How Relevant Is Malthus for Economic Development Today

The Malthusian model of population and economic growth has two key components. First, there is a positive effect of the standard of living on the growth rate of population, resulting either from a purely biological effect of consumption on birth and death rates, or a behavioral response on the part of potential parents to their economic circumstances. Second, because of the existence of some fixed resource such as land, there is a negative feedback from the size of population to the standard of living. These two components generate a number of predictions. Specifically, in the absence of technological change or expansion in the stock of the fixed resource, population will be stable around a constant level. Second, without changes in the function generating population growth, technological improvements or increases in the stock of resources will eventually result in more people but not a higher standard of living. As a description of population-income interactions, the Malthusian model had a long period of success, covering most of human history in most of the world until the beginning of the industrial revolution. In this paper we ask whether the model has any relevance to the world today. For the first part of the model—the positive causality running from income to population growth—the answer is clearly no. For reasons that have not fully been determined, countries that get richer now see falling rather than rising rates of population growth. Regarding the second part of the model—whether higher population lowers the standard of living—some further clarification is required before we can even pursue this issue. First, it important to differentiate among the different channels through which population affects economic outcomes. We will characterize as non-Malthusian those channels that work through the growth rate or demographic structure of the population. These include the effect of population growth in diluting capital per worker; the effect of the population age structure (itself a function of fertility) on the ratio of working age adults to dependents; the association of lower fertility with higher human capital investment via a quality-quantity mechanism; and the effect of lower fertility in freeing up female labor for output production. We reserve the term Malthusian for channels having to do with the size of the population, such as the congestion of fixed resources. This channel was the one Malthus thought about, and it is also the only one that pins down the level of population in steady state, which matches historical experience. Thus, in our typology, it is perfectly possible for reductions in population growth to raise income per capita even though the Malthusian channel is irrelevant. A second issue to be clarified is at what geographic scale we are looking. It is possible that in a world with trade, a high level of population in a single country will not lower that country’s income relative to others, but that a world with more people will be worse off because of congestion of productive resources or the environment. We do not pursue that possibility here. Instead, we ask whether there are countries or subnational regions in the world where the local version of Malthusianism hold true. The likeliest place to look for Malthusian effects is among poor countries, for several reasons. First, poor countries have had (and are continuing to have) the largest increases in population. The population of Africa is expected to multiply by a factor of 9.8 between 1950 and 2050. In India, during the century of most rapid population growth (1920–2020) population is expected to multiply by a factor of 5.5. By contrast, in Europe over the period 1800–1900 (roughly the century of fastest population growth), population increased by a factor of 2.2. If the initial population in these regions represented some equilibrium in the relation between population and resources (given available technology), the more rapid population growth is more likely to result in a disequilibrium in this relationship. Second, poor countries are least able to use trade as a means of avoiding resource constraints. Finally, as discussed further below, poor countries empirically have much higher shares of natural resource rents in national income than do rich countries. The idea that poor countries might suffer negative economic effects from overpopulation has a long pedigree. However, in recent decades, the Malthusian perspective has fallen out of favor among development economists, who have stressed the substitutability of technology, capital, and labor for fixed factors, as well as the productive benefits of density per se or of the technological and institutional changes induced by population pressure (see Allen C. Kelley 2001). We take as an operative test of the Malthusian channel the answer to the question: if a country had fewer people but was otherwise unchanged in terms institutions, human and physical capital per capita, productivity, terms of trade, etc., would it be significantly better off in per capita terms?