Thoughts on economics and liberty

Simple truth: A bigger population makes people richer

For those in India who are DEEPLY confused about population (and are likely to remain so, given that our socialist education system has not taught them to think critically), here's a VERY SIMPLE table.  

hope this at least raises a few questions in their mind, if not making clear the underlying dynamics of this reality.

Year
Population (billion)
Per capita income (USD)
1750
1
300
2010
7
10000

(I've not verified this data but it is likely to be in this ball park.)

A stronger POSITIVE CORRELATION PERHAPS CANNOT BE FOUND IN THE SOCIAL SCIENCES. 

If you break up this data by country you'll IMMEDIATELY realise that the level of freedom explains 90 per cent of the variability in income.

So what we are saying is that FREE PEOPLE become rich. 

Here's a simple graph:

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11 thoughts on “Simple truth: A bigger population makes people richer
  1. Jitendra

    Dear Sanjeev,
    This topic of population is a really interesting one. I would like to put forward below points
    1. As you say population is good for the society, we as a billion plus population should start focusing on increasing this as this will increase the per capita average as per the chart mentioned by you. You really mean that a Tsunami of people will only GOOD to our world?
    2. What I see that when a person start looking things only from the economics laws and average factors like per capita income, an indivudual problem is lost. What kind of distribution of money is this? 42% of the world's population and receives only 9% of the world PPP income. (source: http://en.wikipedia.org/wiki/International_inequality) Will you say that those who has concentration of wealth in thier bank accounts are the most eligible ones? or population has nothing to do with this?
    3. Quantity vs Quality : The human societies like India where not a single system is in place…people are so ignorant that getting killed in Stampade, accidents and so many unnatural incidents. Will there be any system built which could control such crowd? For me, each individual is important and should receive the optimal level of service in his life(Quality). When I have to serve any kind of service to 100 instead of 1, my quality of service will take a toll. Increasing human expertise in handling human services is not directly proportional to the increase in the population. Or will you say Quality of service to a human life does not matter here and we all should enjoy the mad flow of population and live at the mercy of lowest grade of standard of life?
    Thanks
    Jitendra

     
  2. Tilopa

    I agree with what most of Jitendra said.
    Your data doesn't prove that it was population which helped the per capita to grow.It will be amateurish since no study proves this and making such a generalization on simple data is foolish.
    per capita income can also grow because of industrialization…

     
  3. chaitanya

    Really ? How 'bout this simple table ?
     
    YEAR                             POPULATION                                GDP
     
    2011                               1.2 Billion                                       1 Trillion USD (India)
    2011                                400 million                                     14 Trillion USD (USA)
     

     

     
  4. sabhlok

    Tilopa,

    There’s no point my trying to explain since you’ve come back to comment ONCE AGAIN without having read BFN.

    What is “industrialisation”? It is NOT POSSIBLE without freedom. The concept of industrialisation has NO MEANING without the associated institutions.

    The point is simple. The ultimate resource is the human brain which is unleashed through freedom. No more need be said.

    S

     
  5. sabhlok

    Chaitanya

    Of course you’ve not read the second part of what I’ve said, and associated graph. The reality is that India is UNFREE. Please try to understand. With UNFREEDOM you can’t generate sufficient wealth. However, today, India is 4 times more populous that it was in 1947 and about 10 times more prosperous, despite the hurdles placed by Nehru. India can easily become 20 times wealthier with freedom.

    s

     
  6. chaitanya

    I agree that freedom is a very important factor. My point was about population.
     
    I don't see a direct positive correlation between population and economic growth. Its quite obvious. Japan is relatively sparsely populated, still second largest economy in the world.
     
    That India is 10 times more prosperous now than in 1947 despite a 4 fold increase in population, doesn't CONCLUDE anything about the relationship between population and economic growth. There are other factors at play like technology, industrialization etc. If the population had grown only 2 fold, maybe India would have been prosperous 20 times. Who knows ?
     
    To make a point that "A bigger population makes people richer", you need to establish that a bigger population is a NECESSARY / CONTRIBUTING condition to make people richer. If the people become richer from time t1 to t2, and population also increased during that period, it doesn't automatically imply that population has caused the riches. It could very well be argued that DESPITE the population, there was increase in wealth.
     
     
     

     
  7. sabhlok

    True, Chaitanya, I’m not trying to prove what the headline says, for there is a crucial variable that is involved: freedom.

    But note that for those who scream like BIG FOOLS about population being a problem don’t understand that population is NEVER a problem. Policy is.

    But once good policy is established (the catalyst), then large population and wealth go hand in hand.

    All I’m saying is that “educated” Indians ARE THE PROBLEM because they don’t understand BASIC economics.

     
  8. Tilopa

    Due to increase in liberty people become rich…that is correct.
    But proving your point by telling that population increase is the cause for that is not good for person of your level,sanjeev…

     
  9. sabhlok

    Tilopa

    You are probably aware that I didn’t publish one of your earlier comments – because you didn’t confirm that you’d read BFN. This one still doesn’t confirm that you’ve read (and understood) BFN, but I’m pleased that you are now at least half-way to the truth. By agreeing that increased liberty makes people rich, you are half way there.

    You still haven’t understood the point I’m making, though. That’s because you haven’t read and understood BFN.

    The point is simple: As liberty (and hence knowledge) grows, there is an increase in population. The population then absorbs the knowledge and even at pathetic levels of knowledge (like the ones that prevail in India), there is sufficient innovation and improvement in productivity to increase everyone’s wealth. When, however, this large population genuinely absorbs the lessons of liberty, then after a point the growth of population stabilises and even declines, while wealth continues its upward path.

    In general there are two things happening here: (a) catch up – based on copying others, and (b) new innovation based on increased liberty. The net result is very straight forward: bigger population (which is sustained by the fruits of liberty) leads to greater wealth.

    One of the big problems in the West is that the number of people being produced is declining (e.g. in Japan) and that will lead to significant reduction in innovation.

    For innovation you need network effects – which are a function of a LARGE, FREE population.

    So one thing we are to be clear about in life is this: that THE ULTIMATE RESOURCE is the human brain. Nothing else matters. What we want is the liberated human mind.

    Now, please (and I beseech you!) do me a favour and read BFN. I’m a bit tired (and getting old) trying to explain everything ONE BY ONE to everyone I meet.

    S

     

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