.
This is effectively declaring that, to that government, individual wealth is not significant. Government economic success is most often measured by economic indicators that reflect the situation for big business, and the small percentage of very wealthily individuals who own those big businesses.
This topic is covered in more detail in ‘Economic Growth: Holy Grail?‘.
In summary, governments and economists may argue for increased population as it will grow overall economy, even if at the expense of average individual wealth, because they are rewarded for delivering total economic growth. Total economic growth is all that is required to provide positive economic indicators, and to keep those most likely to provide substantial political funding happy.
Economy Vs Citizens
Is a larger population good for the economy?
Answer: yes depending on what is meant by ‘the economy’, but again potentially bad for each citizen
The economy is often measured by total GDP, and as pointed out by the Australian prime minister, the wealth of typical individual citizens is not part that equation.
Is a population growth good for the economy?
Answer: yes, but at the expense of increasing inequality.
In summary, the more people, the greater the total wealth, but unless the extra people enable accessing additional natural resources, the normal result is the less wealth per person, as the natural resources per person decreases.
How wealthy are the very wealthiest in society, is inextricably linked to population size. The pharaohs of Ancient Egypt could never had enjoyed such wealth without a substantial population to generate that wealth. This is a significant, complex and interesting topic.
Governments, Billionaires and Multinationals: Farming Humans
As explored in “Trickle Up Economics: How the Wealthy Get Wealthy“, governments, Billionaires, Multinationals and even national organisations almost always earn their significant wealth by ‘taxing’ or earning some revenue from a significant percentage of the population.
The larger the population, the larger their revenue. Just as a chicken farmer earns more revenue if he can increase the population of his farm, those that earn revenue from the overall population, can earn more if their human ‘farm’ has a greater population. For each of these groups, either the people of a nation, or some segment of the global population, is ‘the farm’. At some point as populations rise, living standards may be compromised.
Jeff Bezos gave a heartfelt thanks to Amazon employees and customers following his record-setting trip to space Tuesday — noting that they “paid for all of this.”
“I … want to thank every Amazon employee, and every Amazon customer because you guys paid for all this,” the 57-year-old Amazon founder told reporters after returning from his trip to the edge of space.
“So seriously, for every Amazon customer out there, and every Amazon employee, thank you from the bottom of my heart, very much. It’s very appreciated.”Jeff Bezos thanks Amazon workers, customers for bankrolling trip to space
In reality, Amazon having less workers Amazon would increase Jeff’s wealth, but his wealth is in proportion to the size of the customer base. If the world still had the same population as it had one hundred years ago in 1921, Jeff Bezos would only have 1/4 of the wealth he has. Unlike the average person, Jeff Bezos is not impacted by increased competitions for housing and other resources as population grows.