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You Should Care About Population Growth

Andrew Hesch profile picture
Andrew Hesch


  • Historical data back through the 17th century suggests a positive correlation of population growth and economic growth.
  • The foundation of economic growth over five centuries is threatened by recent population trends.
  • Unfavorable population trends have historically led to innovation and policy change that sparked economic revolutions.
  • It is crucial that investors recognize centuries-old economic truths and encourage this revolution.

Investors with time horizons of more than a decade should prioritize historical economic implications when determining portfolio allocation. Inflation ebbs and flows, business cycles cycle, monetary policy reacts, and fiscal policy does whatever the prevailing hot air tells it to do. You'll probably see a downturn at least once before you're ready to cash in, and your portfolio depends upon a recovery. This makes it vital to understand historical, economic implications that foreshadow changes in economic growth.

Factors related to the overwhelming economic growth the world has experienced since the end of the 16th century have not changed. Events like the agricultural revolution, the enlightenment, the industrial revolution, and the resulting transcontinental movement of people have all contributed to the economic historian's perspective on economic growth. Government involved itself to fine-tune the economic environment, reinforcing the simple, systemic components western democracies, today. Over the following three centuries, economic growth was unprecedented. Through business cycles, through revolutions, and through monetary policy evolution, the fertility rate and population growth was a force for economic expansion.

A combination of changing political demographics, financial vitality, and shifts in reproduction preferences suggests a time where investors should understand the importance of the fertility rate and population growth to avoid a long-term contraction. Neglecting historical realities pushes the world economy down a road unseen since the 16th century and may increase the risk profile of your portfolio.

Fertility And Population: The Foundation Of Economic Trends

The first half of the previous millennium is characterized by a lack of long-term economic growth and population cycles known as the Malthusian Trap. The second half is defined by economic revolutions, economic growth, and education. The 17th century economy was agrarian, a unique intersection of economics and nature, the essence of the theory with which Malthus is credited.

Source: University

This article was written by

Andrew Hesch profile picture
I am an analyst in the Greater Cincinnati area. I received my B.A. in economics from Denison University with research focused in economic history, healthcare economics, and behavioral economics. My portfolio incorporates a rotational strategy in its long-term, DGI focus, with the flexibility to take advantage of short-term volatility.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (72)

Chart Rider profile picture
This fits with the results of my thesis, when we run out of natural gas for use as an anhydrous ammonia feedstock, we will run out of fertilizer. We run out of nitrogen fertilizer, we run out of food. 4-5 billion ppl will either starve or die in wars caused by it. And no one is listening. "Energy in the Corn Belt: Is Maize Production Sustainable?"
MonteQuest profile picture
Liebig's Law of the Minimum will certainly come into play.
Gold Finder profile picture
And yet science is forced to focus on CO2 emissions, while mass starvation is around the corner.
Long Time Running profile picture
Fire, Floods, Famine and Fascists will do their part to reduce population growth.

From what I have read which I am sure there are dissenting opinions, Japan has a hard time controlling their economy because of aging demographics, emigration, birth control and restrictions on who can live there.

We wont run out of oil, there will always be a need for it but we can be more responsible how we produce it and use it. Long SU, TRP, CNI and CPG and cdn banks.
Long Time Running profile picture
So what happens when the world population tops 10 or 20 billion, the point being you cannot grow forever without running out of resources.

There needs to be a way to reverse population growth and improve quality of life.

The answer, Improve conditions in third world countries and support organized immigration.
Andrew Hesch profile picture
I think your answer is viable. I'd also suggest a greater priority of renewables, pulling from the thread above, other alternative energy sources would be necessary. For instance, I'm familiar with a company (in Denmark?) that manufactures pressure pads for underneath roads. The pressure from braking at intersections is used to generate energy. Greater emphasis on environmental sustainability might be a huge benefit to regenerating the resources we're using.

Of course, oil is used in practically everything when it's not used for energy. An alternative to that would be beneficial. Perhaps increasing use of recycled products?

Maybe those are alternative investments we should think about!
MonteQuest profile picture

"There needs to be a way to reverse population growth and improve quality of life."

That's where things get tricky. The population went up because we lowered the death rate via germ theory. The birth rate exploded, sustained by the advent of fossil fuels. Due to population demographics, if we instituted aggressive birth control, say only replacement ( couples have two children) it would take 75 years to achieve ZPG.

"The answer, Improve conditions in third world countries and support organized immigration."

Demographic Transition lowered the birth rate in developed countries, but it's uncertain that that can be repeated in developing nations. We don't have access to $6/barrel oil anymore.
Curious Wanderer profile picture
Actually birth rates are falling worldwide, even in the least developed of countries. However, life expectancy is also rising (e.g. in Africa, the least economically developed region, life expectancy has risen about 10% already this century), so the net effect is ongoing population growth, though this will eventually level off due to falling birth rates - "eventually" is the key word. In the meanwhile, we are still adding about $80m per year to the world, roughly another country the size of Germany or Egypt every year. That's a LOT in terms of demand on resources. We are going to experience problems as a result of this, long before the world population finally levels off and starts to shrink.
rodness profile picture
"Historical data back through the 17th century suggests a positive correlation of population growth and economic growth."

Is there a correlation between economic growth and the stock market?
Windsun33 profile picture
I would say just the opposite - economic growth leads to lower population growth.
MonteQuest profile picture

Demographic Transition leads to reduced fertility which leads to lower population growth. Many countries are growing GDP with persistent high fertility.
Windsun33 profile picture
Taiwan has one of the lowest birth rates in the world. It's GDP growth rate is 3.8%.
stvrob_63 profile picture
you spin a good story, but its hard to tell who you are talking about? Are these stats you talk about in regard to worldwide population? US? somewhere else?
Andrew Hesch profile picture
Sorry you found it unclear. While the broader theme of the article can be applied to most developed countries, as I show near the end in the international comparison, my aim was to make U.S. investors aware of the current trends underway domestically. These trends have been ongoing for our international peers for some time.

I appreciate the feedback. I'll focus more on providing a more clear thesis next time.
Insightful, and I agree a wider view is necessary to gain an understanding of the economic landscape. I follow the “Baby Boomers” bubble and have found the economic, social and environmental impacts enlightening. In regards to renewables, my thoughts are we are on the cusp of an energy revolution, with innovation in storage being one of the main drivers.
MonteQuest profile picture
"In regards to renewables, my thoughts are we are on the cusp of an energy revolution, with innovation in storage being one of the main drivers."

Kerenza, Euan Mearns has a different take on battery storage. "Battery storage* in perspective – solving 1% of the problem"

Population growth historically drives economic growth because it overwhelms the demand killing trend toward concentration of wealth. Systems that work toward greater equality of wealth and income can have a similar positive effect to raw population increase. Both just oppose the economy’s tendency to choke itself by concentrating wealth and killing demand.
Andrew Hesch profile picture
You mean that's all I had to say?!

Thanks for the additional clarity!
MonteQuest profile picture
"What will be interesting, I think, is if fossil fuels play the same importance as they did. Given the advent of renewable energy, I'm wondering what role it will come to play. After all, energy began somewhere, and only over a long period of time did it go on to make steam in boats, and then cars, and so on. Renewables are certainly in infancy."

Fossil fuels were a temporary dollop of sugar to the Petri dish. They created an ephemeral phantom carrying capacity resulting in overshoot of the sustainable capacity of the earth. And since the population went up due to the population sustainability of fossil fuels, it will go down as they decline—although there is uncertainty as to what a sustainable global population would be without them. The general consensus is billions less.

Renewables may remain a very small part of our energy mix due to inherent obstacles of low EROEI, intermittency and storage. Subsidies are being withdrawn and borrowing costs are rising. Investment has flat-lined to just .7% growth. http://bit.ly/2t71gZY
MonteQuest profile picture
Good article, Andrew! To add a few items of note. Fertility rates decline as a result of developing nations going through Demographic Transition where the country becomes urbanized and experiences a rise in the standard of living through better education, better healthcare, access to birth control and the emancipation of women. This process was fueled by ready access to cheap fossil fuels. The discovery of germ theory in the mid-1800's increased life expectancy. As vaccines and improved treatment insured more people survived to adulthood and their child-bearing years, the birth rate increased dramatically. After 10,000 years with no significant sustained population growth, the world population grew from about 1 billion in 1850 to 7.5 billion in 2017. While agriculture played a big role, without the advent of fossil fuels, these populations could not have been sustained, and would have gone the way of Malthus. Many of them are now peaking in production or becoming harder and more expensive to extract. Modern renewables, despite massive growth rates, still only garner 1.6% of our primary energy. In 2017, they only grew .1%. The world demand for energy outstrips nearly all gains.

Many countries with low fertility rates are now paying their women to have more children. Will the energy be cheap and readily available enough to bring about DT in the developing world? I doubt it. So, we may have two competing scenarios. We have a debt-based monetary system that requires infinite GDP/population growth in a finite world to service the debt. Kind of looks like we are at the End of Growth. I wonder what the next iteration will look like?
Andrew Hesch profile picture
Thanks for adding additional historical context. Regretfully, I significantly under-represented the magnificence of the industrial revolution. A whole article could be solely about it, and another on energy's contribution.

I can't quite remember the academic's name (Allen?), but I've read works attempting to pinpoint why the industrial revolution began in parts of Europe, but not others. Most of the evidence does point to the low energy prices and access.

What will be interesting, I think, is if fossil fuels play the same importance as they did. Given the advent of renewable energy, I'm wondering what role it will come to play. After all, energy began somewhere, and only over a long period of time did it go on to make steam in boats, and then cars, and so on. Renewables are certainly in infancy.

I am excited to see how new technologies may enable the next revolution, too. For example, genomics and computer learning.
Roger field profile picture
“Most of the evidence does point to the low energy prices and access.”

To which I would add, ATTITUDE (think England).
Andrew Hesch profile picture
I suspect you got that from Gregory Clark? It reminds me of his thesis in 'A Farewell to Alms'. I think he ignores quite a lot of empirical evidence for other conditions and factors being more pivotal, but it has the appeal of rational thinking. If you haven't read it, I'd suggest it.
Incredibly simplistic and non-rigorous.
Andrew Hesch profile picture
Sorry you didn't find any value in it. I assure you much time was spent finding my information and critiquing it with counter examples. The amount of academic resources I used to confirm my trends and causation was certainly not a small task.

I'll give you that numerical data are mostly absent, but a few static numbers now don't indicate anything about trends long-term. As my studies were in economic history, I preferred to elaborate on the historical context and present a comparison rather than dive into regression analysis. That would have been incredibly dense. However, it would be a great way to confirm my thesis.
Very good overview.

MAGAphiles would not like the picture it paints and would thereby be in denial.
Andrew Hesch profile picture
Thanks for reading! I assure you, my motivation was not political. Historical economics is fascinating.
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