What About Iceland?

Bryan objects to my intermediate position on future population growth. This is, will we return to subsistence income levels? No. Will there be significant net costs from population growth? Likely yes.

But I think it reflects a problem of his libertarian position on fertility that he has to have a world where there is NO negative population externality for his argument to go through. Will population growth create a Malthusian dystopia, as predicted in book after book by the likes of Lester Brown?[1]—most likely not.

But as world population continues to grow will we lose more animal and plant species? Yes. Will we have further global warming? Yes. Could there be, heavens forfend, an optimal level of world population below 100 trillion? Yes.

He objects that the fact that my extra child leads to a lower wage for your child is not an externality—it just reflects a redistribution of income. Just in the same way if I open up a coffee shop next to yours, I may reduce your income by taking some of your customers, but I have not created an externality.

But let us not get hung up on the murky definition of what is a true externality in economics. Let us just concentrate on the factual issue. If I have another child can that lead to a decline in the net income of people, counting all sources, outside my family? The answer to that is very much yes. As long as there are fixed resources, population increase depresses income per capita below what it would otherwise be. And that depression of income is felt not just by the children of the super fecund, but by a wide share of the population.

Before 1800 we see case after case where increased fertility or reduced disease, and the resulting population growth, cause substantial declines in living standards, even for those who themselves had modest fertility levels. All the descendants of the Bounty mutineers, for example, had to be evacuated from their tiny island home of Pitcairn in 1856, because the original population of 27 that landed and prospered in 1790 had risen in two generations to 193, at which level they could not feed themselves.

So Bryan needs population to have only positive effects on income per person. To this end he cites the fact that there is a positive association between medals per capita in Olympic sports and the population size of countries.[2]

Looking across countries is not a good test of population benefits, since there will be spillovers. Vatican City (population 500) gets to use laptops just like anyone else. But if Bryan wants to pursue this line, how would he account for Iceland?

Iceland has a population of 318,000, of whom 292,000 are native Icelanders. The native population speaks Icelandic, a language with a complex grammar similar to Old Norse. It has evolved little since the twelfth century. Icelandic is spoken by no one other than Icelanders.

300,000 people is a very small number of people. Equivalent sized cities in the US are Anchorage, Alaska and Stockton, California.

We would on Caplan’s theory of population expect this isolated community to have about as much prospect as the Tasmanians of pre-industrial Australia.

Yet Iceland has maintained a vibrant local culture and is a notable presence on the international scene. Start with the film industry. The 300,000 people of Iceland produced 70 films (features, documentaries etc) between 2000 and 2010, in Icelandic! I recently saw one, Jar City, which was very well done.

Iceland also has maintained a substantial literary tradition. Halldór Kiljan Laxness won the Nobel Prize for Literature in 1955. Arnaldur Indriðason is an internationally successful crime writer. In music also we have Björk..

The 300,000 people of Iceland are enough to sustain a respectable university. Iceland is host to an innovative project to map the DNA of hundreds of inhabitants from many different families (Decode Genetics). It is also the home of CCP Games, the company that developed the large and successful game EVE Online.

And of course, it was wildly innovative in its banking arrangements.

If population size is so crucial to innovation and economic activity, how come we hear so much about these obscure Icelanders? (And please don’t tell me it because of their good economic management!).


[1] For example, Saving the Planet: How to Shape an Environmentally Sustainable Global Economy (with Christopher Flavin & Sandra Postel) (1992), Who Will Feed China?: Wake-Up Call for a Small Planet (1995), World on the Edge: How to Prevent Environmental and Economic Collapse (2011).

[2] I do not know this study, but there are two things that make me skeptical.

First, some Olympic sports are team sports, where being from a bigger country would be an advantage. It may be the case that the fastest sprinter is equally likely to come from any person in the world, but if you are looking for the fastest 4 sprinters as in a relay team, then even per capita, Iceland will be at a disadvantage. So if done properly this study would have to be confined to individual events (it may have been).

Second, the huge disparities in country sizes mean that the slope of the regression line is essentially determined by a small group of very large countries. And there are enormous disparities in Olympic performance that are a function of government decisions on whether or not to pursue athletic success. China has quite deliberately chosen to sink huge resources into this.

Also from this issue

Lead Essay

  • 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

  • Gregory Clark argues that, while Caplan may more or less accurately describe the history of economic development, mineral and other reserves in the West have been significantly depleted. What holds true today will not hold true indefinitely regarding food, energy, and basic mineral commodities. The balance between population growth and resources only recently tipped toward abundance, and it will likely tilt in the other direction soon.

    Clark agrees, however, with Caplan’s suggestion that on the margin, middle-class families stand little to lose and much to gain by having more children; cultural assumptions in the West likely overestimate the importance of nurture, and as a result, middle-class Americans probably do overinvest in their children.

  • 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.

  • 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.