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When the growth stops - global population peak and decline


tede02
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Curious if anyone else is as fascinated with the subject of global population as me. There are different aspects of this subject that are intriguing. As a sportsman, I always wonder what it would have been like to travel North America pre-European settlement. Just to see the mostly virgin land and amount of wild game must have been amazing. As an investor, I always think about what happens when the global population starts to decline. Basically all estimates conclude the world population will peak by the end of this century. Some developed world countries are already shrinking. This BBC article was striking in highlighting a number of countries that could see their populations halved by 2100 (Japan, Italy and Spain in particular). https://www.bbc.com/news/health-53409521

It seems obvious this will lead to massive economic problems. The world economy is based on growth in every respect. What happens when there are empty buildings and houses everywhere because there literally is no one to occupy them? There won't be enough taxpayers to support infrastructure, entitlements, etc. The list just goes on. I don't expect any good answers but it's just a mind-blowing idea to me that we're presently living on the J-curve of the good times but the end of this economic goldilocks period may not be too far off. I think my kids and future grandkids likely won't have to deal with these issues. But my great and great, great grandkids likely will. 

Side-note - I've also been thinking a lot about the Fermi Paradox. Perhaps the answer is advanced civilizations all eventually implode because they quit reproducing! 

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Declining population does not need to mean declining economy or "massive economic problems".

It all depends on productivity.

If we reduce this to an absolute, a single (immortal) person living on Earth could still have a great standard of living and great economy if everything was automated.

This puts a tremendous burden on automation and AI for the next 50-100 years though.

Also, invention has to be shifted to AI too, since with declining human population, the number of inventors will also decline. If human inventiveness is not replaced by AGI, there's an issue.

 

Another two alternatives that may become reality:

1. (Practical) Immortality. That would slow down the population decline to almost nothing. I'm still accepting bets for a charitable lunch that we will have practically immortal people in 30 years or so. (Honor basis, I'm paying for lunch if I lose, PM me, limited spots, I reserve the right to refuse. Lunch won't be held if I die before then).

2. Radical reduction in the cost/effort of having children. Uterine replicators. Change in morality/politics/economics that shifts burden and responsibility of raising kids from parents to society. China and CCP: this is your chance to rule the world! And before someone decries this as a communist idea, please remember that Britain did this in the past with boarding schools and they were capitalist thankyouverymuch... and they had a global empire. Risk: morality/politics/economics change (too) slowly.

Edited by Jurgis
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9 hours ago, Jurgis said:

It all depends on productivity.

Secular demographic changes have not been kind to productivity growth in developed countries and Japan is leading the way. Of course, things could change..

Some suggest that productivity seeds have been planted and will be eventually harvested and recognized even if the population ages and the pool of productive workers decreases. In fact, developed societies have built war-time public debt levels and more with that premise in mind. It's an interesting bet: will it happen? will the timing be right?

If interested in this population issue, AI, etc

Artificial Intelligence and the Modern Productivity Paradox: A Clash of Expectations and Statistics (nber.org)

Anecdotal addition (which may be relevant: healthcare technology projects and productivity). i went to the hospital to visit my father-in-law who was in an emergency room bed. i reached directly the information station where a clerical person told me to go back 20 steps behind the line on the floor and use the phone in order to ask the question i had just asked (she added that this was the new protocol as a result of the advanced information technology communication system that had been put in place). So i go back and use the phone. i realize the same person i just talked to starts to talk to me through her microphone-headset piece. So i ask my question (where is Mr. ...?). Answer: Please walk forward and i will help you.

My oldest daughter is deep into artificial intelligence and is less bullish than me on the topic She mentions that humans will have to be part of the AI process, for better and for worse.

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@Cigarbutt: I agree that current productivity gains are underwhelming. If we cannot significantly step up automation/AI, then with flat to declining population we will have a problem. 

I am also (somewhat?) "deep into artificial intelligence". I'm in the AI Moore's law camp though. IMO we will get some radical step ups in the coming 20-50 years.

We'll see. 😎

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I took an upper division populations class my last semester of college as an elective. It became one of my favorite classes. Something I've reflected on regularly is replenishment rates. We see in many western societies a large decrease in birth rates. Many european nations now have negative birth rates. This fact has always boggled my mind.

If every couple only has one child. We reduce the population of the planet in half in one generation. 

I remember studying the after effects of the china one child policy. It still causes them issues.

I like this topic...

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I agree with Jurgis above, somewhat.  It does put a higher burden on AI, but I'm not sure exactly how far that can bring us.  If AI can eventually reach greater than human abilities as the singularityists believe, then sure there is no end to how far we can advance.  But if AI never acquires human creativeness or ingenuity, it might never replace the engine of invention and progress sustained by a growing human population of scientists, engineers, entrepreneurs, etc..   I'd much rather see humanity expand into a new frontier to give us more room to grow and population to increase.  Whether that is the ocean, another planetary body (the moon, mars, etc), or giant space habitats/gravity ships à la Gerard K. O'Neill's "The High Frontier: Human Colonies in Space" (my favorite option), or a combination of all of them.

Edited by rkbabang
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I think it is a great topic. Max world population estimates are I believe 8? billion. So we have some room to grow, still.

More interestingly will be the efforts to maximize human resource allocation. How much of the world is in poverty? Uneducated? No/Low skilled laborers? The big question to me (moreso than AI which I think is a bit of a distraction) is how societies will utilize these people. 

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They'll likely be exploited. The irony in all the US/China drama is that the US basically created the monster that is China because we saw benefits to low wage labor, cheap products, and exploitation of their resources. So we incentivized and put the wheels in motion and now they just kind of figured out how to push us back/cut us out....and we're outraged. 

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@LC - I agree with you, i think the question isnt so much AI or even what the world looks like in 2100, but what it looks like in the nearer term. I think automation will kill so many millions of jobs that the developing world will struggle to maintain social order. I remember taking a history of empires class in college, and one of the key ideas (or so the professor argued) behind the fall of empires was social unrest and the inability of the "elites" to continue to maintain social order. I would argue that the same could take place today if there were millions of people who could not find jobs because a robot could build the same item at a fraction of the price with a fraction of the mistakes.

I guess this is when people will start screaming for a universal basic income to ensure that everyone can "survive", though I think there is a solid argument to be made that it already exists in parts of Europe. So then my question becomes, at what point do we stop existing as a capitalist society and turn into something else? And if we become something else, following on from @tede02 question, do we even need growth?

 

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I appreciate the comments. Was thinking about this further in the context of more immediate implications. In the US, there's a growing fear of China's ascent. In terms of population growth, China is expected to top out by the middle of this decade. It will be quite interesting to see how this impacts growth as the population ages and starts to decline over the coming 20 years. Will the Chinese face the same challenges with growth as basically all the other advanced economies with similar demographic issues (Japan, many European countries, etc.), and therefore all this fear in the west turns out to be over-blown? They still have a much lower GDP per capita so perhaps they can continue ramping that up for decades, but I simply wonder how big of a headwind these demographics will be. 

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Like I mentioned before if every couple only has one child the reduce the population by half in one generation. That fact is pretty staggering. 

https://www.forbes.com/sites/stuartanderson/2020/09/03/chinas-population-to-drop-by-half-immigration-helps-us-labor-force/?sh=5024df2f3d65

This article talks about some of the issues around that fact. Not only is china dealing with this for long term population decline, they have the issues around more boys than girls culture in china favors males over females. 

https://en.wikipedia.org/wiki/Son_preference_in_China#Chinese_one_child_policy

I have thought about these social issues quite a bit as I have a decent position in MOMO (Chinese dating app). 

Overall the Chinese are incredibly hard working and resilient as a people. I am confident they will overcome these challenges but it will take its toll. I think the Chinese economy will only continue to grow even if the population may peak and decline in the next 50 years. 

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The point around the birth rate slipping to 1 child per couple is well taken. It illustrates how quickly a shift could occur. Even if the birth rate slides to 1.5 children per couple, that causes a 25% reduction in global population. What's kind of crazy is over half of all countries already have a birth rate below 2 according tothe CIA world factbook. https://www.cia.gov/the-world-factbook/field/total-fertility-rate/country-comparison

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You have to travel and think global. From what I see the world is vibrant, young and plenty of demand in many places. The western countries have followed failed economic policies for decades and have little to offer. I chalk it up to communism and too much government control. But if you look around globally things are not as bad, just in the so called ´western banana republics´. They either smarten up or continue down the road of more stagnation and pain for the dwindling population.

 

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From a demographic point of view, the defining feature of the 20th century was a very unusual growth in population and life expectancy (global). For the 21st century, the defining feature is an ageing population. Neonatal mortality has gone way down but fertility rates have gone down even further. Population ageing is a global phenomenon but developed countries are more ahead than others. China had done an incredible job at catching up economically but this has been linked to a demographic catch up which makes their ageing population outlook even more challenging in the next few decades.

There will be three features:

1-rectangularization of survival (life expectancy)

2-compression of morbidity in last years

3-old age-dependency ratio

1- Recently, life expectancy at large has started to plateau (and even reverse at times) while maximum human lifespan seems to have reached some kind of natural limit. Rectangularization pretty much has reached its maximal optimization.

2-Compression of morbidity in later years has occurred to some extent in Japan on a net basis but overall, in western countries (and also China),this has not occurred because the improved productivity profile of some has been more than canceled by the deteriorated status of many. As the Covid-19 episode showed, the population health status profile (age and co-morbidities) in developed countries is relatively poor ('improved' very slightly as a result of the viral passage) even for younger cohorts (age 60+ and even 50+). Also (expressed in a neutral way), the improved level of care has allowed a significant sub-group of the population to survive (for a long time) while remaining relatively unproductive and even dependent.

3-This ratio has been moving higher globally and most of the 'economic' impact is coming for developed countries. So far, this aspect has been dealt with by unfunded liabilities and debt. It's interesting to note that many European countries rely more on a public safety net (transfers) compared to others (USA, UK, South and Southeast Asia) which tend to rely more on accumulated assets. The key issue is that the growing sub-group of 'dependents' will tend to not produce and to consume and will tend to rely on younger age groups becoming more productive.

It's reasonable to suggest that 1-, 2- and 3- will be figured out eventually. It's just that secular trends have been slowly grinding their way and 'solutions' are not visible yet. Also, it's unlikely that the digital printing press is the answer.

It's not clear how these trends can be useful in public stock picking but i've made money on this in the past through private ventures and am planning for more in the next 20 to 30 years. An area which i thought would be promising are retirement homes but capital is so abundant and cheap making the investing environment incredibly competitive. The future may lie more in asset-lite 'services'.

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