All Commentary
Thursday, May 31, 2018

How a Free Market Deals with Overpopulation

The Market and Overpopulation

The market does a good job at things like producing the optimal number of bicycles, but can it be counted on to regulate population growth? Left to its own devices, laissez-faire produces far more than the optimal number of people—right?

Actually, prospective parents take into account most of the effects that their potential offspring will foist on humanity, because most of the resources that a child will consume—housing, food, shelter—will be paid for by the parents. If some couples want to have a dozen children and rely on bunk beds and hand-me-downs, while other couples want only one child who gets all of their attention and treasure, then there is nothing “uneconomical” about either approach.

Population “Externalities”

But, you might think, this simplistic analysis overlooks externalities. When a couple brings a new baby into the world, they certainly are not on the hook for the true cost to all of society.

It’s true that there are government programs (such as “free” schooling and financial assistance formulas based on number of children) that in effect subsidize children, but that’s certainly not the fault of capitalism.

Even taking the “externality” argument at face value, there are negative and positive externalities involved when people decide to have more children. In addition to the downsides, myopic parents also aren’t taking into account the fact that their child might develop the cure for cancer or invent a new card game that sweeps the globe. Economist Steve Landsburg walks through the considerations and concludes that extra people, on net, probably confer greater “social benefits” than “social costs,” if we want to think this way about the problem.

Limits of Population Growth

You can try to apportion blame however you want, the argument goes, but the fact staring us in the face is that we live on a finite planet while there is no limit on the “natural” growth of population.

But it is simply a myth that the world is currently overpopulated. Certain cities are very crowded, but the people living in them have concluded that the advantages of city life—which derive in large part from being close to so many other productive people with varied skills and tastes—outweigh the disadvantages of high prices and congestion.

Currently, if you took the global population 7.6 billion and put them in Texas, each person would have about a thousand square feet of standing room—a bit more than a 30ft x 30ft plot of land.

Now critics can mock such calculations as a non sequitur, but the point is to underscore just how big the Earth is. For most people, taking an airplane or a long train ride will showcase a view of mostly empty space. And as humans become more proficient at exploiting the resources of the ocean and even covering its surface with cities, the physical “carrying capacity” of Earth will be even more gigantic.

In a famous 1798 essay, the classical economist Thomas Malthus argued that unchecked population growth would necessarily exceed food production in the long run, because at best food production would grow arithmetically (1, 2, 3, 4…) , while population grows geometrically (1, 2, 4, 8…). Because of his work, whether fairly or not, the term Malthusian has come to denote someone worried about rapid population growth overwhelming the finite resources of Mother Earth.

Yet history shows that Malthus’s “obvious” conjectures were simply mistaken. Even though the global population has grown tremendously since he penned his essay, total food production has grown faster still. Per capita output under any metric is far higher today than it was in the year 1800. Even though there is a sense in which Earth’s resources are finite, so far that hasn’t been a binding constraint. Human ingenuity has managed to do more with less, surprising the pessimists time and again.

The Most Powerful Resource

Maybe it’s the case that Malthus was off on his timing. After all, we can certainly see the strain on ecosystems that humanity is causing more recently.

There will always be particular problems caused by change, and that includes a changing population. But so far, humanity has managed to stay ahead of the curve, with living conditions constantly improving (since the Industrial Revolution).

And the trend has continued into more modern times as well. In a famous 1980 wager, resource optimist Julian Simon—who viewed humans as brains, not bellies—challenged biologist Paul Ehrlich (author of the alarmist 1968 The Population Bomb) to pick five commodities. Over the course of 10 years, if the price increased, then Ehrlich would win, but if the price declined, then Simon would win. After conferring with a colleague who shared his pessimism, Ehrlich selected copper, chromium, nickel, tin, and tungsten as his commodities, and at the time said winning his bet would be “shooting fish in a barrel.” Yet by 1990, all five commodities had dropped in price, because—as Julian Simon had predicted—the human mind proved to be a more powerful resource than the physical materials buried in the ground.


  • Robert P. Murphy is senior economist at the Independent Energy Institute, a research assistant professor with the Free Market Institute at Texas Tech University, and a Research Fellow at the Independent Institute.