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.K. Foley Economics Letters 68 2000 309 –317
The purpose of this paper is to put forward an alternative theory of demographic equilibrium based on Smith’s 1776 assumption of increasing returns to population due to a widening division of labor.
This theory implies the existence of a demographic equilibrium at which population is stabilized because fertility falls with rising household income and household income rises with increasing
population due to an increase in the social division of labor. While Malthusian equilibrium implies a low standard of living at which high mortality balances high fertility, Smithian equilibrium implies a
high standard of living at which low fertility balances low mortality, and thus projects a more cheerful view of human fate.
While the economic data necessary to calibrate these relations is scanty and not very reliable, it does give us, if we are willing to make a few heroic assumptions, a rough picture of where the
Smithian equilibrium might occur. The available data suggests that economic forces alone would stabilize world population and world per-capita output at about 25 2 30 above their 1990 levels, that
is, with a population of 7–8.5 billion people, and a per-capita output of 6500–7500 1990 inflation adjusted dollars.
2. The demographic theories of the classical political economists
The Classical political economists regarded the problem of population as an aspect of the analysis of capital accumulation and growth. In this view, population growth is a consequence of economic
development, and the size of the population is regulated by economic factors. Malthus based his analysis on two central postulates: that increasing standards of living raised net
population growth rates by reducing mortality particularly infant mortality and raising fertility, and that the standard of living was regulated by diminishing returns to human productive activity in the
face of limited land, including natural resources. The implication of these two postulates is Malthus’ famous, frightening, image of a stable demographic equilibrium at which high mortality balances high
fertility at a low absolute average standard of living. Increases in natural resource and labor productivity, in Malthus’ framework, raise the equilibrium level of population without much altering
its low standard of living.
History has not been kind to Malthus’ postulates. While the early stages of economic growth did indeed produce population explosions in many countries stemming from a rapid fall in mortality with
improved sanitation, nutrition, and public health, there is an equally strong longer-run pattern of falling fertility rates stemming from reduced infant mortality, increased educational and economic
opportunities for women, and better public and private financial provision for old age. The spread of cheap and accessible contraception has facilitated this demographic transition to lower mortality and
fertility rates. Thus the first of the Malthusian presumptions has not been borne out by the historical record. Economic demographers have argued convincingly that the demographic transition is a
reliable consequence of economic development.
Nor have the past 250 years of historically rapid increases in economic production and population exhibited signs of diminishing returns in the face of limited natural resources and land, despite the
ominous signs of environmental and ecological degradation that have accumulated over the last 50 years. The explosive increase in the global human population has in fact been accompanied by
increases in economic productivity and average standards of living, although these increases have
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been extremely unequally distributed both between and within countries. The causes of this epochal rise in productivity are less well-agreed-on among social scientists. Economists tend to attribute it to a
change in ‘‘technology’’, stemming from an accumulation of scientific and technical knowledge that proceeds either autonomously as the fruit of human curiosity and ingenuity, or endogenously from
incentives for cost-reducing technological innovation.
Smith, who identified the division of labor as the underlying condition for technological progress, would perhaps not have been surprised by the unfolding patterns of world population and production.
For Smith a larger population would imply opportunities for a much wider and deeper division of labor, both at the detailed level in particular production processes, and at the social level through
regional specialization and trade. Smith’s vision implies, contrary to the postulate of diminishing returns, that a larger population, up to some limit, will have higher rather than lower productivity. If
this relationship holds, it has important consequences for the stability of the world population. Curiously, the economic increasing returns posited by Smith due to the division of labor is precisely
the condition necessary to stabilize human populations that are undergoing the demographic transition to lower fertility rates. These considerations suggest that the current world population may be quite
close to an equilibrium stabilized by falling fertility rather than rising mortality, Autonomous technical progress will have the consequence of lowering, rather than raising, this Smithian
equilibrium world population.
3. Malthus’ equilibrium
