If the US economy functioned fine 10, 20, 50, and 100 years ago, when the population was ~half the size, why can’t it withstand a population decline now?
In: Economics
Part of the problem is economies of scale. Pretty much the entire western economic system is hypertuned to provide goods and services at the current and increasing level of population with all the scale effects that accompany it. Reduce the population and you end up having both less economies of scale effects AND fewer people who actually pay for goods and services. That means prices will skyrocket.
In the end, population decline is something that needs to be manages, and I think it’s unclear if our current understanding of capitalist market models and public policy are well suited to manage this shift. One example: It is not possible to sustain a nation’s road network for half the population it was designed to accommodate, because roads cost money and money comes from tax payers. When you have a large city with roads to 10 neighboring villages, but those villages (and the city) experience a 50% population decline, you’d have to stop maintaining 50+% of the roads (50% due to lack of tax payers + x for rising cost to maintain the remaining roads). Now, of course, in real life it’s not that 5 of those villages become deserted, while the other 5 don’t experience any population decline…. so what do you do now? You still have people living in 10 villages who require roads to the city, but in fact you can only maintain 5 of those roads. You’d have to relocate people to maintain “population centers”, so that you can cut off public services to places that are no longer needed, all while the prices will still get ever higher.
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