Demography

A reasonably well remarked feature of the modern world is the decline in the “total fertility rate” (TFR) of many populations. Much of the Western world (plus China) has fallen below the “replacement” TFR of 2.1; this is expected to cause those populations to not only shrink, but to age. An aging population poses some real nuts-and-bolts problems that will affect you.

Aging

A population’s age is measured in terms of the distribution of the ages of its members, and is heavily influenced by the TFR. In an extreme, “Children of Men” situation in which the TFR dropped to zero, the population’s age distribution would march upward year-for-year. In a (simplistic) stable population, in which the birth and death rates matched, the distribution would be flat-ish, and unchanging from year to year. In a society in which the TFR suddenly increased (as in the U.S. during the baby boom), the uptick at the bottom of the distribution would pull its median age down.

The age of your population in particular, and of the world’s in general, matters to you; to see why, let’s consider a very simple economy.

The Village

Consider a primitive farming village with 100 inhabitants, in which the only economic activity is the production of food: specifically, each year enough food must be produced to feed the entire population. Let’s assume that 10% of this population is aged 65 or older, and that, at that age, a person is no longer able to contribute to the production of food. In this situation, 90 people are working to grow food for 100.

Now let’s assume that the population ages, s.t. 40% of the population is 65 or older. Now 60 people are working to grow food for 100. In the absence of technological advances that make each person 150% as productive as he was in the baseline, there’s going to be less food to go around. All else equal, an aging population will cause a declining standard of living. This is not an accounting issue, this is a physical problem caused by a population distribution that has relatively few workers as compared to consumers.

Realism

In case a 10% to 40% increase in the 65+ cohort strikes you as unrealistic, know that this is projected to happen in Japan between 1989 and 2055. This cohort was already at 20% in 2006. And just for the record, this little note is not intended as a case for an ever-expanding human population; instead, it’s a simple argument about what’s coming. It’s positive, not normative.

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