Decline and Fall

What does the global economy look like with plateauing population?

Within certain sections of the concerned citizenry, it is fashionable to put a CO2 PPM number in their bylines.   The “I was born at 320 PPM” fashion.

So here is mine: “I was born at 3.4 Billion”.

Or put another way, there are 4.8 Billion more people on earth today than when I was born.  Admittedly, I am no spring chicken, but the fact that the global population has more than doubled in my lifetime is a staggering statistic.  For a ninety-year-old living today, the global population has quadrupled since they were born. No wonder all those tourist sites are overcrowded.

Population is an emotive topic, yet there is no denying that “human flourishing” and mastery of nature over the last 200 years has led to a massive increase in the number of humans.

That said, this was not unexpected - population growth was quite well understood and indeed the 1968 book “The Population Bomb” by Paul and Anne Ehrlich was a precursor to modern “environmental” movements. It is often seen as an early example of “catastrophizing” - which led to some very dubious and very unpalatable conclusions from the autors (including mass sterilization programs in a 1977 follow-up book).

To Infinty And Beyond

Population growth is one of the examples that Hans Rosling uses in FactFulNess to explain how not everything is a linear trend. Population growth follows an “S-curve” - meaning there is a gradual rise, followed by rapid increase, followed by less rapid increase, potentially trending to a tangent or subsequent decline.

For those who want to present a narrative of “the human plague” - presenting the steep part of the slope without any reference to the rounding-off of the S-curve is too tempting. In addition, careful choices for the axes can make for vary scary images.

The Guardian (of course)

Just look at the slope on that World Population graph!

Where will it end, 12bn, 16bn ??? Er, no.. much lower.

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Feeling Peaky

A recent article by the ever excellent

Roger Pielke Jr.

at The Honest Broker substack, reviews how population forecasts regularly over-state the future population growth (which as above, is just part of the usual scare tactics). Dr Pielke notes that if the population peaks early and lower “than expected” - then emissions scenarios should account for this (fewer-people = lower emissions). To the absolute surprise of nobody, climate models do not get updated to the more conservative population models. Colour me amazed.

When reading Roger Pielke’s article I was, of course, minded to think about the implications, not for the climate, but for the economy.

There are many reasons for population growth to slow and indeed invert. One widely cited cause is that an increase in affluence leads to lower fertility (in the statistical, not biological sense) - people can afford to have fewer children. Ironically, it would appear that in many “developed” countries people are having fewer children because they can’t afford them. If you are still having to live with your parents when you are in your 30’s because of house prices and the general cost of living, this is hardly inducive to having big families.

Peak population may be coming sooner than we think FT

The Chinese population profile has been driven by the now defunct “one child” policy.  This has resulted in an inverted age pyramid – sometimes referred to as the 4-2-1 problem (four grandparents, two parents one child); being an extreme example of the difficulty of a small working population to support many aging parents and grandparents.  This creates a worker-scarcity; the time of China being a manufacturing hub based on “limitless” cheap labour has long passed (hence their natural and reasonable desire to move up the value chain). Given the outsized influence the Chinese economy has on materials and energy demand, one should not ignore the demographics.  Indeed, some commentators believe that China could implode “within a decade” due to the instability of this extreme demographic profile.

This problem of aging populations with fewer working age people supporting lots of oldies is also a feature of most “western” countries - those that typically make up the club of wealthy countries (outside of those blessed with natural resources). But this problem is a “known-known”, even if the only solution ever proposed is immigration, which is IMHO a non-solution because it just delays the problem by a generation.

The Kaya Identity

When thinking about the complexity of energy, economic growth, population and sustainability (specifically carbon emissions, it is not unusual to come across the Kaya Identity. This is an impressively mathematical looking equation that isn’t really an equation. The clue is in the name. But it is widely cited and hope springs eternal that we can solve for CO2 emissions.

Whilst the climate alarmist narrative is all about human-caused increasing emissions there is an understanding these come about from a combination of :

• Lots of humans

• Becoming wealthier

• Using more energy

• Causing emissions

When applied to the climate narrative, the Kaya identity looks like this:

Whilst people are concerned about population size and growth, it would be a political minefield to really address this question. So the focus has been on CO2 emissions, mostly with respect to energy. The “Myth of Green Utopia” is that we can have the same GDP (or other measure) of wealth (See the start of my series on “What is Wealth” Part 1 here and Part 2 here) by using only Net Zero energy.

The key thing about the Kaya Identity is that there is no causation in any of the relationship. You can see this because one can mathematically cancel out each pair (even if the terminology had been changed - in the above example “population” and “capita” are the same thing). If you cancel out GDP with 1/GDP and the same for energy and population, this “equation” states that CO2 = CO2. Yes, it is an Identity.

In case that is not enough - enjoy this article on the subject. And to whet your appetite:

Whilst the Kaya Identity is all a bit silly, there are two useful take-aways

1. There is an intuitive correlation of population with the other elements (GDP, energy use, emissions (and indeed with cats and puppies… but I digress)).

2. The noted “faster than expected” plateauing of the global population ought to have implications not just for carbon emissions, but also for global energy demand forecasts and at the highest level - economic growth.

Growth, DeGrowth

When one digs into the climate alarmist narrative - it is not long before you come across “degrowth” and “managed decline”. Again, from the Kaya Identity, one can see the attraction - reducing GDP could be a way to reduce emissions. Whilst the Kaya Identity says nothing about causation - it seems quite likely that this one has some basis in fact. Make everyone poorer and emissions would go down.

However, this may not be popular, and that is why the focus is on renewable energy and EVs that will save the planet without having to go down the degrowth path. Indeed the idea of “Green growth” will be familiar to many, even if it is highly improbable - but it is a narrative that is much better for your chances of getting elected than “we’re going to make you all poor to save the planet”.

The Muppet Show

For balance, the counter argument is that if we don’t “save the planet” the economy is irrelevant. I don’t adhere to this argument because I believe that a strong economy and the “wealth” that that represents will provide the greatest resilience to any form of natural disaster, whether natural or anthropogenic. Societal wealth provides the means for adaptation. Iin contrast, it is not for nothing that the climate movement always say that the “poorest are the most vulnerable to climate change” Yes indeed. So let’s help make them wealthy. It should be obvious that impoverishing ourselves in vain attempts at mitigation would be counter-productive.

But back to population: the growth in global population is slowing, but the total number of people is still increasing (rather like inflation… the headline inflation numbers are coming down - but prices keep going up, albeit more slowly).

Economics has been around for about 300 yrs - and during ALL of that time the global economy (and population) have been expanding. I’m sure there has been work on what “degrowth” looks like, but I haven’t seen any - so would welcome reading suggestions.

Whilst I have no formal framework for this, I think of the growing economy as one that is in a form of semi-stable equilibrium, but when it flips to degrowth it would be unstable. I have written about this before - but when the money-go-round starts to slow, so everyone makes small alterations to their lifestyles, spending less - which makes other businesses tighten their belts and so on and so forth (this is a version of the Paradox of Thrift).

Future Shock

World energy (and materials) demand is not going to collapse - with 8bn people we are starting from a position in which we use c.550 ExaJoules (or c.525 Quadrillion BTUs) of energy every year. Most of this is needed to just maintain the health of the super-organism¹ that is human civilization. Surplus energy is required for growth. In the graphic below we can see a prediction that is based on a population growth graph that avoids the fear-mongering manifest in the first graphic in this article (albeit also playing a bit fast and loose with the y-axis). The Energy Demand on the right-hand side is a curiosity. The dotted-line is the future energy demand if the historical relationship of energy-gdp-population is extrapolated (this is for Primary Energy and there is a lot of good debate (including my views) about how valid that is as we reduce combustion and replace with electricity… but bear with me here). The gigantic gap in 2040 is helpfully labelled “Energy Savings”. If we don’t find those energy savings, the implication is that for the global population to grow slowly AND to continue increasing affluence along historical trends, we would need to double Energy Demand (supply!) between 2020 and 2040. To me this is wishful thinking - at both ends.

Firstly, the energy savings that can be eked out of the energy transition are far less than the simplistic view that 2/3rds of current primary energy is lost as waste heat.

Secondly, I find it unimaginable, outside of a breakthrough in nuclear fusion, that we could double global energy supply in 20 years.

The implication for me is that GDP is an output of the equation, population and energy are inputs. Consequently, the forecast growth in global GDP will be constrained by the availability and affordability of energy. In this world-view, a plateauing population might be a very good thing.

Exxon 2016 Energy Outlook Forecast to 2040

Sadly I don’t have a compelling conclusion: It seems clear that economies need "growth", and I have never seen a convincing argument for stable de-growth² or indeed for a “steady-state” economy.

Moreover, there are good arguments that “growth” is a natural feature of organisms and that degrowth is typified by “collapse”.

I get to wondering what a global economy would look like in a world of a stable or shrinking population. For me the opposite of growth is decay. So whilst “growth” may not be sustainable or good, maybe it is the lesser evil?

1. To borrow Nate Hagen’s excellent terminology

2. This is a good place to start “Can we have prosperity without Growth”