The Ultimate Resource — For How Long?

Bryan Caplan offers a sprightly defense of population growth. Middle class Americans should discard two entrenched prejudices that keep their families small. Children are costly to the world at large. And they are tiresomely and endlessly burdensome to parents.

Children impose not costs, but benefits, on the rest of society. And children can be raised to be prosperous citizens with only modest parental care.

I think Caplan’s first proposition will soon prove to have applied only in a limited historical window. Future population increases will likely exert substantial downward pressure on the growth of living standards.

But he is right that the U.S. middle class dramatically overestimates the benefits of parental inputs for children. Since there are positive social benefits from middle class children, higher fertility by this group would be a social benefit.

Are People the Ultimate Resource?

Caplan’s empirical evidence on this is merely that since 1800 world population has increased 7 fold, to 6.7 billion, while incomes per person have also increased.

But that historical fact tells us nothing about the future effects of population on incomes. If by 2050 the projected 9 billion people in the world all have just current U.S. consumption standards, then we must produce 8 times as much oil as now, and 5 times as much food. In that world will population levels still not matter?

Population growth always generates gains and losses. More population drives up the cost of limited resources: land, minerals, and fossil energy. But larger populations reduce production costs through scale economies. Think Walmart. And more people increase rates of technological advance by multiplying the stock of potential innovators.

There is thus a race between resource costs and scale economies as population grows. And the crucial factor that determines the strength of these effects is just the share of land and mineral rents in national income. Before 1800 that share was substantial: 20-25%.

Thus for 99.9% of human history, up till 1800, the winner in that competition was resource scarcity. We see this clearly in the onset of the Black Death in Europe in 1347-8. England, for example, had a population of 5 million in 1347. By 1450 recurring waves of plague slashed that to 2 million. England then was reduced to isolated pockets of people (England now has 51 million). The population collapse thinned markets and trade. But living standards rose dramatically, rising to nearly triple the level of 1347, because food and energy became fantastically cheap and abundant. Indeed England did not again equal plague year living standards until 100 years after the onset of the Industrial Revolution.[1]

Similarly the doubling of population in England 1540-1620 may have helped produce Bacon, Shakespeare, and Marlowe. But it also halved living standards.

The reason population had so little effect on income 1800-2011 is that technological advance made food and energy much cheaper over these years, driving down the land and mineral rent share to less than 5% worldwide.

The figure below shows, for example, shows the hours of work required to buy the energy equivalent of a gallon of gas in England from the 1260s to the 2000s. Workers today can buy a gallon of gas with the earnings from 20 minutes of work. In the 1960s and earlier that took four hours.

Energy Costs Relative to Wages, England, 1250-2000

Energy Costs Relative to Wages, England, 1250-2000

Demand for food and energy grew more slowly than supply 1800-2011 for several reasons.

  • Only a small fraction of the world grew rapidly. The living standards of 2 billion Indians and Chinese in 1990, for example, barely exceeded pre-industrial levels. The West thus was alone in its voracious appetite for raw materials and energy. India, for instance, by 1900 had become mainly a raw material exporter: wheat, jute, cotton and tea.
  • There was a huge expansion of the cultivated acreage—new lands were opened in the Americas, in Australia and New Zealand, and in southern Africa.
  • Fossil fuels cheaply substituted for farmland by increasing yields.

But now, with much of the energy and mineral reserves of the West depleted, China and India instead of supplying food and energy to the world economy have become frantic importers. The supply of new lands is largely exhausted. In addition fears of global warming, and equal fears of nuclear energy, have added a new burden of bio-fuel production to land in the U.S., Brazil and the EU. The U.S. alone plans producing 30 billion gallons of bio-fuel annually by 2022, implying trebling corn output.

To feed a world of 9 billion by 2050 living at U.S. consumption standards would require food yields per acre worldwide to grow 4% per year between now and then. There is room for substantial catch up in yields in the Third World with those in the West. But once that happens the prospect of continued rapid expansion of output is poor. In the UK, for example, the total output of the farm sector is no higher now than in 1984.[2] This will force up food and energy prices, raising the share of land and resource rents in total incomes.

So the downward march of food and energy prices since 1800 may well end soon. Current high prices may presage a food scarce-energy scarce future. If this causes the share of land and mineral rents in economies to again become significant, then we will have Malthus Redux. Population will again be an important determinant of income.[3]

This implies a negative externality associated with fertility, with all the unpleasant implications this holds for those of libertarian persuasion.



How costly are children to parents?


I find convincing Caplan’s argument that the modern middle classes have wildly overestimated the value of constant parental attention in raising the quality of their children. Genetics plays a much greater role in child outcomes than the average middle class parent believes. Indeed perhaps the major parental contribution is made by the time of conception.

What is surprising, however, is the grip that “the nurture obsession” has on the modern middle classes. There is plenty of evidence around for everyone to see that nurture is not determinative of outcomes. So why is this such a deep rooted and unquestioned belief?

I can add, however, some historical work (done with co-author Neil Cummins of CUNY Queens) in support of the Caplan contention.[4]

In this work we look at the social mobility of a group of rich and poor people with rare surnames in England over five generations between 1858 and 2011. The rich of the first generation had significant wealth, lived much longer, and with high frequency attended the elite universities, Oxford or Cambridge. The poor had no wealth, lived short lives, and none of them had attended Oxford and Cambridge.

Even four generations later these groups are still distinct. The descendants of the rich group are twice as wealth on average, live four years longer, and were twice as likely to be students at Oxford or Cambridge.

But they have clearly moved much closer in status with each generation. And they are clearly destined within 3-4 more generations to both converge on average social status. There is eventual regression to mediocrity for both rich and poor.

However slow it is, the fact that these two groups from the opposite ends of the social spectrum eventually converge is one of compelling interest. What makes this happen? Throughout these generations the rich have fewer children than the poor. With their resources, and with fewer children to nurture, why did they not form a permanent upper class? Why were they eventually dragged down to the average? Similarly how did the poor get themselves towards the average, starting as they did with no wealth, and larger families?

If we posit that nurture is destiny then this process defies explanation. Societies should be divided forever into upper and lower classes.

But if we posit that the most important element in the fate of families is genetics, we can perfectly well understand these processes. The achieved social status of families is a phenotype, stemming from some underlying genotype plus some random error. If men and women mate, as they must, based on the observed phenotype, then there will be an inherent tendency of those above and below the mean to mate with those whose genotype is closer to the mean, and to thus produce children closer to the mean. Francis Dalton, in his study of the inheritance of stature in the nineteenth century, explained the phenomena of regression to the mean in heights in exactly such terms.

So a challenge to anyone who would doubt Caplan’s claim that nature is much more important than nurture in the outcomes for children is to account for the above observation of eventual regression to the mean. Why must the few and pampered children of the elite eventually have offspring who return to the mean if the circumstances of our upbringing are the major determinants of our success in life? How do the abundant and neglected children of the poor eventually rise to average status if again nurture is the crucial determinant of life success?

Notes

[1] For more on this see Gregory Clark, A Brief Economic History of the World, chapters 2-3.

[2]Output per worker has grown substantially in this period, but not output per acre. http://www.defra.gov.uk/statistics/foodfarm/cross-cutting/auk/, table 10-1.

[3] This is not to imply that these constraints will reduce income, just that population growth will once again slow income growth rates significantly.

[4] See http://www.ehs.org.uk/ehs/conference2011/Assets/ClarkFullPaper.pdf

Also from This Issue

Lead Essay

  • Population, Fertility, and Liberty by Bryan Caplan

    Bryan Caplan argues that declining world populations aren’t such a good thing after all. While we may have dodged the “population bomb” predicted in the 1970s, the world still benefits from more suppliers — and demanders — of new goods and services. Friends of scientific and cultural advancement should want more people around. All of which leads him to a question: Are there ways to incentivize population growth without sacrificing individual liberty? Caplan suggests several methods, including open immigration, tax incentives for children — and the direct, ultimately private argument that having more kids is more fun than most people realize.

Response Essays

  • Pro-Natalism’s Checkered Past by Matthew Connelly

    Matthew Connelly reviews the history of pro- and anti-natalist policies around the world. He finds them both full of coercion, perverse incentives, misogyny, and — if states try hard enough — atrocity. Population trends, however, are very stubborn, and the payoff to such policies is low. In his words, “economists do not know where babies come from.” Not, anyway, such that they can motivate people without destroying their autonomy. If libertarians are recruited to the pro-natalist side, as Caplan urges, their enlisting could come at the price of individual liberty itself.

  • Parents Are Unhappy. But Why? And Should We Care? by Betsey Stevenson

    Betsey Stevenson agrees that parents are often generally less happy than otherwise similarly situated nonparents. But she casts doubt on the theory that excessive parental worry is the source of the unhappiness. The most worrying parents, those who spend the most time on childcare, are also the ones who report relatively higher levels of happiness. There is, moreover, more to life than self-reported happiness, and parents may very well have other desires and values than just this one. Neither self-reported happiness nor economic utility are all that there is to our various ideas of the good life. We still need to learn more about why parents describe themselves as less happy before we can prescribe more children and less worrying as the remedy.

The Conversation