Why does population decline matter?
Plus: cutting NIMBYs a deal, wars that don’t affect the polls, and more
Why does population decline matter?
Falling birth rates are leading many people to worry about population decline. But why exactly is that a problem? There’s often a lack of clarity on that question. I think it’s useful to distinguish between three kinds of problems.
The transition problem
The most common worry is not about having a smaller population, but about the process of getting there. As birth rates fall, each new generation is smaller than the one before. Over time, this could mean too few workers to support all the pensioners.
I think this problem is somewhat overblown, and that we will manage it as long as completed fertility doesn’t fall too low (say, approaching 1.0). Those who worry about it often focus on the old-age dependency ratio, defined as the ratio of people over 65 to people between 18 (or 20) and 64. This has two problems. First, the fixed cutoff at 65 neglects that people are retiring later. Second, it doesn’t account for children, who are also dependents. Falling birth rates obviously mean fewer children, offsetting some of the burden from having more pensioners.
The size problem
But a smaller population can also be bad in itself. Is the world better if it contains more people (provided they live typical, reasonably happy lives)? Many population ethicists think it is. If so, that’s an argument to prevent population decline.
A smaller population can also reduce economic growth as it reduces both the returns from innovation and the number of innovators. And some worry that it could eventually lead to human extinction by weakening our resilience to disasters.
The balance problem
The third argument is that well-functioning democracies like Japan, South Korea, and Germany will be disproportionately affected by population decline. These countries drive much of global innovation and contribute to peace and stability. If their share of the global population continues to shrink, the world could become both poorer and more volatile.
Population decline is slow
How serious are these problems? While I think the transition problem is a bit overblown, I take the size and balance problems seriously. At the same time, population decline is a slow process (depending on how low birth rates fall) and the global population is set to peak only in the second half of this century. By then, we may live in a very different world, given the speed of AI progress. It could well make our population forecasts obsolete.
Cutting NIMBYs a deal
A major reason many cities don’t build more housing is that homeowners pressure local government to block it. Housing reformers often respond by trying to persuade higher levels of government to step in and overrule these restrictions. But as David Foster and Joseph Warren show in a new article for Works in Progress, this strategy has a checkered track record. NIMBYs have influence far beyond the local level, and they use it to water down reforms and obstruct implementation. Instead of trying to steamroll residents, Foster and Warren suggest an alternative: offer them a cut of the profits, upgraded homes, or better amenities in return for accepting new development. From London to Tel Aviv, this has already helped get more homes built.
Trump’s wars haven’t changed his approval numbers
The conventional wisdom in American politics used to be that war has a big impact on the president’s popularity. War typically produced a rally around the flag effect, which could be reversed if it dragged on and casualties mounted. But as Nate Silver writes, this pattern hasn’t held up during Trump’s second presidency.
One possibility is that American politics is now so polarized that wars no longer move the needle the way they used to. It could also be that the relatively small wars Trump has started drown in the chaos of his second term.
Rising gas prices remain far from 2022 levels
While gas prices have increased sharply due to the war in Iran, it’s important to put this increase in perspective. Compared with the dramatic spike after Russia’s invasion of Ukraine, it’s still fairly small.
In brief
Polymarket estimates a 61 percent chance that US forces will enter Iran this year
A third of claims in economics papers are based on causal inference, up from eight percent in 1990
IVF patients favor less regulation of polygenic embryo selection than clinicians do
That’s all for today. If you like The Update, please subscribe – it’s free.
Some people argue that the UN population projections are underestimating how fast fertility will fall, and that population will peak/fall significantly sooner than they project. Thoughts?
While populations of course differ in their GDP per capita, the largest single factor determining total GDP is still just total population. Thus a shrinking population implies the rational expectation of shrinking total GDP, for the first time in hundreds of years. In the complex adaptive system that is an economy, who knows what indirect second and third order effects this essentially unprecedented reversal of absolute growth expectations will have? We'll find out!