9 ms·

The more interesting thing about this is that it is part of a new type of economics, contraction economics. The global trend toward birth rates below replenishm

The more interesting thing about this is that it is part of a new type of economics, contraction economics. The global trend toward birth rates below replenishment means that first-world countries are maintaining their population growth through immigration. As some countries embrace restrictions on immigration, and ultimately all countries plateau in their population growth (projected to be around 2100) it means that the driving force behind increases in property value (population increases) will be curtailed.* As we saw in 2008 curtailing or reversing growth in real-estate can have major impacts on society, but in the future this won't be just a correction it will be a new phase of global economics. There will be fewer humans each year making the total pressure on land values negative. Even before that an aging workforce will cause the total working population to contract (as it already has in Japan). Everything the Japanese do with more land and fewer workers is a canary in the coal mine for the global economy. One of the great predicates of modern economics (perpetual expansion) will need to be re-thought. In some ways it's great news (more space for everyone after the great pinch of the 21st century) but in others it will necessarily wipe out the speculative aspect of many current growth markets. Contraction economics means deflation becomes a norm not an exception. * Urbanization means cities will lag behind this reversal.

pm90 8y ago
Well, this is all assuming that humanity will not expand out of Earth. If that does happen, we might actually have a perpetually expanding populace and economy. Fun times.
- fbinthrow 8y ago
  You just accidentally summarized why growth obsessed global capitalists are completely delusional.
  - JumpCrisscross 8y ago
    > growth obsessed global capitalists are completely delusional Infinite growth and finite material resources are perfectly compatible. Case in point: Fortnite.
    - saagarjha 8y ago
      I’m not sure if you’re being sarcastic; how does Fortnite demonstrate “infinite growth”?
      - JumpCrisscross 8y ago
        > how does Fortnite demonstrate “infinite growth”? Fortnite makes money by selling digital in-game goods. Their revenues could grow infinitely without their material footprint expanding one iota. What they demonstrate is not infinite growth, but the capacity for infinite growth in a finite universe. Value, at the end of the day, is subjective. Growth is a measure on this subjective value. It is not a measure on material inputs.
        skissane 8y ago
        That's not infinite growth. There are only a finite number of humans on earth who could possibly play the game, and many of those either have no interest or can't afford to do so. And, of all those potential players, each of them only has finite disposable income. So there is a hard upper limit on their revenue, without growth in world population (to increase population of potential players) or growth in the world economy (to increase disposable income of those players). So, Fortnite is subject to the same finite growth limitations as every other business.
        JumpCrisscross 8y ago
        > There are only a finite number of humans on earth who could possibly play the game, and many of those either have no interest or can't afford to do so. And, of all those potential players, each of them only has finite disposable income. So there is a hard upper limit on their revenue The proposed metric, a product of population and incomes, is unbounded (in aggregate). Population isn’t. But nominal incomes, a function of the unbounded money supply, is. Real incomes are trickier, but they--too--are unbounded. It just requires some fraction of the basket be immaterial. As long as that component grows sufficiently, the real value of the basket–which, again, is subjective–grows. This isn't some edge-case philosophy, but a well-recognized effect of the subjective nature of value. (The physicist in me points out that the observable universe has, based on known physics, a finite computational capacity, but that objection merely illustrates the absurdity of proposing a practical upper bound on growth.) We're used to thinking of production as making cars and ships. Those activities represent a falling share of human activity (weighted by value). To illustrate, witness the falling material intensity and energy intensity of GDP growth.
- eloff 8y ago
  I think you're assuming the current decline in birth rates is due to scarcity of resources. But I don't think that's true. In the developed world food and energy are not scarce, and even land outside of major metro areas is not scarce. Population might just stabilize at some point, and then there's not much of a driver to expand off of our planet (apart from some resource mining, and other activities.)
  - colechristensen 8y ago
    Food and energy are not what defines scarcity any more. If you want to pay the mortgage, have a fulfilling job, have time to spend with your family, and give your child a good start in life, you can't have 8 kids in a middle class family. Sometimes 1 is the right number if you want your child to be successful and have enough free time to enjoy life yourself. That IS resource constraint, the resource just isn't food. The replacement rate is a little above 2 children in the modern world. Three kids is a burden for a lot of people.
    - eloff 8y ago
      What's the resource constraint then if it's not food, energy, or shelter? People want to buy more stuff? Hardly a requirement of years gone by. People want more free time? Doubtful, otherwise people would work less and buy less stuff - which we don't see. People keep getting more productive, but they just funnel that into a more expensive lifestyle rather than cutting back on work. I don't think the reasons are simple (or even the same between people) but I don't think it's dominated by resource constraints. I know software engineers with no children and school teachers with four. Very different lifestyles, but all middle class. And I don't think resource constraints factored heavily into their decision making.
      - chongli 8y ago
        The resource constraints now are time and location. It's affordable to buy houses in a lot of places, just not so many that have access to good jobs and schools. So people prioritize the latter and sacrifice their time by commuting for work. Since both parents now work, often with lengthy commutes, there isn't a whole lot of person-hours left to spend with the children. That means people have fewer of them. When the kids get older and it's time to send them to university, well, that's something which has gone backwards in affordability. The cost of a university degree has shot through the roof. How could anyone afford to send 3 kids to university these days, let alone 8?
- rhacker 8y ago
  The people left to live on earth will be more and more tied to doing mindless jobs. I think there are a lot of people that would be excited to start a new community on Mars, get paid to, basically exist and build homes (pods) and connect those pods to additional pods. The act of mining will have meaning again beyond helping someone else get rich off bitcoin.
jameslk 8y ago
Japan is not a very good proxy due to their strict immigration policies and preference to be an "ethnically homogeneous nation." As you mentioned, other countries can just replenish their head count through relaxed immigration. I'd wager, for example, that the US will remain highly multicultural with looser immigration long term since it's baked into its identity[0], despite some recent policy changes. 0. https://en.wikipedia.org/wiki/Melting_pot https://en.wikipedia.org/wiki/Melting_pot
- smsm42 8y ago
  In 2017, over a million people[1] received legal permanent resident status. In 2017 it was slightly less than in 2016, but on roughly the same level as the previous decade. So recent policy changes don't seem to have much effect in that regard. [1] https://www.dhs.gov/immigration-statistics/yearbook/2017 https://www.dhs.gov/immigration-statistics/yearbook/2017
  - bduerst 8y ago
    Over 500,000 of those are familial green cards (spouses and children), meaning they likely would have been issued regardless of the changes in policy and don't really reflect a multicultural dimension for the country. Other permanent resident status issuances take up to 15 years to achieve, meaning you won't see the effects of recent policy changes in that metric until the years to come. A better metric is visa issuances, since those are the first step for many to becoming a legal permanent resident. Those have peaked in 2015 and have declined back to 2013 levels now: https://travel.state.gov/content/dam/visas/Statistics/AnnualReports/FY2017AnnualReport/FY17AnnualReport-TableXVIA.pdf https://travel.state.gov/content/dam/visas/Statistics/Annual...
    - smsm42 8y ago
      That depends a lot what exactly visas are those. There are dual intent visas, which allow change to permanent immigrant status, and ones that explicitly prohibit such change. Most visas at your link are B type visas, which would be denied if immigration officer even suspects you have intent to become a permanent resident.
snowwrestler 8y ago
I disagree that there is a significant correlation between expanding population and an expanding economy. In fact there are plenty of examples of countries whose economy expanded way faster than their population, which implies that factors other than population dominate economic growth. (If population was the dominant factor in economic growth, we would see a consistent correlation between the two.) Every day we read articles about how AI is going to drive massive improvements in productivity, killing millions of jobs in the process. If we really believe this is true, then a shrinking population is what we want, to "soak up" those destroyed jobs. A bonus of massive productivity increases is that real property transactions as a percentage of the economy will shrink too, softening the blow of contraction there. Real estate is not the first industry to be threatened by changes in the economy! Creative destruction is part of our economic story and there is no inherent reason real estate should be immune from that, or that we should feel special concern about that industry among all others. In short, I see no reason to believe that a shrinking population necessarily creates a shrinking economy. "Contraction economics" sounds cool but it's just a new name for what happened to the buggy whip industry, the telegraph industry, the canal industry, etc. And yes, maybe the real estate industry too. EDIT to add: In my opinion a more significant future for economics is accounting for externalities that have typically stayed off the books, like clean water, clean air, a stable climate, etc. Economics has typically modeled economies as open systems, that is, there are "inputs" like raw materials and energy sources, that create economic outputs. But we've conquered the Earth now... with the exception of insolation, the global economy is a closed system. Every ounce of raw material and every joule of energy creates a complementary cost somewhere else in the system. Unless we can account for that, we will fool ourselves about the actual net value we are creating.
- adventured 8y ago
  One prominent recent example that destroys the myth that economic expansion is very tightly bound to population expansion, is the US. 2008 pop: 304m people. 2018 pop: ~327m people. A 7.5% increase in population across a decade. 2008 GDP: $14.72t ($17.64t inflation adjusted). 2018 GDP: $20.5t. Approximately a 17% real increase in GDP. The US added an economy close to the size of Germany in just ten years while only adding 23m people (Germany's population is 83m). That's courtesy of increasing output per capita far more than it is population growth.
almost_usual 8y ago
We're likely going to experience significant population contractions not driven by "stabilization" as humanity approaches 2100.
raquo 8y ago
If we keep going the way we're going now, by the time population decline puts a negative pressure on land and housing prices, they will be so high that 99% of people will have no way of ever owning it other than by inheritance. I don't think we will arrive at declining housing prices the way you suggest. Something will have to give way before that.
adventured 8y ago
> it means that the driving force behind increases in property value (population increases) will be curtailed > There will be fewer humans each year making the total pressure on land values negative Your premise about real-estate inherently contracting in value due to population contraction, is not correct. Nor is your premise about the driving force correct. Double the US population and drop the total national income by 95%. See which is the greater driving force in real-estate values. You can see this in action right now just by looking at high population density countries that are poor. Bangladesh has extreme population density, their real-estate is not expensive compared to Canada (~1/400th the population density) or the US (~1/40th the population density). You can increase the value of real-estate while contracting the population, by increasing the per capita income of each person enough to overcome the effect of the population decline. Germany's population has barely budged in 50 years, their real-estate has increased in value in that time as the economy has expanded in real terms with a climb in their per capita wealth and incomes. Today nearly everything you've ever heard about healthy (ie non-war, famine, etc) population decline being a horrible outcome, is false. It may have been true in the past, it is no longer. The ideal outcome is for populations to decline while productivity and income soars per capita, improving the standard of living of each person remaining and lightening the burden on earth's resources. The focus of all nations should be on aggressively increasing per capita output, not on fighting healthy population decline.
brownbat 8y ago
George Friedman wrote a book of creative predictions called "The Next 100 Years" that argued mounting depopulation pressures and labor shortages would lead countries to begin competing for migrants. Interesting that has not been Europe's solution so far... https://en.wikipedia.org/wiki/The_Next_100_Years:_A_Forecast_for_the_21st_Century https://en.wikipedia.org/wiki/The_Next_100_Years:_A_Forecast... Japan's politics, with a strong aversion to open immigration and a desperate need for labor, have landed on some controversial compromises--for one, "internships" for temporary foreign workers with questionable protection for rights. May be an early signal for how the rest of the world will handle this. https://www.wsj.com/articles/japan-skirts-immigration-debate-by-offering-internships-to-foreigners-1429049533 https://www.wsj.com/articles/japan-skirts-immigration-debate...
- Jyaif 8y ago
  > Interesting that has not been Europe's solution so far Not all immigration is of equivalent "quality". The worsening IQ test results in europe is often credited to the african immigration. On the other end of the spectrum, asians are being actively restricted from entering the top schools in the US. Europe (and pretty much every country in the world) is already competing for qualified immigration.
peter_retief 8y ago
It seems to be the opposite, Africa has positive population growth with low economic growth.

pm90 8y ago

Well, this is all assuming that humanity will not expand out of Earth. If that does happen, we might actually have a perpetually expanding populace and economy. Fun times.

fbinthrow 8y ago
You just accidentally summarized why growth obsessed global capitalists are completely delusional.
- JumpCrisscross 8y ago
  > growth obsessed global capitalists are completely delusional Infinite growth and finite material resources are perfectly compatible. Case in point: Fortnite.
  - saagarjha 8y ago
    I’m not sure if you’re being sarcastic; how does Fortnite demonstrate “infinite growth”?
    - JumpCrisscross 8y ago
      > how does Fortnite demonstrate “infinite growth”? Fortnite makes money by selling digital in-game goods. Their revenues could grow infinitely without their material footprint expanding one iota. What they demonstrate is not infinite growth, but the capacity for infinite growth in a finite universe. Value, at the end of the day, is subjective. Growth is a measure on this subjective value. It is not a measure on material inputs.
      - skissane 8y ago
        That's not infinite growth. There are only a finite number of humans on earth who could possibly play the game, and many of those either have no interest or can't afford to do so. And, of all those potential players, each of them only has finite disposable income. So there is a hard upper limit on their revenue, without growth in world population (to increase population of potential players) or growth in the world economy (to increase disposable income of those players). So, Fortnite is subject to the same finite growth limitations as every other business.
        JumpCrisscross 8y ago
        > There are only a finite number of humans on earth who could possibly play the game, and many of those either have no interest or can't afford to do so. And, of all those potential players, each of them only has finite disposable income. So there is a hard upper limit on their revenue The proposed metric, a product of population and incomes, is unbounded (in aggregate). Population isn’t. But nominal incomes, a function of the unbounded money supply, is. Real incomes are trickier, but they--too--are unbounded. It just requires some fraction of the basket be immaterial. As long as that component grows sufficiently, the real value of the basket–which, again, is subjective–grows. This isn't some edge-case philosophy, but a well-recognized effect of the subjective nature of value. (The physicist in me points out that the observable universe has, based on known physics, a finite computational capacity, but that objection merely illustrates the absurdity of proposing a practical upper bound on growth.) We're used to thinking of production as making cars and ships. Those activities represent a falling share of human activity (weighted by value). To illustrate, witness the falling material intensity and energy intensity of GDP growth.
eloff 8y ago
I think you're assuming the current decline in birth rates is due to scarcity of resources. But I don't think that's true. In the developed world food and energy are not scarce, and even land outside of major metro areas is not scarce. Population might just stabilize at some point, and then there's not much of a driver to expand off of our planet (apart from some resource mining, and other activities.)
- colechristensen 8y ago
  Food and energy are not what defines scarcity any more. If you want to pay the mortgage, have a fulfilling job, have time to spend with your family, and give your child a good start in life, you can't have 8 kids in a middle class family. Sometimes 1 is the right number if you want your child to be successful and have enough free time to enjoy life yourself. That IS resource constraint, the resource just isn't food. The replacement rate is a little above 2 children in the modern world. Three kids is a burden for a lot of people.
  - eloff 8y ago
    What's the resource constraint then if it's not food, energy, or shelter? People want to buy more stuff? Hardly a requirement of years gone by. People want more free time? Doubtful, otherwise people would work less and buy less stuff - which we don't see. People keep getting more productive, but they just funnel that into a more expensive lifestyle rather than cutting back on work. I don't think the reasons are simple (or even the same between people) but I don't think it's dominated by resource constraints. I know software engineers with no children and school teachers with four. Very different lifestyles, but all middle class. And I don't think resource constraints factored heavily into their decision making.
    - chongli 8y ago
      The resource constraints now are time and location. It's affordable to buy houses in a lot of places, just not so many that have access to good jobs and schools. So people prioritize the latter and sacrifice their time by commuting for work. Since both parents now work, often with lengthy commutes, there isn't a whole lot of person-hours left to spend with the children. That means people have fewer of them. When the kids get older and it's time to send them to university, well, that's something which has gone backwards in affordability. The cost of a university degree has shot through the roof. How could anyone afford to send 3 kids to university these days, let alone 8?
rhacker 8y ago
The people left to live on earth will be more and more tied to doing mindless jobs. I think there are a lot of people that would be excited to start a new community on Mars, get paid to, basically exist and build homes (pods) and connect those pods to additional pods. The act of mining will have meaning again beyond helping someone else get rich off bitcoin.

jameslk 8y ago

Japan is not a very good proxy due to their strict immigration policies and preference to be an "ethnically homogeneous nation." As you mentioned, other countries can just replenish their head count through relaxed immigration. I'd wager, for example, that the US will remain highly multicultural with looser immigration long term since it's baked into its identity[0], despite some recent policy changes. 0. https://en.wikipedia.org/wiki/Melting_pot https://en.wikipedia.org/wiki/Melting_pot

smsm42 8y ago
In 2017, over a million people[1] received legal permanent resident status. In 2017 it was slightly less than in 2016, but on roughly the same level as the previous decade. So recent policy changes don't seem to have much effect in that regard. [1] https://www.dhs.gov/immigration-statistics/yearbook/2017 https://www.dhs.gov/immigration-statistics/yearbook/2017
- bduerst 8y ago
  Over 500,000 of those are familial green cards (spouses and children), meaning they likely would have been issued regardless of the changes in policy and don't really reflect a multicultural dimension for the country. Other permanent resident status issuances take up to 15 years to achieve, meaning you won't see the effects of recent policy changes in that metric until the years to come. A better metric is visa issuances, since those are the first step for many to becoming a legal permanent resident. Those have peaked in 2015 and have declined back to 2013 levels now: https://travel.state.gov/content/dam/visas/Statistics/AnnualReports/FY2017AnnualReport/FY17AnnualReport-TableXVIA.pdf https://travel.state.gov/content/dam/visas/Statistics/Annual...
  - smsm42 8y ago
    That depends a lot what exactly visas are those. There are dual intent visas, which allow change to permanent immigrant status, and ones that explicitly prohibit such change. Most visas at your link are B type visas, which would be denied if immigration officer even suspects you have intent to become a permanent resident.

snowwrestler 8y ago

I disagree that there is a significant correlation between expanding population and an expanding economy. In fact there are plenty of examples of countries whose economy expanded way faster than their population, which implies that factors other than population dominate economic growth. (If population was the dominant factor in economic growth, we would see a consistent correlation between the two.) Every day we read articles about how AI is going to drive massive improvements in productivity, killing millions of jobs in the process. If we really believe this is true, then a shrinking population is what we want, to "soak up" those destroyed jobs. A bonus of massive productivity increases is that real property transactions as a percentage of the economy will shrink too, softening the blow of contraction there. Real estate is not the first industry to be threatened by changes in the economy! Creative destruction is part of our economic story and there is no inherent reason real estate should be immune from that, or that we should feel special concern about that industry among all others. In short, I see no reason to believe that a shrinking population necessarily creates a shrinking economy. "Contraction economics" sounds cool but it's just a new name for what happened to the buggy whip industry, the telegraph industry, the canal industry, etc. And yes, maybe the real estate industry too. EDIT to add: In my opinion a more significant future for economics is accounting for externalities that have typically stayed off the books, like clean water, clean air, a stable climate, etc. Economics has typically modeled economies as open systems, that is, there are "inputs" like raw materials and energy sources, that create economic outputs. But we've conquered the Earth now... with the exception of insolation, the global economy is a closed system. Every ounce of raw material and every joule of energy creates a complementary cost somewhere else in the system. Unless we can account for that, we will fool ourselves about the actual net value we are creating.

adventured 8y ago
One prominent recent example that destroys the myth that economic expansion is very tightly bound to population expansion, is the US. 2008 pop: 304m people. 2018 pop: ~327m people. A 7.5% increase in population across a decade. 2008 GDP: $14.72t ($17.64t inflation adjusted). 2018 GDP: $20.5t. Approximately a 17% real increase in GDP. The US added an economy close to the size of Germany in just ten years while only adding 23m people (Germany's population is 83m). That's courtesy of increasing output per capita far more than it is population growth.

almost_usual 8y ago

We're likely going to experience significant population contractions not driven by "stabilization" as humanity approaches 2100.

raquo 8y ago

If we keep going the way we're going now, by the time population decline puts a negative pressure on land and housing prices, they will be so high that 99% of people will have no way of ever owning it other than by inheritance. I don't think we will arrive at declining housing prices the way you suggest. Something will have to give way before that.

adventured 8y ago

> it means that the driving force behind increases in property value (population increases) will be curtailed > There will be fewer humans each year making the total pressure on land values negative Your premise about real-estate inherently contracting in value due to population contraction, is not correct. Nor is your premise about the driving force correct. Double the US population and drop the total national income by 95%. See which is the greater driving force in real-estate values. You can see this in action right now just by looking at high population density countries that are poor. Bangladesh has extreme population density, their real-estate is not expensive compared to Canada (~1/400th the population density) or the US (~1/40th the population density). You can increase the value of real-estate while contracting the population, by increasing the per capita income of each person enough to overcome the effect of the population decline. Germany's population has barely budged in 50 years, their real-estate has increased in value in that time as the economy has expanded in real terms with a climb in their per capita wealth and incomes. Today nearly everything you've ever heard about healthy (ie non-war, famine, etc) population decline being a horrible outcome, is false. It may have been true in the past, it is no longer. The ideal outcome is for populations to decline while productivity and income soars per capita, improving the standard of living of each person remaining and lightening the burden on earth's resources. The focus of all nations should be on aggressively increasing per capita output, not on fighting healthy population decline.

brownbat 8y ago

George Friedman wrote a book of creative predictions called "The Next 100 Years" that argued mounting depopulation pressures and labor shortages would lead countries to begin competing for migrants. Interesting that has not been Europe's solution so far... https://en.wikipedia.org/wiki/The_Next_100_Years:_A_Forecast_for_the_21st_Century https://en.wikipedia.org/wiki/The_Next_100_Years:_A_Forecast... Japan's politics, with a strong aversion to open immigration and a desperate need for labor, have landed on some controversial compromises--for one, "internships" for temporary foreign workers with questionable protection for rights. May be an early signal for how the rest of the world will handle this. https://www.wsj.com/articles/japan-skirts-immigration-debate-by-offering-internships-to-foreigners-1429049533 https://www.wsj.com/articles/japan-skirts-immigration-debate...

Jyaif 8y ago
> Interesting that has not been Europe's solution so far Not all immigration is of equivalent "quality". The worsening IQ test results in europe is often credited to the african immigration. On the other end of the spectrum, asians are being actively restricted from entering the top schools in the US. Europe (and pretty much every country in the world) is already competing for qualified immigration.

peter_retief 8y ago

It seems to be the opposite, Africa has positive population growth with low economic growth.