Resource Depletion and Growth

Yesterday The Oregonian dedicated 1,500 words in the opinion section to an expert economist former managing editor and current writing coach, Jack Hart, who used his 1,500 words to badly mangle basic economics and reiterate the canard that economic growth necessarily means resource depletion.  I am familiar with all of these arguments and have discussed them in this blog before.

The most fundamental problem with the entire argument is that it sets up a straw-man that reflects a fundamental lack of understanding of the basics of economic growth: that economic growth means resource depletion.  While it is true that if you find a valuable resource and exploit it you are often contributing to economic growth, the same is true if you invent a new solar technology that allows people to use only sunlight to power their homes.  In either case you have created stuff that people want and value and this, not resource depletion, is the source of all economic growth.

The same straw man is used to equate consumption with resource depletion.  Again, we can all have rising consumption without resource depletion.  In fact what most distinguishes wealthy societies is how much more leisure we consumer than do poorer societies.

As usual, population growth is thrown into the mix without recognizing that a key correlate of population growth is poverty.  So how do you tell a poor farmer in India with no retirement, no social security and no insurance that he should not have multiple kids to help him out?  You don't.

Which is why this argument bothers me so much, because I have dedicated my life to trying to improve the growth trajectories of developing countries precisely because I think it represents the solution not the problem.  With higher incomes, societies have fewer children, value the natural world around them more, can afford to invest in cleaner technologies, and so on.  It is only through growth that the world can overcome some of the most pressing worldwide challenges that confronts it.

This idea that growth has been bad conveniently ignores the vast improvement in infant mortality, life expectance, morbidity, etc. experienced in the 20th century.  Instead statistics about subjective measures of 'satisfaction' are used never mind that ones perception of their lot in life has a lot to do with what they see in their community.

Which is why this idea that there is some grand mechanism that we control that drives growth is absurd.  Growth comes from the desire of every human being on the planet to better their lot in life.  Growth is inherent in who we are and what we strive for.  How you actively control growth is unclear - a soviet style command and control economy?  History has shown that to be an unsuccessful method of organizing on a national scale, one imagines how much worse it would be on a global scale.

Finally, the fatal flaw in the argument of the so called "steady staters" is that they profess to offer a better alternative.  This suggests that people will be better off in their version of the world.  Well if this were true people would value this new paradigm and therefore the new paradigm itself would create value and, oh dang...growth!  Nooooo!

So talk about resource depletion all you want but don't conflate it with growth.  The challenge of the 21st century is creating growth exactly from the invention of technologies that allow us to do more with less, not from finding more.  Just because the 20th century was mostly about finding more and exploiting it does not mean this defines growth.

Latin American Growth

The New York Times today has an interesting article on Latin America and their dominance at the World Cup their recent growth performances.

While the United States and Europe fret over huge deficits and threats to a fragile recovery, this region has a surprise in store. Latin America, beset in the past by debt defaults, currency devaluations and the need for bailouts from rich countries, is experiencing robust economic growth that is the envy of its northern counterparts.

Strong demand in Asia for commodities like iron ore, tin and gold, combined with policies in several Latin American economies that help control deficits and keep inflation low, are encouraging investment and fueling much of the growth. The World Bank forecasts that the region’s economy will grow 4.5 percent this year.

Recent growth spurts around Latin America have surpassed the expectations of many governments themselves. Brazil, the region’s rising power, is leading the regional recovery from the downturn of 2009, growing 9 percent in the first quarter from the same period last year. Brazil’s central bank said Wednesday that growth for 2010 could reach 7.3 percent, the nation’s fastest expansion in 24 years.

After a sharp contraction last year, Mexico’s economy grew 4.3 percent in the first quarter and may reach 5 percent this year, the Mexican government has said, possibly outpacing the economy in the United States.

Smaller countries are also growing fast. Here in Peru, where memories are still raw of an economy in tatters from hyperinflation and a brutal, two-decade war against Maoist rebels that left almost 70,000 people dead, gross domestic product surged 9.3 percent in April from the same month of last year.

I think there is far too much generalization here, but I do believe that the implication of good macro management of the economies in the relatively good growth experiences is correct.

Education Causes Growth

Two new papers by Hanushek and Woessmann provide powerful new evidence of the causal link between cognitive skills and economic growth:

IZA DP No. 4575

Eric A. Hanushek, Ludger Woessmann:

Do Better Schools Lead to More Growth? Cognitive Skills, Economic Outcomes, and Causation

Abstract:
We investigate whether a causal interpretation of the robust association between cognitive skills and economic growth is appropriate and whether cross-country evidence supports a case for the economic benefits of effective school policy. We develop a new common metric that allows tracking student achievement across countries, over time, and along the within-country distribution. Extensive sensitivity analyses of cross-country growth regressions generate remarkably stable results across specifications, time periods, and country samples. In addressing causality, we find, first, significant growth effects of cognitive skills when instrumented by institutional features of school systems. Second, home-country cognitive-skill levels strongly affect the earnings of immigrants on the U.S. labor market in a difference-in-differences model that compares home-educated to U.S.-educated immigrants from the same country of origin. Third, countries that improved their cognitive skills over time experienced relative increases in their growth paths. From a policy perspective, the shares of basic literates and high performers have independent significant effects on growth, and the estimates suggest that the high-performer effect is larger in poorer countries.

http://ftp.iza.org/dp4575.pdf

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IZA DP No. 4576

Eric A. Hanushek, Ludger Woessmann:

Schooling, Cognitive Skills, and the Latin American Growth Puzzle

Abstract:
Economic development in Latin America has trailed most other world regions over the past four decades despite its relatively high initial development and school attainment levels. This puzzle can be resolved by considering the actual learning as expressed in tests of cognitive skills, on which Latin American countries consistently perform at the bottom. In growth models estimated across world regions, these low levels of cognitive skills can account for the poor growth performance of Latin America. Given the limitations of worldwide tests in discriminating performance at low levels, we also introduce measures from two regional tests designed to measure performance for all Latin American countries with internationally comparable income data. Our growth analysis using these data confirms the significant effects of cognitive skills on intra-regional variations. Splicing the new regional tests into the worldwide tests, we also confirm this effect in extended worldwide regression! s, although it appears somewhat smaller in the regional Latin American data than in the worldwide data.

http://ftp.iza.org/dp4576.pdf

Summers on Schumpeter: Creative Destruction and Growth

An interesting blog post by Larry Summers, Director of the National Economic Council:

During the past two years, the ideas propounded by John Maynard Keynes have assumed greater importance than most people would have thought in the previous generation. As Keynes famously observed, during those rare times of deep financial and economic crisis, when the "invisible hand" Adam Smith talked about has temporarily ceased to function, there is a more urgent need for government to play an active role in restoring markets to their healthy function.

The wisdom of Keynesian policies has been confirmed by the performance of the economy over the past year. After the collapse of Lehman Brothers last September, government policy moved in a strongly activist direction.

As a result of those policies, our outlook today has shifted from rescue to recovery, from worrying about the very real prospect of depression to thinking about what kind of an expansion we want to have.

An important aspect of any economic expansion is the role innovation plays as an engine of economic growth. In this regard, the most important economist of the twenty-first century might actually turn out to be not Smith or Keynes, but Joseph Schumpeter.

One of Schumpeter’s most important contributions was the emphasis he placed on the tremendous power of innovation and entrepreneurial initiative to drive growth through a process he famously characterized as "creative destruction." His work captured not only an economic truth, but also the particular source of America’s strength and dynamism.

One of the ways to view the trajectory of economic history is through the key technologies that have reverberated across the economy. In the nineteenth century, these included the transcontinental railroad, the telegraph, and the steam engine, among others. In the twentieth, the most powerful innovations included the automobile, the jet plane, and, over the last generation, information technology.

While we can't know exactly where the next great area of American innovation will be, we already see a number of prominent sectors where American entrepreneurs are unleashing explosive, innovative energy:

In information technology, where tremendous potential remains for a range of applications to increase for years to come;

In life-science technologies, where developments made at the National Institutes of Health and in research facilities around the country will have profound implications not just for human health, but also for the environment, agriculture, and a range of other areas that require technological creativity; and,

In energy, where the combination of environmental and geopolitical imperatives have created the context for an enormously productive period in developing energy technologies as well.

It is all a nice way of talking about the forces of economic growth. The problem I am having (as are many economists) is where growth is going to come from in the near term. However, I am optimistic that our environmental problems will actually be the genesis of a period of sustained growth through vast improvements in energy usage (efficiency) and generation (renewable energy).

Spectator Sports and Economic Growth

I have said this before but as The Oregonian has once again put it on the front page it bears repeating: No evidence for the positive is NOT evidence for the negative.

I am, of course, referring to the link between investing in spectator sports and the economic growth of the city.  Here is what we know: when you look carefully at the basic measure of economic growth, GDP per capita through time, and introduce a sports stadium and/or new sports franchise there is no apparent 'bump' in the data.  Or more precisely, sometimes you see a bump from the direct construction spending, but it is temporary.  From this you can conclude that there is no evidence that such investments create a measurable spurt in local economic growth.  You CANNOT conclude, however, that such investments do not spur growth because you cannot compare it with the counterfactual (like you could in a lab - see yesterday's post).  The fact is that any sports franchise investment is a relatively small part of any city's economy and finding a measurable effect on overall growth would be so extraordinary as to rouse suspicion that the correlation is spurious.  

Think of a study which looked at the the GDP of Denver over the last 50 years and controlled for many other factors that effect the local economy including, for example, revenue from natural resources.  Then you add the addition of the Rockies baseball team and see if there is a jump in the time series.  Nope.  But does it mean the rockies did nothing for the local economy?  No, it means that there is no identifiable boost, but since we don't know what growth would have looked like absent the Rockies we can never truly say anything meaningful about what their presence has meant for growth.  

My guess is that investments in sports franchises are not considerably more or less stimulating for growth than any other average business investment in the short and medium term.  The difference in my mind is the much bigger social welfare that spectator sports provide than, say, a new restaurant.  Just look at the folks that turned up for the Blazer rally yesterday.  What this means is that you may not get outsized private returns on the investment but you may get outsized public returns.  

What I don't know, and will probably never know, is what such franchises do to the long term trajectory of the growth of a metro area.  Would Portland be any different if the Blazers never arrived?  I don't know, but I suspect that, just like theaters, museums, concert halls, spectator sports make a place a nice and stimulating place to live and are part of the decision to live somewhere.  So I suspect that the Blazers have had a small role in making Portland a desirable place to live over the past 30 plus years and this cumulatively has created a different growth trajectory than there would have been without them.  Since Oregon does a particularly bad job of educating its residents, we benefit from the flow of educated people who choose to live here, and cultural amenities, including spectator sports, are important in this regard.  

This leads to the argument that we should spend more on education.  This argument is powerful, but the city's investment in the stadium is an investment in a revenue generating asset paid for by borrowing from the future.  Conflating this with current investment education is a mistake - it is not a zero sum game.  I would love it if investments in public school buildings could lead to increased future revenues that would pay for such investments, but the reality is that they don't - or at least not ones the city can capture.  

The essential story of economic growth is the mixing of educated workers, technology, capital, infrastructure, etc.  To put it simply, you need to create educated people AND a local economy in which they can be productive.  I think that given the relatively small cost to the city and the potential benefit to the residents of the city it is worth it.  But as always, I get a lot of personal benefit from spectator sports and soccer in particular, so I am inclined to think the overall benefit is large. Judging from the movement of the poll, I am in the minority.

Is Economic Growth Good or Bad? Redux

In an earlier blog post I included some preliminary back and forth between me and Rob Dietz of the Center for the Advancement of a Steady State Society. On Monday we had our discussion at the Corvallis City Club. Here is how it was reported in the Corvallis Gazette-Times.

Note, however, that my middle initial is not 'D' but 'M' for MUNRO:

Casteal Foulais na theine!

Is Economic Growth Good or Bad?

On April 13th I will be participating in a City Club of Corvallis discussion about economic growth and development and whether it is a good goal for a city like Corvallis. In preparation for the event, John Sechrest, the Economic Development Specialist for the Corvallis-Benton Chamber Coalition, has initiated a preliminary discussion between me and Rob Dietz of the Center for the Advancement of a Steady State Society. The first exchange was about setting the table, defining growth and its implications. Here is a slightly edited version of the first exchange:

Rob Dietz

A large part of the problem with economic policies today is that governments, businesses, and citizens have confused the concepts of"economic growth" and "economic development." Pursuit of economic growth has become the top priority of virtually every nation in the world, and this priority, in turn, affects policies at all scales of society -- from states to regions to cities to communities.

Economic growth is not an end, but rather a means to an end. We are not interested in growth for growth's sake, but presumably to achieve a higher level of individual and societal well-being. Before we can decide whether economic growth is a good way to increase well-being,we need to agree on the meaning of economic growth.

The most policy-relevant and publicly resonant definition of economic growth is increasing production and consumption of goods and services, indicated by rising GDP. Some definitions add a few more words, but they tend to be more convoluted. Instead of "increasing production and consumption," they use phrases like "increasing capacity to produce and consume" or"increasing value of goods and services." Regardless of the phrasing, economic growth boils down to more quantity of more things. For a colorful definition, Brian Czech writes in his book Shoveling Fuel for a Runaway Train that economic growth means "more MacDonald's and Antoine's, more Fords and fiats, more jeep trails and ship sails."

Here are a few definitions from various economic authorities... [He describes them , but for brevity I'll just provide the links]
http://canadianeconomy.gc.ca/english/economy/economic_growth.html
http://www.worldbank.org/depweb/english/beyond/global/glossary.html
http://www.minneapolisfed.org/glossary.cfm#e
http://www.finance-glossary.com/define/economic-growth/12811/0/E
http://www.bloomberg.com/invest/glossary/bfglose.htm

All of these definitions have at their core the concept of quantity. Economic growth is about quantity. Economic development, on the other hand, is about quality. A well developed economy is one that meets peoples needs and provides a high level of well-being for citizens. If increasing quantities of goods and services help achieve that goal, then pursuit of economic growth makes sense. If growing bigger does not help society get better, however, then pursuit of growth is wasteful and potentially hazardous.

Patrick Emerson

All of the definitions of growth are acceptable to me (they are all essentially the same), but the key to all of them is this: growth is about creating more value per person. With that additional created value a society can afford to do more things: more medical care, more and better schools, fund parks and arts and cultural institutions, etc., etc..

Suggesting that growth is about using and consuming more quantity of more things is a bit misleading. Growth is about producing more value - not just about making more material stuff. For example, if someone is good a singing songs and other people find it enjoyable to listen to those songs, the singer can create value by performing in a cafe and charging admission. This activity has created more value where there was not before and thus can caused economic growth to happen. It has also increased both production and consumption, by the way.

The point is that growth and resource depletion are not inexorably linked. Yes, the industrial revolution and growth in the 20th century is closely linked with resource depletion, but future growth will have to be different - it will be driven by increased productivity much more than resource extraction. In fact it is in economic growth that hope for the future rests - without major improvements in things like energy efficiency the future is not so bright. But every increase in average energy efficiency is an increase in growth.

I agree completely that economic growth is a means to an ends and not an ends itself. But these ends are critically important. John [Sechrest] mentions some of the worldwide metrics of the human condition, here is another one: for the almost one billion people that live in the "Low Human Development" countries, life expectancy is 53 years old. Much of this is due to the fact that many of these people do not have access to clean drinking water and basic medical care.

Here are some more statistics (from 2003):
•826 million people do not have enough food
•1 billion people have no access to safe drinking water
•2.4 billion have no sanitation
•10,000 children die EVERY DAY from diseases caused by contaminated water

Some of this is due to political reasons, but most of it is due to poverty. And while growth will not automatically cure these ills, it provides the means to do so. Without growth in these countries there is virtually no hope in improving the lives of the citizenry.

Locally, we have problems with poverty, malnutrition, inadequate access to medical care, under funded schools, etc. I can't imagine that most local residents are satisfied with the way things are and the way to improvement in these areas is through future economic growth.

So I think that growth is not the point but the means to the ends, and in the same vein growth is not the enemy but the friend as long as it is done right. Growth can be dumb or smart, and no one wants dumb growth, but smart growth is the way we can create the town, the state, the nation and the world that we can all be happy with.

What do you think?

Early School Closures and Economic Growth

Yesterday, I cited research from Maryland that shows that the loss of school days has a measurable impact on performance on aptitude tests. There is also a very strong link between scores on aptitude tests and economic growth. Below is a graph from an article by Eric Hanushek, perhaps the leading expert on the economics of education, and co-authors:

Though a measure of years of schooling has a weak impact on growth this is largely due to the fact that years of schooling and education are not the same thing (for many reasons like the fact that grade repetition is common in developing countries). So measuring education by aptitude tests uncovers the very strong link between education and growth.

Education and Growth

A group of interested parties gathered at the state capitol today to advocate for school funding. I agree and I include higher education as well. The causal link between education and growth is well-established. This illustration from The New York Times sums it up:

The forcing of quick and drastic cuts is very costly and damaging - I think the rationale for using part of the reserve funds now to avoid these cuts is strong. Schools can make much more intelligent decisions in the next academic year about ways to cut that are the least costly to the students.

Economic Growth

I try and refrain from cross posting, but this is simply to good to ignore: David Leonhardt's article about growth in the context of the federal stimulus bill in The New York Times Magazine. His section on education and growth (Section VI) obviates my planned blog post on the Katz and Goldin book (and I just received my very own copy - drat!). [Well ignoring sunk costs may be what one is supposed to do, but in this case my investment will prompt me to follow through]

Anyway, kudos to Leonhardt for writing such an exceptional piece.

Is Going Local an Alternative to Growth?

One of the reasons I became an economist was because of the precision it demanded.  Other disciplines that I explored that addressed the issues I was interested in were too seduced, in my view, by the allure of good sounding ideas without any real evidence or theoretical underpinning suggesting that they would be effective.  Economics is, for some, too rigid for those same reasons, but I appreciated the disciplined thinking economics demanded.  Today, in an opinion piece in the Oregonian is a good example of the kind of sloppy thinking and nice-sounding idea that does not survive real scrutiny in economics.  Unfortunately, I think we are going to see a  lot of this type of rhetoric in these troubled economic times. 

Seth Walker in his earnest opinion piece discusses the plight of an educated but unemployed homeless couple. He claims that 'flawed economic theory' in the form of 'free market economics' was the cause of their plight and the current economic crisis.  Their jobs were, apparently, victims of downsizing and there is a suggestion that globalization and outsourcing could be to blame.  His answer? Investing in local business, but not just local, business that do business with other local businesses.

Now, let me pause here and say that the idea that local businesses should strengthen local ties, source locally when possible, and reinvest locally are all fine.  I have no problem with this idea, nor do I have a problem with the similar idea of local currency.  These efforts can have marginally beneficial effects on local businesses and to the extent that we care about eating locally and the like, it can lead to increased consumer surplus.  But please don't sell these ideas as something they are not, and they are certainly not an alternative to market based growth strategies.  [The piece is a little confused, by the way, talking alternately about not focusing on growth but suggesting that investing locally is the way to economic security]

There are two big problems with this line of argument.  The first is that growth comes from investment and productivity and this strategy offers neither.  The second is that without growth it is virtually impossible to to focus on the "other factors" he identifies such as social benefit and environmental well-being.  

The idea that if everyone were to concentrate on local investment we can make the local economy better is simply wishful thinking.  This is not net new investment in the local economy, just a shift in investment capital (assuming everyone everywhere took his advice) and it represents investments in an ideal (localism) that presumably would lead to lower returns -  since efficiencies from comparative advantage would be sacrificed.  Thus the return on these investments would be lower, future investment would be muted and so on.  So the end result would be slower growth.  There is also no reason to believe that this investment strategy would spur the development of new technology that would promote efficiency gains that could be growth promoting.  In fact, if new capital is not chasing the best ideas wherever in the world they may be, there is good reason to believe this would stifle the development of new productivity enhancing technology.

The suggestion that we shift our focus away from economic growth to 'other factors' ignores the inconvenient truth that all of these other factors are inexorably linked to growth. Without increasing productivity and growth we have no way to combat serious issues such as global poverty, malnutrition, low life expectancy, political disintegration and the environmental degradation emanating from developing countries like China.  With about one billion impoverished people in the world, I have to admit that as much as I like the idea of localism it is, for me, a second-order concern.  It is also quite possibly harmful to the environment.  Sourcing everything locally suggests that we need to make everything locally even if it is less efficient.  Doing so would leave a larger carbon footprint.

So these nice sounding ideas are not much help to the unemployed couple mentioned in the piece, without growth where are their new jobs going to come from? Their story perhaps (if indeed their jobs were outsourced) is one of a lack of government provided retraining opportunities in response to the disruptions increased globalization can bring. 

The ironic thing is that these ideas are not new.  During the 70s and 80s many developing countries, such as Brazil and India, pursued a strategy of 'import substitution' where they tried to develop local industries to provide goods that were being imported from other countries.  The results were disastrous.  Growth stalled and these became lost decades for these countries with real and dire consequences for the millions of the resident poor.  It was not until this strategy was abandoned that these countries have experienced the rapid growth that has allowed them to lead serious campaigns to eradicate poverty, address environmental degradation and the like.  

Not all is rosy about the recent growth of these countries, Brazil, for example, is one of the most unequal countries in the world.  So even though it is now considered a middle income country, it still have a massive poverty problem.  So growth is not the end goal, you can have growth and still see little progress on the other dimensions, but it is the means by which you can achieve these goals.

While it is true that the current economic crisis has revealed some egregious flaws in the way we regulate the banking sector, and the unequal returns we have seen from the latest growth episode in the US is also a problem, to suggest that it has shown free market economics as a whole to be a failure is misguided. It is only by harnessing the power of markets that we can seriously hope to deal with the earths biggest challenges. The key is in becoming better at recognizing the limits of markets and addressing these limitations with appropriate policy.  We need to embrace globalization and free trade but better manage the global economy so that we can tackle these problems - problems that are global, not local.

Fred Thompson - Econ 101: Economic Growth

I was desperately trying to find time to post and, hooray, along comes Fred Thompson to save the day with a great post on economic growth theory. Thanks Fred.

Patrick Emerson in an earlier blog post wrote:

“But children are also resources in and of themselves: they are the ones who will have to come up with the solutions to the resource issues and I have faith that they can and will do it. Within each child comes the potential for being a vital part of the world's human capital resource that will solve global warming, find new renewable energy technologies, will invent more efficient ways to produces goods and services that use fewer resources, and so on. They are the ones that will create the new resources with which humanity will thrive. In fact, during the recent explosion in human population, living standards have risen considerably.”

Patrick eloquently explains the conclusions of contemporary economic growth theory. I am going to ratchet this up a bit and try to explain the theory itself and how these conclusions were reached.

This story begins with the notion that capital and labor are combined to produce goods and services. The more goods and serves you can produce/consume the wealthier you are. We call the mathematical representation of this process a production function. Once upon a time, most economists believed that the rate of capital accumulation determined the productivity and wealth of an economy. That is, if you added more tools, plant, and equipment, you could make the labor force more productive. The faster you accumulate capital the faster economic output will grow.

Then, in the early 1950s, a guy named Robert Solow was playing around with production functions and discovered something very interesting about them. Beyond a certain point you cannot increase output per unit of labor input by adding more capital. The implication is that once the optimal labor capital combination has been reached an economy can grow no faster that the rate at which the labor force expands. Moreover, in the real world, where resources can and throughout history have been depleted, this implies that output per worker must fall, ultimately to below subsistence levels.

However, when Solow looked at the available data he found that output actually grew faster than could be explained by the growth in labor and capital. In mathematics a result that isn’t explained by a model’s variables is called a residual, in this case, unexplained growth. By definition a residual must be explained by a variable that is outside (or exogenous to) the model. Solow hypothesized that this particular residual was due to technological improvements that made capital and labor more productive. The implication is that, if technology complements labor and capital in a production function, as long as it grows faster than the rate of resource depletion, the economy can continue to grow in wealth and population.

So what determines the rate at which technology grows? In exogenous growth theory, once you have reached the limits of investment in human as well as physical capital, the rate of technological innovation ought to be about the same as the rate of population growth. Ultimately, however, this implies that, since the rate of resource depletion speeds up as the labor force grows, while technology is a linear function of population size, all technological innovation does is to put off the eventual crash to a later date. This is, of course, the kind of model that drove the Club of Rome’s doomsday results. Folks talk about these formulations in terms of limits to growth (in wealth and population). In fact, almost any kind sustainable human future is incompatible with this kind of model. Every conceivable set of choices eventually leads to declining wealth and eventually a population crash.

Unsatisfied with this approach, economists, including, most prominently Paul Romer, built mathematical models (or production functions) that included (or endogenized) technological advancement as an explanatory variable. In so doing they made a surprising discovery: the payoff to investment in technological advancement is different than the payoff to investment in capital. Because in theory, technological advancement can be freely shared with all users, it is characterized by increasing returns to scale. This means that even if the rate of technological innovation is a direct or linear function of the size of the population and, thereby, the workforce, its payoff increases at an increasing rate when you increase workforce size.

For example, if every unit of the workforce invents something that makes work ten percent more productive and you have one workforce unit, productivity is increased ten percent. If you have two units, you can produce 21 percent more stuff; ten units, 160 percent; and 100 units, 1,378,000 percent.

The implication of this theory is that population growth is not inimical to increased economic wealth. Moreover, there are almost an infinite number of sustainable growth paths both in terms wealth and population (although not all growth paths are sustainable). I think the best growth paths are those in which everyone is well educated and technologically innovative. Indeed, where being smart, technologically literate, and innovative are universally admired personal qualities. But the status quo will probably suffice.

I also like plenty of open spaces, clean rivers, blue skies, old-growth forests, and pristine beaches. I don’t like crowds and can barely tolerate cities. But these are aesthetic preferences, not matters of survival. We all have to make trade offs, individually and collectively. Generally, however, richer is better. And, because aesthetic preferences are normal goods, richer also means that they are more likely to be realized.