🚀 Faster, Please! — The Podcast #29

Many countries around the world have below-replacement fertility rates. And today’s today's guest says it's happening faster than we think, with world population on track to peak around 2060. That’s decades before the well-known UN model projection. What does that mean for the American and global economies, and what can we do about it — if anything? My AEI colleague Jesús Fernández-Villaverde joins this episode of Faster, Please! — The Podcast to discuss those questions and more.

Jesús is a professor of economics at the University of Pennsylvania, where he serves as director of the Penn Initiative for the Study of Markets. He’s also the John H. Makin Visiting Scholar at the American Enterprise Institute.

In This Episode

* The speed of demographic transition (1:19)

* World population prospects (5:57)

* The geopolitics of declining fertility (9:51)

* Can public policy reverse demographic trends? (15:09)

* Immigration and demographics (23:28)

Below is an edited transcript of our conversation

The speed of demographic transition

James Pethokoukis: A lot of our discussion is going to be based on a paper that you co-authored, “Demographic Transitions Across Time and Space.” When you talk about a demographic transition, you're talking about a shift that countries undergo as they get richer and develop, from a high-fertility/ high-mortality demographic to low-fertility and low-mortality. Is that what you mean by demographic transition?

Why is that something economists study?

Jesús Fernández-Villaverde: Two reasons. First, because we believe that demographics are intimately linked with economic growth. Go back to the beginning of our science: [Thomas] Robert Malthus, one of the very earliest economists, already wrote very coherently about it. And second, because it helps us to think about a long list of policy questions that depend in a crucial way on demographics. When I think about the future of Medicare, when I think about the future of Social Security, those depend crucially on demographics. Understanding demographics is key to having good economic policies.

The key findings of that paper have to do with the speed and the depth of that transition? What are you saying that is different from what people previously believed about the demographic transition?

You're absolutely right: It's about the speed. If you stop any economist or demographer and you ask them what is happening with fertility on the planet, they will tell you it's falling. That's well known. What we add is a twist; we say it's falling much faster than anyone had realized before. And it's falling at a speed that is going to fundamentally transform many of our societies and the planet as a whole in ways that most policymakers are not really taking into consideration. So it's the speed. It's not that it's falling; it is falling immensely fast.

I look at the fertility of the planet as a whole in 2023. According to my calculations, it’s already 2.2. That means that the planet in 2023 is already below replacement rate. Which means that the world population will start falling some moment around the late 2050s to early 2060s. … What I want the listeners to understand is, for the very first time in the history of humanity — humans have been around for 200,000 years — we are below replacement rate in terms of fertility.

People and policymakers may have a general knowledge, but what you're saying is that they're dramatically underestimating how fast that is happening across the world.

Exactly. Let me give you a couple of numbers which personally I think are mind-blowing. Usually, we talk about the replacement rate. The replacement rate is how many children does a woman need to have on average to keep population constant in the long run? And many listeners may have heard the number 2.1. Why 2.1? Because under natural circumstances, without any type of selective abortion, there are around 105 boys born per 100 girls. And a few of the girls that are born are not going to complete their fertility age. So that's why you need a little bit more than two.

In fact, 2.1 is a very good number for the United States. It’s not a good number for the planet. Why is it not a good number for the planet? Because of two reasons. Reason one: selective abortions. You go to China, you go to India — and these are huge countries, demographically speaking — there is a lot of selective abortions. In India or China, you have around 110 kids per 100 girls. Second, because in Africa, another big part of the demographic future of humanity, infant mortalities is still sufficiently high that it makes a little bit of a difference. For the planet as a whole, the replacement rate is not 2.1. It's more like 2.2, 2.25. It’s kind of hard to know the exact number.

So I go to the planet and I look at the fertility of the planet as a whole in 2023. According to my calculations, it’s already 2.2. That means that the planet in 2023 — I'm not talking about the United States, I'm not talking about North America, I'm not talking about the advanced economies, I'm talking about the planet — is already below replacement rate. Which means that the world population will start falling some moment around the late 2050s to early 2060s. Of course, this depends on how people will react over the next few decades, how mortality will evolve. But what I want the listeners to understand is, for