Sun Jun 29th, 2008 at 08:44:25 AM EST
Written in the spirit of the Socratic Economics Series
From the June 26th Salon:
The Future of American Power
But Europe has one crucial disadvantage. Or, to put it more accurately, the United States has one crucial advantage over Europe and most of the developed world. The United States is demographically vibrant. Nicholas Eberstadt, a scholar at the American Enterprise Institute, estimates that the U.S. population will increase by 65 million by 2030, whereas Europe's population will remain "virtually stagnant." Europe, Eberstadt notes, "will by that time have more than twice as many seniors older than 65 than children under 15, with drastic implications for future aging. (Fewer children now means fewer workers later.)
My first reaction was my usual frustration that the need for fresh young babies are taken for granted, and that the finite carrying capacity of the earth seems to be taken into account nowhere.
But on a second examination, there is something else potentially amiss here. Children and the old have one thing in common. They are not economically productive, and they require resources for their survival. Yet, somehow, the old are in this type of article considered only a burden, and the young, only a benefit in terms of future workers. Yet, right now, they both need nourishment and care, and give nothing (of economic value) in return. Thus it would seem, to me, naively, that perhaps fewer children to support would make the numerous aging more affordable. Sure, they will provide fewer workers later, but at that point we would expect even fewer children. In effect, the two 'parasitic' age groups would balance each other out. So, what would the demographics of a shrinking population look like?
Promoted by DoDo
Well, I will have to begin with a bunch of assumptions, as I don't have time to make a detailed analysis of the topic, and then do some very quick population simulations. Let's start with the death rate. I withdrew some numbers quickly from Statistiska centralbyrån, the Swedish statistics agency. By looking at a the difference in population year to year in the different one year age groups, I calculate which fraction of each dies. (I.e. of the n-year olds, how many survive to n+1 the year after?) With some light, (very) approximative, exponential fitting that extrapolates a bit after 100, and make 105 the definite maximum age, I get the following Death Rate curve:
(DeathRate = exp((t-105)/9))
Then I fudge together my approximately stabilized base population, with a brisk birth rate of 1.5 children per person, or 3 per couple. (These are calculated as 1.5 children of the mean of the 25-40 year olds for next years population). I then run populations with births and deaths forward for 150 years. I create 8 different curves, the first one holding steady at 1.5 births, and the other 7 decreasing over 50 years to between 1.4 and 0.8, and then holding steady for the remaining 100 years. I display three different age groups in the graphs: 0-20 (unproductive) 21-64 (productive) and 65+ (unproductive). The colors match between the two graphs, and blue to red they represent 1.5, 1.4, 1.3, 1.2, 1.1, 1.0, 0.9, and 0.8 children per person.
Thus it seems, that my very simplified model yields a (slightly) larger productive slice of society with shrinking birth rates! (~52% -> 54%, comparing 1.5 to 0.8 children) at the end of the 150 years.
How should demographics and their economic impact be modeled? Are all 'unproductive' people the same? Do old people cost more than young to maintain? How much would things change if we allow for a changing death profile, with an increased life span? How much is an average human lifespan expected to rise over the next N years? Are more young people really as important as seems to be assumed?
Or do we simply need more people each generation to pay interest on the debt of the previous one, and preferably provide some 'growthing' on top of this? Are they needed to provide an increased 'quantity of lifestyle'?
[editor's note, by Migeru]
Socratic Economics is an occasional series of questions posed in a Socratic effort to understand economics. Previous entries:
- Socratic Economics I: Why GDP growth above all else? by Colman on June 29th, 2006
- Socratic Economics II: What is Money? by Migeru on September 28th, 2006
- Socratic Economics III: Is full employment possible? And how? by A swedish kind of death on August 31st, 2007
- Socratic Economics IV: How is inflation calculated? by A swedish kind of death on October 11th, 2007
- Socratic Economics V: Supply and Demand by Migeru on November 7th, 2007
- Socratic economics VI: all I know is I know nothing edition by kcurie on November 22nd, 2007
- Socratic Economics VII: Guaranteed Living Income by Migeru on January 8th, 2008
- Socratic Economics VIII: The Blue Screen of Death by JakeS on Friday April 11th, 2008
- Socratic Economics IX: National Accounts by Migeru on May 31st, 2008
- Socratic Economics X: Is "compound empowerment" a valid argument for progressive taxation? by marco on June 23rd, 2008
- Socratic Economics XI: Demographics by someone on June 26th, 2008
Other diaries which should have been added to the series...