(The article with images is here.)
This is a topic that I keep thinking about since coming back from China.
One of the big problems of our time is the falling birth rates.
Surveys show that both men and women in Europe want more children than they actually end up having. Rapidly declining birth rates also skew the population pyramid, leaving fewer working-age people compared with older retirees (something called the dependency ratio). That can cause problems with pension payments and health care provision.
But it doesn’t seem to make sense, why, when we get richer, do we have fewer children, and not more?
And it seems to happen everywhere, in all time periods, from the Romans empire, to Japan, to Italy, to UK and USA, to Africa
A core theory is:
People earning more have a higher opportunity cost if they focus on childbirth and parenting rather than their continued career.
But I don’t think it’s as simple as that.
In this article, I want to zoom out and analyse the mechanisms that I think are causing it and how we can reverse it.
This is one of the most important topics in the world today. It’s at the heart of what makes an economy, and therefore a country, strong and powerful and it the core political debates including the rising cost of living, and immigration, and how we should be structuring society, making decisions and allocating resources.
Carrying Capacity
The carrying capacity is the maximum population size of a particular species that an environment can sustain indefinitely, given the availability of resources.
When a population exceeds its carrying capacity, it can lead to environmental degradation, resource depletion, and a decline in population size as the ecosystem can no longer support the excess individuals.
All animals have a certain instinct that makes them decide whether to have more offspring or not.
It can be incredibly risky for a species to overpopulate when there aren’t enough resources. In times of famine, and competition, animals conserve resources. In times of conquest, animals populate at a rapid rate.
I believe that the same reason that animals populations expand and decline is the same reason we humans decline or multiply.
A biological instinct.
A feeling of abundance, of consumer surplus.
There is something biological in us, on a genetic level, that makes us want to maximise our lifetime value by either multiplying and having offspring or just conserving our resources to invest it in ourselves.
Wealth Does not Always Lead to a Decreasing Birth Rate
In the founding of colonies of US,
People were getting wealthier, but there was a huge amount of space to expand. they had an overwhelming feeling of abundance and instinct to expand
Year, Population, Growth Rate
Let’s look at another example – Korea
As Housing Density Rises, Fertility Falls
When women live in smaller, more crowded houses, they have fewer children. This is especially true if those small, crowded houses happen to be in areas of high population density, where crowding within the household is echoed outside of the household.
South Korea has 0.81 births per woman (2021) which is one of the lowest fertility rates in the world.
These are some interesting studies.
Cities are a Human Zoo
The Human Zoo examines the nature of civilised society, especially in the cities. Morris compares the human inhabitants of a city to the animal inhabitants of a zoo, which have their survival needs provided for, but at the cost of living in an unnatural environment.
Animals Are Difficult to Breed in Captivity
Many wild animals are notoriously difficult to breed in captivity. (Source)
Social Modeling
We look at those around them to help decide on what choices to make and on how to live. We look at family models and model our future family based on that.
They might look at their parents family, as a model, and those of their friends and family, and those without children, to decide which is the best model for us. This happens on a social genetic subconscious level.
The reason is that it is not some logical decision this is such a fundamental biological decision, something very core to our being, that happens to every animal and living thing,
Three Reasons for Low Birth Rates
There are three reasons why the carrying capacity is changing, and people have a biological instinct to have fewer children:
- The Digital revolution has made more people worse off – cost of living crisis and the squeezing of lower and middle classes – our economic system hasn’t caught up with the digital economics
- Aging population and misallocation of resources squeezing the younger generation
- Economic Incentives of Urbanisation
The solutions are therefore to reverse or deal with each of these changes. We need to rethink and redesign how our economy and society is structured and resources are allocated on a longer term level.
The Digital Revolution – Our Economic System is Changing
Carrying capacity is not a fixed number but can vary over time
In the past, we had a the following stages of human progress which can be loosely written as follows:
- Nomadic Tribal Economy – Hunter Gatherer
- Agrarian Economy – Farmers
- Merchant Economy – Traders
- Industrial Economy – Factories
- Information Economy – Internet
These different economies all had completely different societal structures.
We are now entering the digital revolution which has unique attributes.
In the last 20 years we have seen a shift to a new type era economy – the internet.
In the previous economy – the industrial economy, unskilled workers saw a huge growth in consumer surplus which created a huge population boom
As Adam Smith said
“In a pin factory, when workers specialize in different tasks, they can produce a lot more pins together than if each person made pins from start to finish. For example, one person might draw out the wire, another might cut it, and another might put on the head. By dividing the work like this, ten workers could make about 48,000 pins in a day. If they didn’t specialize and each worked alone, they might only make 20 pins each, or 200 pins in total. So, specialization and division of labor can greatly increase productivity.”
With this huge wealth increase and rising middle class. It did not matter how productive or how efficient each person was. The important factor was having economies of scale. 10,000 people working together less efficiently would beat a company with 10 people and drive them out of business. Therefore rates were standardised and people were paid the same. It was the age of equality. Because there were so many workers they could organise together into unions and demand higher salaries or take control of the factory.
Because of the traders age and then the industrial revolution we saw huge efficiencies and a massive increase in production by combining people together in factories which made society wealthy and people better off. They were then able to expand their population faster than ever before in human history.
What made this population explode? There was much more wealth and it was distributed equally among the people. We also saw an increase in living standards and healthcare which meant the infant mortality fell.
But this is not a unique attribute in all of human history – it’s not a universal rule that as a society develops, the resources are distributed to all people in society equally.
Digital Economy
In the digital economy, those unskilled are no long as valuable, instead the surplus of the system goes towards the skilled creators and platforms.
The market is moving from Economies of Scale, to Economies of Efficiency
Content can be replicated for free, which means one person can create software that turns into billions of dollars.
Small companies such as instagram and whatsapp can sell for billions of dollars because of their use of technology.
The elite are increasingly globally mobile.
Competition has opened up and the labour market and the digital market and the information market and to some extent the dating market is no longer local or national but global.
Instead of seeing a divide between rich and poor between countries, we are seeing a divide between rich and poor within countries. More and more work is going overseas to lower cost workers to save efficiency, and we are moving to greater efficiencies.
Rising Living Costs and The Squeezing of the Middle Class
The middle class is shrinking, and some people are moving up to the global elite makers, and some people are left behind, falling to the less well-off – seeing rising living costs and standards of living.
Elizabeth Warren: “The middle class is getting squeezed to the breaking point.”
People are no longer able to be entitled to a better standard of living just because they were born in a developed country. In fact, being born in a developed company with high tax and high cost of living and inefficient government is a disadvantage during this transitional period compared to developing countries with a low cost of living and low tax rate.
During this transition people see the costs of living rise. Taxes are still high in many developed countries, and the nation states are bloated.
People are on average less well off, and so people consider they can’t afford big families. Society can’t afford more children.
Read More here.
Implications of the Digital Dating Market
One other implication of the digital dating market is that with the increased connectivity and accessibility, men and women are connected to a greater number of potential partners who they consider as potential partners, whereas before people only had access to a small number of those in their area. This leads to a paradox of too much seeming choice and not wanting to settle.
With an increase in education and empowerment of women, and with 50% more women than men going to university, and the preference of women to “marry up” there are just not enough men for them.
We were designed to live in local communities, and now with an expanded pool of the entire world from social media and dating apps, both men and women have unrealistic standards of the opposite gender. As a result they are no longer satisfied in relationships.
Our Economic Model is Not Sustainable
I could sense it in China, but I thought that moving from China to the UK would be different, but it is the same.
There must be something about our global economic system that is not sustainable.
And I believe there is a big part of the sustainability movement that many people can sense that our system is not sustainable in some way in its current form.
But it has been misguided towards the environment when it should be focused on the entire economic system.
Our Economic Goal – GDP Growth
Our obsession with GDP is not healthy – it is counter productive in the long run
With our current economy we place so much emphasis on GDP and economic growth that people have become the resource to be farmed for shareholder profit, taxes, higher energy bills, and pointless consumption that makes them worse off.
Examples of things that increase GDP? Car crashes, growing government spending, inefficiencies and waste, rising train tickets and rising energy costs. Spending on pointless consumer goods to through them away and get a new one. Fitting more and more people into smaller and smaller living spaces.
What decreases GDP (in the short term?) Lowering prices, taking time off work to look after a baby, learning and education.
Our economic system is set up to milk people for all they are worth for the economy to grow.
This is not just about government GDP, but companies, and shareholders and stocks all have this same incentive, to maximise shareholder value, to raise prices constantly, try to encourage workers to work longer for maximum value. It’s something core to our economic system.
GDP is also a backward looking indicator. Most of what leads to our economic growth in 2024 is thanks to work done in 2023, and before (most of it is actually a result of the institutions that were created hundreds of years ago).
It doesn’t measure the future, and so obsessing over it stunts future growth.
We have to move away from GDP, which incentivises people to consume and work harder and longer but damages our abilities and life experience, leading us to live close together in cities preventing us from investing in the future. How much personal wealth and capabilities people have is far more important, and how abundant and happy people feel has to be taken into consideration.
Anyone in business knows that you can’t focus on pure profit or else your customers will end up leaving as you continually squeeze them, you also need a countermeasure – something to assess how satisfied they are, and you need to think long term.
We currently do have a counterbalance which is in the form of elections, but this does not lead to long term solid decision making because it ends up in a further squeezing and a short term reallocation of resources from one to the other – in this case to the older voting populations away from the young.
How about measuring a forward looking indicator – such as fertility rate? or some way to capture the consumer surplus indicator as a measure of economic success?
I wrote some more about this topic here.
Collapse of Aging Societies
This is the population pyramid – as we get wealthier and living standards and life expectancy increases, we move into stage 4 – contraction.
Our economic system of aging economies fundamentally collapses because young people are working to support aging societies, and it doesn’t work for young families who can’t support their own young families.
Young people are being squeezed.
We are living and working longer, and most of us build the majority of our wealth in our last 30s, 40s, 50s but the reproductive window is short.
Broken Housing Market
With the mismatch in resources and reproductive capacity, those who have accumulated greater resources, and don’t have children, are able to out-buy houses than those who are younger in their career, paying off student loans, and trying to save to get on the housing ladder.
Not until they have accumulated enough to get a family home to give them the biological feeling of surplus to expand and raise a family.
This is further worsened by the growing voting power of older people in aging populations who have the majority of their wealth in houses and seek to protect that.
How much does a home actually cost?
Bricks are cheap!
It’s just the labour and economics of houses that are not working for younger people.
But because there is so much wealth, and GDP, in property – there is no incentive to fix it and for house prices to fall.
Younger people need to get smaller houses and live further away and spend longer commuting. Hardly a feeling of economic surplus and abundance.
One example of this problem is the large number of “empty nesters” who remain in large houses when younger families can’t get on the housing ladder.
The economics of it don’t make sense to fix it.
Maladaptive Societies
Humans engage in maladaptive behaviours all the time
Spending hours on social media and doom scrolling is one example
The average person spends 2 hours and 27 minutes daily on social media. Teens and young adults have particularly high usage rates, with 17-year-olds averaging up to 5.8 hours daily.
We are designed to be comfortable – to survive, rather than thrive.
When you put all these people together, voting in a democracy, the decisions work in the same short term interests when people vote for decisions and don’t think on a bigger level to reorganize and do activities that will make us grow but might be painful in the short run.
What is the earth’s true carrying capacity?
The important question is – what is our carrying capacity – how many people can our society hold? Can we expand indefinitely? And what is the limit?
This depends on
1) Resource availability
2) Resource allocation – and governance,
There are many who are of the view that we are already at overcapacity, and I argue that many have the feeling that we are, that’s why birth rates are falling.
It seems like, in many ways, our society might be breaking.
I argue that we are nowhere near our limit, that we need to reorganise society, and allocation and management, to build more larger housing, to build more settlements and restructure society away from the cities into the countryside, to give tax breaks to younger people so they can have the feeling of abundance and expansion and opportunity.
We are going in one of these two directions
The top right is Japan’s expected population pyramid in 2050
We need to do rigorous retraining of the unskilled and help them so they become skilled and can thrive in the digital age.
The problem with expanding birth rates, is that it just postpones the problem until later.
So we need to manage the populations level, by expanding or contracting so we are managing our populations level
The important point to maintaining our society and economic system is that we need to find a way to organise society and allocate resources so that our birth rates never drop below replacement level. If they do, we see a top heavy structure, which causes the problem to worsen over time.
After those older people in the top heavy society get older, the next stage then becomes a much smaller population, which has more space and resources, and the cycle starts again.
The problem with that is that the society might have already shrunk and lost relative global power so that it is taken over by another that is more powerful.
But with technology, who knows?
Is a smaller population or a larger population better?
So we need to make a decision collectively about what kind of society we want to live in. Whether we can support a larger population, or whether we should have fewer people.
We need to either continually expand our society or build our society into a column structure that never contracts. Or accept that we are going to contract, and follow that.
GDP pushes growth
Our economic and political system all wants to keep growing, they are pushing each for other. We are always seeking economic growth
Yet, our economic system is built on scarcity – that’s the core economic problem.
And so this causes a milking of people, a rising living costs and expenses.
So we need to resolve this problem. We have to have a measurement and a sustainable way to grow that benefits people and gives them consumer surplus.
A promotion of technological solutions and retraining and efficient allocation of resources.
If we want things to stay the same, things are going to have to change
This is not a matter of reallocating resources from one group to another, this is a matter of making our economy sustainable.
We need to find a solution to rebalancing economies, young people need to realise that the current system is not working in their interest.
All people need to work together to build an economic system that sees growing families as part of a successful economic system.
The Importance of the The Younger Generation
There is a natural tendency for older generations to hold on to power which can have negative implications for society and the overall progress of our species.
We need to reallocate resources and grow the birth rates and reorganise society
“what is good for the hive is good for the bees”
Marcus Aurelius
“We do not inherit the earth from our ancestors, we borrow it from our children.”
– Native American Proverb
Some solutions?
- Young people need to wake up to what is in their interests.
- One solution could be for a lower tax rate for young married couples with children for 10-15 years or until they are 35.
- My advice to young people is to move to societies where they don’t have a top heavy structure and where there is space to expand.
- We need a massive upskilling and education towards higher value skills from the lower value
- We need to realise the importance of young families and help recognise this problem and tackle it early before it gets worse, and irreversible.
- Immigration is not a solution – it’s a short term fix, that just exports the problem to the country they are leaving from.
- We need a massive building of new houses, and a delicate managing of the housing market so that young people can get on the housing ladder and feeling of abundance to multiply
- We need to encourage dispersed living in the countryside with larger houses and more space to expand – something that is natural to the digital economy – we no longer need to live in cities.
