We’re not all out of the Malthusian Trap

Wednesday, January 20th, 2010

Malthusian alarmists like Paul Ehrlich (The Population Bomb) were wrong about the world as a whole, but population growth is still a problem in places where a large share of income is derived from fixed assets:

In 2008 remittances were 18.7% of Haiti’s GDP. In comparison foreign aid before the catastrophe was 10.4% of GDP. Agriculture is 28% of Haiti’s GDP. These 3 sources of income are a combined 57% of Haiti’s GDP.

They have one thing in common: they have a low (but not zero) marginal product of labor. Having more people will not make these sources of income go up proportionally.

Why would remittances not be affected by the number of people? The reason is that other countries limit Haitian immigration. According to Gallop about half of Haiti’s population would emigrate if it could, one of the highest in the world. They have not emigrated because other countries limit how many Haitians they want to absorb.

Foreign aid is somewhat responsive to population, but far from proportional. Small poor countries tend to get more aid per capita.

More workers in agriculture certainly have some value, but again given how many people there are already in agriculture (two thirds of the labor force) more workers will not add much value. The scarce land limits the value of more labor.

Haiti’s per capita GDP would be 43% higher if today’s aid and remittances were shared on their 1960 population instead of their current population (assuming it aid and remittances were same, but ignoring agriculture).

The idea of population control has been discredited in rich countries — for good reason:

The reason is that with our institutions, wealth is produced by labor. More mouths also mean more hands, so per capita income is generally not related to population size. Since more people produce more ideas, growth may even increase with population size for rich countries.

But that’s not true everywhere:

The most obvious case where more people reduces the average standard of living is Saudi Arabia.

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