Hot and Crowded

Congratulations! You are now one of eight billion humans. According to number crunchers at the United Nations, this milestone was passed last week. This matters, not just because the world is quite crowded these days, but also because economies ultimately revolve around people.

Abstractly, we might think of an economy as consisting of farms, machines, factories, mines, ships, banks, office buildings and so on. But it is ultimately all about meeting the needs and desires of human beings. The more people there are, the greater demand for food, shelter, clothing, entertainment, communication services and healthcare. As the population grows, so does the demand for those goods and services.

A growing population also supplies the workers to produce those things. Therefore, population growth is a key ingredient in economic growth. It is not the only factor; however, productivity growth is absolutely crucial, allowing us to do more with less. Indeed, it is growing productivity that has allowed for the world’s population to grow so rapidly over the past century. The world produces more food than ever, even though the share of the labour force engage in agriculture has declined. The nightmarish scenario predicted by Thomas Malthus in 1798 – that overpopulation would lead to persistent famine since population growth is exponential while food production growth is linear – never came to pass on global scale. Meanwhile, advances in science and medicine led to a decline in infant mortality and expansion of life expectancy. The fact that we live longer today, on average, compared to our ancestors is probably humanity’s greatest achievement, but it’s something that gets little attention compared to, say, the first moon landing.

Consider UK as an example (this is where actuarial tables were first compiled). According to the UK’s Office for National Statistics, a girl born in 1841 could expect to live to 42 years old. A hundred years later, female life expectancy at birth was 62 and today it is 82. Initially, the increase in life expectancy was largely due to improvements in healthcare for children and particularly infants such as immunisation. More recent improvements are largely due to better disease treatment among older people.

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