In Defense of Speculation
Max Kummerow, Ph.D.
[Reprinted from a World Bank internet discussion, 11
Real estate can be thought of as a part of applied economics.
Economics can be thought of as a subset of biology (in that it
studies living creatures, namely us). A risk of specialisation that
we all face is that we get trapped in our narrow disciplinary
perspectives and thus miss important aspects of a broader picture.
I've recently read Joel Cohen's excellent book "How many
people can the earth support." A discussion of poverty and
land should not omit at least a mention of the denominator of the
per capita income equation, GDP/population. Since the earth has a
finite land area, we should also consider the same denominator in
the land/population ratio, whether the numerator is arable land,
housing units, or natural resources in general. The most easily
controllable variable in the long run is the denominator.
Population dynamics are clearly one of the most powerful economic
forces, and reducing population growth is the sine qua non or
necessary condition of economic development in poor countries. Most
of the land, land institutions, and land services problems are
simpler if there are fewer people. So by the indirect approach of
controlling population, a country can dissolve the problems of
housing, pollution, political repression, urban sprawl, and poverty
that seem so difficult to solve by other means.
Reproductive behaviour is also a key change agent in rich
countries to a far greater extent than usually discussed. Anecdote:
Two people in America. 1) Myself--middle class, PhD, employed, one
kid, born when I was in my late 30s. 2) Rosa Lee (subject of a
Pulitzer prizewinning documentary by Leon Dash)--poor, uneducated,
on welfare most of her life, 8 kids by age 21, deceased (AIDS) in
1998. This is social change. Rosa has about 50 living descendents, I
have one. Run those numbers forward a couple of generations and
America will be a poor country. The rich get richer and the poor
have children. Different population growth rates are causing
dramatic changes in the compositon of the human family and these are
closely linked to economic outcomes and all sorts of other issues.
Classical economic theory makes growth a direct function of labour
force. In simple form this leaves out the big investment in human
capital needed in a modern workforce. But countries with fewer
children per family can invest more in capital goods (including
human and physical capital), less in child maintenance. Moreover,
slower demographic growth takes pressure off land use and
construction, freeing resources for other uses. Slower growth makes
it much easier to manage city planning and infrastructure. Resources
are freed from building more houses and so can create other capital
projects, giving productivity increases that will increase per
The history of land use regulation provides an important analogy.
When the U.S. Supreme Court ruled (in the 1920s) that zoning is
constitutional, Justice Sutherland referred to changing conditions
making new institutions necessary. As density of land uses
increased, land uses began to impinge more on each other. As
externalities became too large to ignore, land use regulations were
enacted. In the same way, as human populations have grown, your
decisions to have children come to have more effect on the life
outcomes of my child. The fact, for example, that 1.3 billion
Chinese provide a labour force that works for a few dollars a day,
has an effect on prices and wages in the rest of the world. There
are many other congestion, crowding, and resource competition
externalities whereby your children affect prices paid,
opportunities encountered, pollution, congestion, and other aspects
of my child's life. Think of this every time your child stands in a
queue or competes for a position. It makes a difference whether
there are 200 million Americans or 300 million. It takes longer to
drive to work, at a minimum. Domestic oil supplies last 20 years
instead of 30. And so on.
As environmental limits are reached or surpassed, economics'
tendency to abstract from the real underlying physical processes
becomes less viable. E.F. Schumacher remarked that in ignoring
environmental limits "the economic problem regarded as solved
is not." Everywhere I've travelled around the world, I have
observed environmental damage that may reduce long run carrying
capacity of the earth for humans. Certainly the damage reduces the
diversity, stability, and beauty of our experience. Example: A
debate in the journal Science a couple of years ago about whether 5%
or 15% of the earth's agricultural soils had already been lost
through erosion. A very long list of similar losses, some
irrevocable such as species extinctions or depletion of ore bodies,
could follow. Humanity can be thought of, at the moment, as
performing a set of experiments along the lines of "How much
can we change the world and still have it habitable? How much
pollution before we get sick? How many threads pulled out before an
ecosystem unravels?" The pace of change is too fast, risks are
too great and too poorly understood.
Cohen's admirably cautious book refuses to take any dogmatic
positions on Malthusian predictions. He argues that both future
technology changes and population changes are uncertain so there is
little ability to predict future per capita food production or
living standards. No simple function fits past population growth,
why should the future be any more simple or predictable? However, in
searching for some things we know for certain, it is clear from the
mathematics of compound growth that at current rates of increase, a
limit to human population would (all forecasts have to be
conditional and reflect uncertainty) probably be reached within 50
years and almost certainly within 100 years. Perhaps much sooner--it
all depends, as Cohen points out, on how we want to live and in what
sort of world, as well as on uncertain future technology change and
how well we manage and share resources. Once population
stabilises--most probably within the lifespan of our children, then
it is certain that societies face "Methusalah's choice"
that is low birthrates and long lifespans or high birthrates and
short lifespans. It is impossible at ZPG to have both high
birthrates and long lives. That is about all demographers know for
The good news is that it does not seem to be nearly as difficult
to reduce population growth as previously thought. As economies
modernise, it seems, traditional attitudes change and limiting
numbers of children becomes more attractive. Most educated women who
are free to choose have few children. This implies that "interferring
with individual's rights to choose numbers of children" is a
bit of a red herring. What we really need to do, it seems, is get
rid of the barriers to people having as few children as the small
number freely chosen by the prosperous and educated. More good news
is that limiting fertility is technologically feasible and cheap. I
think it is the only anti-poverty program cheap enough to have a
chance of success in the poorest countries. Unless you can think of
a way to keep GDP increasing forever, limiting population growth is
the only feasible long run solution to the economic problem.
Moreover, I think limiting population has positive effects on
political freedoms and increasing the value of each individual. My
kid will have more human capital, because I invested more in him,
than Rosa's 8 kids. So perhaps "limit population growth"
should be thought of as an essential box to tick on the list of
things to do in a development effort.
The missing bit is for economists to design and endorse
institutions to speed up reduction in population growth. There are
examples: negative externalities of excess population were reduced
by policies like China's one child policy or Singapore's two child
policy. I think Japan should relax about being in negative
growth--they are still rich--and simply institute long run policies
to get population and consumption down to where they do not have to
import (and therefore export) so much. In the long run, increasing
GDP is a dead end--we run out of stuff on this small planet. But
decreasing population is quite feasible and cheap.
Decreasing population in the face of limited resources used to be
accomplished by quite inhuman and horrible means--wars, famine, and
plague. But now it is possible to control fertility using technology
and economic incentives. Rather than continuing to solve an
increasingly impossible and difficult problem--how to increase
growth rates in the face of limited resources, it is much more
sensible to try to simplify the problem by choosing to have fewer
people to feed and house.
A long run no growth target requires a major change in mind-set
for economics. The logistic curve, the normal population growth
pattern observed in biology, is not much used in economics.
Classical economics began with the assumption of scarcity (but
unlimited natural resources) and trys to work out the problems of
dealing with scarcity by efficient management of capital and labour.
The scarcity assumption is no longer inevitable in a world with
birth control pills. Societies can collectively choose abundance by
limiting population. Feminist economists have proposed assumptions
of abundance and caring for others to replace the conventional
individualistic Hobbsian view. If we choose a vision for the future
to pursue, the limited population, no growth in production, abundant
GDP/capita vision is more appealing than attempting to dig deeper,
cut down more trees, take more risks, strive harder to maintain
growth in a world of depleted moral and physical resources caused by
growing population and consumption. By accepting global resource
limits and therefore the necessity for population and consumption
limits, we can address the poverty problem in a way offering
reasonable hope for good outcomes. If limits are not accepted, the
poverty problem will soon return (as it is in the U.S.), even in the
unlikely event that the present trend towards increasing world
poverty could be somehow reversed for a time by economic growth.
Keynes said economics is a "moral science." This means
choices are necessary--how to produce, how to distribute, and, we
should add, how many to distribute to.
The above is, admittedly, a sermon that may offends some peoples'
faith. One of the jobs confronting social sciences is how to bridge
the huge gap between the "objective" stance of science and
the necessity for moral content in social science without returning
to wars about religion. The objective pose (however illusory) helps
direct attention to empirical evidence and keeps the tone of
discussion cool. The cost of the objective pose is that it creates
detachment regarding issues--like starving children--where
detachment is a form of insanity. The moral choice element is
essential, because we are really making choices about our own lives
How do we get moral content back into economics without merely
generating endless controversy? How can we combine emotion and
reason while maintaining civility in discourse leading to better
understanding and action?