The effect of population growth on the economy

Some of you have been asking what happens if population goes up. Doesn't that create more jobs?

The answer is a little bit more complicated. There will be more people, but each person will have less money.

The quality of demand has changed. And since the quality of this demand has changed, this new type of demand can be harder to meet.

Think about it. More services demanded (in volume) but less money available to be paid per service.
From a private business perspective, one might say revenue has increased a little bit, but profit margins are down.

When the quality of demand shifts in an economy like this, generally there becomes less economic activity. It simply isn't worth it anymore.

There are more customers, and more services they are wanting, but each customer has less money to spend. For a larger share of those potential customers, it simply won't be worth doing business with them.
What they will pay will barely cover the business costs, and the profit margin to the business will be too small. The business will have to do a lot of work for only a little bit of money.
This carries over onto the workers in that business as well. They are going to be expected to do more work, with less money paid for each time unit of work.

Even in the case of overall economic growth, directly caused by population increase, living standards can still go down.
The increase in overall economic growth is not in proportion to the population increase.


Is the amount of "wealth" limited in an economy? That is not what is being claimed here. Over time with gradual population increase, it is possible for the economy to grow with the increase in population, and for overall living standards to even increase.
But when population growth exceeds economic growth, it can start creating a relative "oversupply" of workers, tipping the balance between labor and capital.
That is probably one of the major causes of increasing inequality (although many on the Left and some Conservatives don't want to see this).


And this is what a Third World country typically looks like. Plenty of work available, but most all of that work pays very low poverty wages.

 

Though more people means more demand as well.

If that were true then the bigger the population the lower the wage would be, but that is not true.

No, If the population increases more people want stuff but more people want wages, so the economy expands but does not grow per individual.

Why would each customer have less money, again this would mean small countries would be richer than large countries. Patently not so.

This whole post is based on a false assumption, that more people means the same money being spread thinner. But more people, means folk wanting cars and therefore more car salesmen and more car showrooms.

There are many reasons why third world countries remain poor, but this is not one of them. There is a myth that countries in Africa are teeming with people, but in fact most have a lower population density than Europe.

 

Our population has grown considerably since the Pilgrims hit Plymouth Rock and I'm finding there's enough money for me and mine.

 

Most of our wealth isn't in labor. It is in intellectual property valuations. In addition, less than 20% of us currency is in active circulation in the US. Your argument is more along the lines of Money Malthusian logic. In theory, economics needs population growth to drive economic growth. In reality, the planet could benefit from far fewer human life forms.

 

And there was wealth and poverty during all that population growth.

 

As I have said elsewhere, population growth has been used to subsidise taxation, we can only reduce population growth if we are prepared to meet the difference in taxation.

 

We can just default on the debt or print the money or cancel the current currency and issue a new one. Money has no intrinsic value. It changes constant;y simple based on supply and demand. Dollars are pokemon cards.

 

I suppose the government can steal everyone's money, which is what you claim.

 

Not strictly true but I agree in a way.
Money is a representative of your asset and ability to honour your debt so printing more recklessly would quickly show your creditors you are a high risk borrower causing them to devalue your currency or call your debts.
However to an extent if your credit rating is good you can print money creating yourself loans and those who underwrite those loans will accept that because as your economy grows so your debt to GDP shrinks and your ability to honour those loans stabilises.

But there is an upper limit on this.

 

It can. It produces it. It destroys it. It owns it. More specifically, us dollars are federal reserve notes and controlled by the federal reserve in every aspect of its existence.

 

A car need a ton of ressources to be build, of limited ressources. The nature of universe is to be of limited energy, then limited growth.

Africa could absolutly get 2 billions people, it's really a huge continent. However, the speed of the population growth is more the problem than the population growth itself. A very high population growth create problems when you want to educate your population for instance.

 

The car was just an example, so if it stops you going off topic then swap it for a dining set. and a furniture sales man and a furniture shop.

So education is an issue in Africa, not population. For as I say Europe has a denser population yet no trouble educating its children.
Africa's instability is many fold and a whole thread of its own, but it is not caused by over population.

 

More demand, but less demand per person.

That was sort of the whole point to my post.

 

I think you two are getting very confused and have not thought about this very well.

Your statements are as disingenuous and logically absurd as saying stuff like:
"Everyone has some radioactivity inside their bodies, so radiation does not cause sickness"
or
"If it were true that adding more people into our lifeboat could cause it to start taking on water and sinking, then every boat with hundreds of people in it could easily sink, but that is not true"

Your two statements here show a complete lack of understanding about the idea being presented in my opening post.

Maybe I can present it to you this way: Demand is not merely so simple as being a factor of how many people there are.

You can't (and won't) just automatically increase demand proportionally to population by adding more people.

In economic language, the issue is one of capital. Capital won't suddenly start growing much if you just suddenly jam in more people.

Think about the jobs in the economy. There are a lot more potential low-paying jobs than there are higher-paying ones. It's a lot easier to add more low-paying jobs to the economy than higher ones.

 

Why less demand per person? Why do bigger populations want less per person?
I mean, we can clearly see that isn't true, demand per person is not greater in lower populated countries across the world, so why would that be the result of future population growth?

 

That makes literally no sense.

Nor this. It is true that if you keep adding people to a lifeboat it would take in water and sink. And every boat with hundreds of people in every boat could easily sink. So it is true. Yet you say "but its not true"
I think your explanations have become muddled and you are not saying what you mean to.

True, I do not understand your point.

This is not an explanation, its just you repeating the same statement as if its fact. Yet we see that as population in America has grown so has demand. In fact demand person has grown in the last 100 years. A settler from the 1900's could not imagine the goods owned by the average American in the 2,000's

I don't know why you included the word 'suddenly' there is no 'sudden' growth in population. Though a sudden massive increase in population would cause a lag in goods catching up with demand.

Yes but they are proportional to the population at any point in history. The proportions do change due to things like automation, but not because of population growth.
For instance; The number of Doctors needed per 100 population remains the same whether the population is 10,000 or 10,000,000

 

You are confusing "need" with the economic phenomena of demand.
Third World poor countries have a much lower ratio of doctors to population than higher standard of living countries do.

Doctors in poor countries also earn much less than doctors in wealthy countries do.

 

How do you believe that ties in with people trying to escape desperately poor countries to enter into wealthier countries?

It's obvious that the mere presence of people doesn't make a country wealthy, so what is it?
Is it something in the air they breathe?

Or is it something else that doesn't relate to people?
If it's that, then simply adding more people might result in a lower ratio of what it is that creates that additional wealth (the difference between a poor country and a wealthy country) to people.

Think about this and let's use some logic here.

 

Because demand is not so simply just proportional to the number of people. It is not so simple as that.

People who have higher paying jobs create more demand than people in lower paying jobs. So you can add more people to the economy, and still the overall demand per person will go down.

Many of these higher paying jobs do not actually really add wealth to the economy in proportion to how much they pay. So in some sense, it's almost like the economy handing out "free" surplus money to some people, based on its excess.
(Again, like I previously mentioned, labor value is not the only factor in an economy that directly generates wealth)

 

Yes, but as you say that's down to the wealth of the country not the size of population.

 

You're just repeating yourself, when its clear that your statement is not explaining your position.
I have already said the proportionality of well paid and poorly paid jobs is unaffected by population size.
Australia and the UK have very different population sizes but the pretty much the same wealth spread.

 

Then the same problem apply. Richness is not disconnected from the ressources available. Prosperity is linked to the amount of ressources available. They might be more or less efficient way to use those ressources, but richness is not unlimited simply because the amount of ressource is very limited.

It's not a problem of density, it's a problem of growth. Europe has a deplorable birth rate and is a sterile land, basically killing itself. The more you have children, the more difficult it's to take care of them on a sasifactory of them, because there is not enough adults to take care of them.

 

It would be real handy if you could remember what you just said and what I answered.
It was you that stated cars use a lot of materials, now you say it has nothing to do with resources.
Sigh.

That would only be true if the population grew at staggeringly high levels. which doesn't happen.

 

I must have misexpressed myself, because my only point is : it has everything to do with ressources/energy/space.

In the case of many of subsaharian africa, it is, even if there is obviously many differences between countries. Some manage pretty well that growth, other it's very difficult.

 

We do know that proportionality of well paid and poorly paid jobs is affected by some factor (even if we don't agree on what that factor is).

Isn't it logical to assume that if that factor does not have to do with humans numbers, that increasing the number of people could change the ratio of number of people to that unknown factor, and that this could then result in change in population having an effect on the proportionality?