Alumni Home > News & Events > What Matters

The Economic Effect of Population Decline:
A Subject for Study

By David L. Wiesen '54

Crowded scenes like this could be a thing of the past.

Planned economies, such as the Soviet Union and China under Chairman Mao are only effective with a static population and one possible reason for the global failure of Communism was its inability to change with a growing population. The various utopias from Edward Bellamy's "Looking Backward" (written in 1887.) to Ayn Rand's "Atlas Shrugged" all had a fixed level of population (and some sort of infinite energy supply).

Capitalism may resemble multi-level-marketing with the need for an ever-expanding base. What is the impact of a static base or of a declining one? I can think of only one instance when this happened: the Bubonic Plague in the 14th century. The plague itself killed off one third of the population of Europe and by the time other opportunistic diseases finished the job, the European population had declined by almost 50%.

This was not the same sort of economy as today's free-market model. Guild capitalism was emerging from feudalism but the impact was dramatic. Laws were passed to make it illegal to withhold one's labor, for example.

Karl Marx never expected Communism to emerge in a feudal society like the Russian one of his time. He had Germany in mind. Communism was redistributive, not creative. But first you had to create. He expected Capitalism to do that. But when the redistributive process began, you needed to stop change to facilitate administration and preserve equity. The society which Edward Bellamy imagined in "Looking Backward" enjoyed the upper middle class lifestyle of the Victorian era. Again, it's a static model. These thinkers did not think in terms of "disruptive technology," a new technology that displaces an established one, for example, digital photography vs. print. (Neither do the managers of large modern corporations. When a friend of mine boasted that he had a disruptive technology which would prove a winner, I pointed out that the benefits of disruptive technology applied to society as a whole. In the individual case, the established firms would first attempt to squash him and only later consider accepting it.)

What would a world with a smaller population look like? What would the effect on employment be? What about the impact on markets and products? Would we all have to have many cars and several vacation homes? And if we managed to increase the level of individual consumption would that not negate the global health benefits of the smaller population? Suppose we didn't do that, what then? One possibility is an order of magnitude increase in services and products of intellectual content. These products don't absorb natural resources and the output in value is very high per individual worker: Biotechnology, information security, data mining, wireless networks and new power sources come to mind.

This is surely not today's problem, but if the efforts of Zero Population Growth and Negative Population Growth are successful it will be. And there is a trend in that direction even without their efforts.

A cursory Internet search under "Economic Impact of Declining Population" did not produce anything along these lines. One article applied to Thailand, a much smaller economic entity and one which depended upon outside markets in any case. There was one on the problems of Japan, and one on the US but it was concerned as much with increases as decreases. None considered what would happen if the overall global population were to fall. However, if MIT were to develop a study group on this issue, one task would obviously be to insure against reinventing the wheel.

Several additional searches involving economics and population growth or decline uncovered a few articles which were more local in scope. Any one country could survive as long as there were parts of the world where the population was growing. One Marxist tract insisted that capitalism couldn't survive without a large population to exploit and impoverish. However the emphasis there was on the inequalities which the free-market can produce, not on the overall efficiency of the system. One article answered yes/no. This one was the closest to what I have in mind.

Another article, "Population Reduction Scenarios", studied global consumption under several assumptions of overall decline and supposed a great increase in individual consumption to offset the impact of a 70% to 80% drop in population.

I'm sure that a more thorough search would produce more results and many of those would be more applicable to my thought. However, I believe that MIT can bring to bear models with better metric support for the analysis.

Free-market capitalism as it has evolved in the west has proven to be the most successful economic model devised thus far. How will it do when we get our population under control? This is a subject worthy of serious and in-depth research.

About the Author

After serving in the Military upon graduation from the Sloan

David L. Wiesen '54

You can contact David Wiesen at dwiesen@alum.mit.edu.

Published October 28, 2003.