Density is Destiny: Economists Predict the Far Future

In a paper that just won the JPE’s Robert Lucas Prize, Desmet, Krisztian Nagy and Rossi-Hansberg model the evolution of the world economy over the next 400-600 years! Is it laughable or laudatory? I’m not entirely sure. The paper does have an insight that I think is very important, in addition to a number of methodological advances.

If we look around the world today we see that the places with the densest populations, such as China and India, are poor. But in the long-run of history that doesn’t make sense. As Paul Romer, and others, have emphasized, ideas are the ultimate source of wealth and more people means more ideas. As a result, innovation and GDP per capita should be higher in places and times with more people. The fact that China and India are poor today is an out-of-equilibrium anomaly that happened because they were slower than the West to adopt the institutions of free markets and capitalism necessary to leverage ideas into output. China and India weren’t relatively poor in the past, however, and they won’t be relatively poor in the future. With that in mind, a key long-run prediction of Desmet, Krisztian Nagy and Rossi-Hansberg becomes clear. If people are not allowed to migrate then the places that are densest today will not only equal the West, they will overtake the West in innovation and productivity.

One of the key determinants of these patterns is the correlation between GDP per capita and population density. As we mentioned above, the correlation is negative and weak today, and our theory predicts that, consistent with the evidence across regions in the world to-day, this correlation will become positive and grow substantially over the next six centuries, as the world becomes richer. Two forces drive this result. First, people move to more productive areas, and second, more dense locations become more productive over time since investing in local technologies in dense areas is, in general, more profitable. Migration restrictions shift the balance between these two mechanisms. If migration restrictions are strict, people tend to stay where they are, and today’s dense areas, which often coincide with developing countries, become the most developed parts of the world in the future…. In comparison, most of today’s high-productivity, high-density locations in North America, Europe, Japan, and Australia fall behind in terms of both productivity and population.

Thus, if migration restrictions are strict, density is destiny and the dense parts of the world will rule. But what if migration restrictions are loosened?

… if migration restrictions are lifted, then people today move to the high-productivity regions such as Europe and the United States and these regions become denser and so remain the high-productivity regions in the future. World welfare in this scenario goes up by a factor of three.

It’s much better to remove migration restrictions today because we get to a much richer world, faster. In addition, population is better distributed in accordance with natural amenities. All is not perfectly rosy, however, in the free migration scenario. So let’s conclude with a few sentences that would make Hari Seldon proud.

[in the free migration scenario]…growth in utility drops substantially in the short run as many people move to areas with high real GDP; hence these areas be-come more congested and become worse places to live (lower amenities). This initial loss in growth is, however, compensated in the long run by a large surge in productivity growth after year 2200.

Comments

News You Can Use: Far sooner than the next 400 years, we living today will be dead. Repent.

It's good news week!

https://www.youtube.com/watch?v=AglW6QpmPp8

This seems to be simple propaganda by the elite globalist to encourage and justify massive immigration.

Or to justify travel accounts and conference attendance. I mean it is not like there is ICT or anything. People have to be able to sniff each others behinds up close and in person in able to work together and communicate. No one has ever collaborated with anyone else by email ever in all of history.

Yes, and the pressure is relentless.

Every lifeboat of sufficient size probably has at least one priest and one screaming maniac. The more sober passengers have to make the hard decisions.

That's why you pay taxes to have Immigration and Customs enforcement.

Immigration happens for a reason, conspiracy theories are optional.

But the UN predicts that sub-Saharan Africa will have 4 billion people in just 81 years, so I guess the Congo will be super-rich.

That would be around 40% of India's current population density with access to technology of the year 2100, so that's probably a good call.

A strong correlation between density and prosperity may have made sense 100 or even 50 years ago. However, with current technology, geographical distance is a minimal barrier to the spread of ideas.

Yes, technology diffuses fast, but profits concentrate on source more than destination.

A more educated world will be more innovative (even if innovation falls per person), but still it's nice to be the innovator. Or to live in a center of innovation.

VR and flying cars over the next few centuries may indeed break correlation between population density and information density, the number of ideas that a given person is exposed to. On the other hand, migration restriction seems to correlate with idea/communication restriction since they spring from the same authoritarian philosophy. For example, China has many restrictions on even internal migration as well as notorious restrictions on communication (Great Firewall). China is also investing heavily in surveillance, especially electronic, so it remains to be seen whether such surveillance ends up inhibiting communication or instead allows separation of "economic" communication from "fundamental" (political) communication.

People have been saying this for 30 years now. Amazing that prices of San Francisco victorians have crashed and are vastly cheaper than they were then.

California absolutely is the story of a generator of ideas that travel outside their sphere of origin.

Silicon Valley does continue to be a generator of ideas of course, but it's sure as hell not because it's a peak of world population density.

It never made sense.

Ideas have always had a way of travelling outside of their center of origin. Even if the central plain of China has more people who generate ideas, those ideas won't stay put.

Never mind though, that the intellectual history of the world doesn't actually match this formulation ("Two heads are better than one") -
Classical Greece was not enormously intellectually fertile because it had huge population densities, and so on.

Necessity is the mother of invention, unique circumstances give rise to unique ideas and unique environments give rise to the right incentives even when these environments are low density (or even because they are - why did Finland have a lead in mobile phones until the point they transformed into portable microcomputers? because the low density rural society needed wireless phones), etc.

China and India weren’t relatively poor in the past

Well, historical econ, per capita income work suggests that they actually were, point of fact.

What if the low IQ/extremist migrants bring their politics with them to Europe and North America? Seems to me like the reason most 3rd world countries are 3rd world countries is because of the people and the political realities they support (and the same for 1st world countries). South Africa is an example of what happens when a country gets taken over by 3rd world people, is that really what we want? Is that conducive to continued technological progress and improved gdp per capita?

Christchurch should still be a little bit raw for this.

They were actually a number of highly educated technologists killed, from places like India.

https://www.newshub.co.nz/home/new-zealand/2019/03/one-of-the-boys-air-nz-mourns-engineer-lilik-abdul-hamid-killed-in-christchurch-terror-attacks.html

Something bad happened 10,000 miles away in a different polity last week. That means you must adopt my policy views. Also, it’s now against the rules to speak against my policy views.

Thank you.

The fear that "low IQ/extremist migrants bring their politics with them to Europe and North America" is exactly what spawned the killing.

This is not politics. This is basic morality. This is a basic belief that all life is sacred.

Exactly. Anyone who does not fully support mass immigration from the third world is literally responsible for murder in New Zealand. After all, to think humans bring their politics when they immigrate clearly does not believe life is sacred.

QED

There are actually two separable issues here. One is "what should our immigration policy be?" The second is "should we vilify entire continents of people as we discuss that?"

I say no.

And the vilifiers should understand the risks they create.

Yeah, but no one really cares what you have to say.

It's actually interesting why MR is such a weird backwater. Many of MR's former friends, like Will and Noah, are all over this with the same energy.

And certainly Niskanen is setting a standard as well.

But for some reason MR has decided to be .. less direct.

I agree, MR is a terrible place. You should think about commenting elsewhere.

“Exactly. Anyone who does not fully support mass immigration from the third world is literally responsible for murder in New Zealand. After all, to think humans bring their politics when they immigrate clearly does not believe life is sacred.”

I read the reply / manifesto released by the two student radicals who confronted Chelsea Clinton. They literally believe the above. Agree with us or there’s something wrong with you.

Their squabble with Clinton was over Clinton calling Omar's AIPAC comments anti-semetic not immigration.

M:The second is "should we vilify entire continents of people as we discuss that?" I say no.

More typical media response is "Yes!!!! Oh wait, you weren't talking about Europe and North America, my bad!"

You can't debate "what should our immigration policy be?" without discussing the relative merits and demerits of the immigrants in question.

If people weren't constantly lying about the merits and demerits of the immigrants in question (libertarians being some of the biggest culprits here) then it might be easier to let ugly truths go unsaid. The open borders crowd won't leave well enough alone though.

Hi mouse!

You are utterly predictable. Just like most SF Bay Area lefties your first impulse is to shame people who disagree with you. Then you claim the moral high ground with a sermon. How pompous!

We do actually have some data as the experiment has been run before. Hordes of migrants did colonize North America, starting around 1608. At first their numbers were small, but they did not assimilate. They built tight communities surrounded by the locals and their different culture. They did not adopt the rules and mores of the locals. Eventually, the migrants annihilated the locals.

You may have heard about this.

Maybe you should spot the moral high ground first, and claim it. I'd be fine with that.

And I don't do 1608 because it's impossible for us to know how we'd experience our options in that situation.

Let's look instead at what I'm actually replying to:

"South Africa is an example of what happens when a country gets taken over by 3rd world people, is that really what we want?"

You know what jumps out at me here? "3rd world people" as a threat, rather than as human beings suffering a bad situation. There is neither compassion to accept them here, or help them there. I'd be fine with the latter, even as footnote (or fig leaf!).

They are a threat. To civilization. If you don't want people to keep repeating that, stop trying to bring them here and make them out problem.

There is a simple solution to not wanting to get real talked about 3rd worlders. Don't import them.

Christchurch should still be a little bit raw for this.

Utrecht is on lock-down this morning after what appears to be a terror attack. How's that for raw?

The thing about being for nonviolence is that you don't have to change your opinion with the news. Same thing with having faith in humanity as a whole. In both cases, look at who became radicalized, and who is supporting that radicalization.

"Faith in humanity" is not a basis for setting an immigration policy. It's sentiment over rationality.

As I say, you can make an immigration policy, even a conservative immigration policy, without vilifying continents of people. Example:

https://niskanencenter.org/blog/news/niskanen-immigration-policy-brief-the-diversity-visa/

Seems pretty rational to me.

Agree, but stating that Islamic extremism and the low-human capital of migrants from the 3rd world is a potential problem that ought to be considered when setting such policies just doesn't equate to vilifying whole continents; that's silly. That is, again, sentiment over rationality.

As I am sure you know, people commonly extend the threat of extremism to all Muslims.

Which is why I put in that bit about radicalization above. People of all religions and all points in the political compass have been radicalized at one point or another. That process is the problem, as are the people committed to radicalization.

None of that is untrue, but it shouldn't be used to stifle legitimate debate, like you're trying to do.

I see what you did there, and here is the painfully honest answer:

Trump is likely emboldening hate groups.

if you are going to be against violence and radicalization, you should be against it everywhere.

"We have to stifle debate because Trump. "

Your honor, the prosecution rests.

Is that seriously the level at which you operate?

Mentally and emotionally, it's where I'm at. Deal with it.

Saint mouse!

Nice sermon!

I'll bet you live in some plush apartheid neighborhood in CA, protected by zoning laws from the policies you advocate.

Did your kids go to a bilingual school? Did they ever have to shelter in place while the police searched for a handgun hidden in a backpack of a teenager with gang affiliations?

I already know you are a carbon climate hypocrite, flying your extended family in a posh vacation while claiming carbon taxes for everyone are the way to go while surely your behaviour will have no impact. No. Poor people will conserve because they can't afford the taxes, while the wealthy will have bought indulgences for their carbon emmissions.

The wealthy will not live in neighborhoods populated with poor, uneducated, non-English speaking migrants from Latin America or Africa.

Ironically, NZ is a popular bug out location for the super wealthy, something the people of NZ have noticed and are trying to curb. When the consequences of the moral posturing of the globalist elite finally hits home, they are going to bug out and head for the least populated nation in the Anglosphere.

Diversity, inclusion, and multi-culturalism doesn't look so bad when you have a bugout mcmansion in New Zealand.

Unless of course, NZ becomes just another beneficiary of the wonders of third world immigration.

You guys actually even notice when you give up on the subject and just start attacking people personally?

I think I know you and your tribe - I have lived among the noble savages in the SF Bay Area for 45 years. I speak the language of the natives, but have never fully assimilated. I am attaching your ideas, in which I have been immersed for all of that time, even studying among the savages at UC, while never forsaking my New England and peasant roots. One of my grandfather's was a sheppard, one great grandfather a goat herder, grandmother a Lowell mill girl, and blue collar to the core.

Over the years I have noticed certain moral signalling and contradictory lifestyle choices to be constantly conjoined. You are an archetype.

No idea who your peeps are, but maybe you make the same mistakes with them.

I say we are all responsible for global warming. You come back at me and say I am responsible.

See the sad difference?

I mean, I don't remember anyone here declaring themselves a paragon, with an absolute minimum carbon footprint.

"We are responsible."

"Yes, you are responsible."

Actually, this pattern repeats.

Yeah, that's raw.

I had to read through reports from, BBC, CNBC, NPR, et al until I found out - in the open borders WSJ ironically - that the suspect is a Turkish man. Of course, all the facts are not in, so we don't want to rush to judgement, and we're sure there are good people in both sides and all that ...

Anyway, here is a tram photo of the suspect. He looks Irish, maybe he's in the IRA, or perhaps he's an American from Iowa and a dues paying member of the dastardly IRA. Who knows? I guess nobody else in the tram was packing heat. That is probably illegal in Amsterdam, you know, to prevent shootings like this.

Anyway, here he is:

Check out @PolitieUtrecht’s Tweet: https://twitter.com/PolitieUtrecht/status/1107636046685188096?s=09

Isn't it possible that some of the "low IQ/extremist migrants" are seeking to leave third world political realities and enjoy the opportunities of other jurisdictions rather than convert their new homes to third world conventions? Isn't that exactly what the Puritans that settled in North America did? Of course, they did call the place New England and were instrumental in the conduct of the War of the Three Kingdoms back in the old country. Plus ça change, plus c'est la même chose.

Exactly. The outcome should serve as a warning.

It's absolutely possible and true for some. I'm not entirely against taking the cream of the crop if they respect and take to heart our western ideology/culture. But that's not what the west is doing for the most part.

if they respect and take to heart our western ideology/culture.

So there's some kind of unanimity in western ideology/culture? There must be many examples of this. Capital punishment, elective abortion, use of dogs in law enforcement, poisoning of industrial alcohol, prostitution, inhaling the smoke of burning common plants, asset forfeiture, pornography, etc., all these things must be regarded in the same vein by everyone in the west.

Otoh, I think we agree that honor killing, FGM, forced child marriage, and killing blasphemers should be illegal, don't we?

FGM. On the other hand, it's OK, actually good, to chop the end off the pecker of new-born American boys.

That's something the west should stop doing, it appears that this is changing. The point is there are some big incompatibilities with culture whereas they both can't coexist. If Muslims get majorities in western countries for instance they will enact strict blasphemy laws among other things that are not compatible with the west. Latin Americans in general support socialist policies and have a high tolerance for corruption. I wouldn't want to live in a country like Saudi Arabia or Colombia.

If Muslims get majorities in western countries

You're continuing to endorse the faux democracy paradigm. The US doesn't have a democracy, those who voted for AOC can't enact their Green New Deal, Diane Feinstein will cast her Senate vote from an old people's home, Muslim immigrants will be transformed into atheistic hedonist consumers by American culture and classrooms. A Muslim majority won't happen in your lifetime, if ever. In fact, a growing Islamic diaspora is evidence of their weakness, not their strength. See the Irish.

Empirically, there are no good examples of 3rd worlders not bringing their ideology/culture with them.

The Puritans appear to have been whip smart.

They were so smart that they enthusiastically hung witches.

But they didn't hang Roger Williams, and that made all the difference.

Contingencies ...

Well MR, know your audience.

Shutting down debate via moralizing is lame. Don’t be a child.

But the hysteria over immigration is just irrational. And ramping up fear of “the other” just makes these people the 21st century version of the “know nothing Party” of old.

There’s a rational immigration policy where we take the best and brightest as citizens and relegate the rest to working illegally for generations, forever deportable if they commit a crime or complain about working conditions/pay. 90%+ of business republicans would be fine with this policy.

OTOH Camp of Saints wasn’t supposed to be an instruction manual. Which is where the Democrat Party is at.

Do they teach this in some kind of school?

In the middle of a debate you say "you are shutting down debate!"

"There’s a rational immigration policy where we take the best and brightest as citizens and relegate the rest to working illegally for generations, forever deportable if they commit a crime or complain about working conditions/pay. 90%+ of business republicans would be fine with this policy."

Of course, that "rational immigration policy" would require a constitutional amendment, and would be opposed by 90% of Democrats, and a fair percentage of republicans and independents who would never agree to abolishing birthright citizenship.

Nice. Trolling both sides at the same time. Good one.

A first world migrant brought an extremist ideology to New Zealand and caused its worst terrorist massacre.

Free migration makes sense in a world of unlimited resources, but not in a world of limited, and declining, resources. Tabarrok's post doesn't appear to address this, except for the optimistic view reflected in the final sentence (i.e., in the l o n g r u n (how long is that?) free migration will reap rewards). The optimist would argue that free migration will allow the uber smart to converge and collaborate to find the solutions to a world of declining resources. The pessimist would argue that free migration will allow the uber smart to converge and find solutions to the most profitable short-run endeavors. It's often asked if the world will produce another Einstein. The short answer is not likely, not because there aren't uber smart people around but because their pursuits are either too grandiose (a unified theory of physics) or not grandiose enough (algorithms to make the few even richer)

"Free migration makes sense in a world of unlimited resources, but not in a world of limited, and declining, resources. "

Especially when that resource is space.

In the long run means "after I am dead". In the meantime, my family, my kids, and I are to suffer a tremendous loss for some uncertain benefit for future generations.

Not gonna happen. It may be too late for parts of Europe and the UK, but many people are pushing back, and pushing back hard, in the UK (Brexit), France ( yellow vests and Le Pen), Italy, Spain, Germany, Hungary ...

Imagine you are in a lifeboat with your own children, filled to the gunwales, surrounded by the drowning, and you are faced with a dilemma. Do you take on more people and risk your life and the lives of your children? Or do you steel yourself and make the hard decision and row away and live with the guilt and shame, knowing you will feel haunted by nightmares. Do you do fulfill your obligations as a parent? What do you do?

There will always be idiots like mouse that stand up in the boat and shout moral platitudes. Do they jump out of the boat and let someone else take their place?

Exactly. I would kick Mouse overboard, then row, hard.

I am a just man with a reserve of good will, but make no apologies for rationally defending my own selfish interests in extremis. Once my own family are secure, I'll go back for other survivors.

Anyone who wants an apology for that I regard as a dangerous virtue signaller; either they are entirely delusional and a hazard to everyone near them or they are trying to form an extortion coalition at my expense.

So, sign up for a miserable life now, so that in 200 years your great-great-great-grandchildren can live in a better world.

This seems like a most unreasonable proposition.

It also ignores future uncertainty. Every year into the future adds some additional uncertainty to any prediction. So you are left with a present negative and a future (highly uncertain) positive. This does not seem to be a compelling argument.

You are both correct.

Haven't you read Tyler's latest? We should all increase our savings rate to 90% in order to increase the happiness of future imaginary beings who are not related to you in any way. This is just par for the course.

Increasing our savings rate to 20% would probably be a boon to the majority of Americans. But I'm not really doing it for directly for the future's benefit.

Ironically, those future humans, given our current trajectory, will be richer, healthier, happier, have more leisure time, and will live much longer than us. So, no, I am going to spend money on my current family.

Also, all the global warming alarmists will be dead and those future humans will shake their heads at the silliness of it all.

I read it and reviewed it for Advisor Perspectives https://www.advisorperspectives.com/podcasts/2019/01/25/tyler-cowen-economic-growth-and-the-threat-to-our-distant-future I don't think he said to save 90%, because that would not maximize GDP growth, and he definitely said, repeatedly and with great clarity, that maximizing GDP growth is the best way to help future humans. It's pretty obviously true: I'm "rich" (in a global historical sense) because those who came before me made the United States a rich country through innovation as well as saving. There is an optimal amount of saving and it sure as heck isn't 90%.

Larry, I may have been slightly unfair to Tyler for the purposes of Hyperbole. I think he can take.

So long as the actual % is "much higher than present" I consider it irrelevant if the actual rate is 90, 50, 30, or whatever.

The real problem with Tyler's argument is Tyler's utilitarianism, his weird weighting of future utility, and conjuring moral obligations to non-existent entities. His argument should be rejected on epistemic and moral grounds rather than practical debates about saving ratios.

I really expected better from Alex, his is an even worse argument than Tyler's. Libertarian-leaning economists have changed from:
"The free market makes us all better off, yes some will be richer than others, but we all have iPhones and a/c!"
to
"Ok, quality of life is going to dip badly for millions upon millions of middle class people in the developed world, but just think about the abstract people eight generations now who will be better off! Don't you care about them?"

Rofl. Yes. Exactly.

And this is why I left libertarianism; when they announced it was necessary I destroy my capital to uplift people I'd never heard of. Somehow I couldn't see how this followed from the NAP. The fault must be mine, I suppose.

It worked for China.

Clearly China, famous for thinking long term, should open their borders and encourage maximum immigration from everywhere. Plus it’s addresses their main weakness, a cripling lack of diversity.

Well, China does have it's Uighurs, so they have that going for them.

Translated: Immigration will be a net negative for a while, but it’s ok because things will turn around in 200 years.

Addendum translation:

"Immigration will be a net negative for a while, but it’s ok because things will turn around in 200 years....if not for you, or your descendants".

more people means more ideas

Does Tabarrok really believe such transparent nonsense?

Well, he thinks like an economist, so he just forgot to add "ceteris paribus". Except the ceteris isn't paribus at all, for a myriad of reasons...

"More Ideas" unfortunately includes more *bad* ideas, more "seductive but ruinous ideas", etc.

Alex believes people are fungible. Enough said!

Well, of course they are, they must be, they have to be; it is necessary, it is reassuring, it is unthinkable otherwise... if there are problems, like violent rape gangs and sharia law spoiling your local microbrewery, then perhaps they just need some more education...

It is impossible for Tabarok to question this assumption, if he looked closely all the rest falls apart, and then what would he have to post at MR?

Ha, "More people = more ideas" often seems to be dogma among certain kinds of smart economists talking about immigration, until for mysterious reasons it stops being believed at the admissions stage for their children's schools and universities and internships.... at which point some hodge podge of diversity, "character", meritocracy and high resources:individuals ratio becomes the prime criteria believed to be linked to productivity in innovation.

"ideas are the ultimate source of wealth and more people means more ideas." is about the most simplistic and idiotic statement I've read for a while. SO many other factors are involved with creative thinking and then taking those thoughts out of the world of dream into the world of society.

They must be fans and true believers in Asomov's foundation fiction. I think I'm more likely to turn to the Hollywood take on I Robot and quote Will Smith: "stupidest smart people".

If we look around the world today we see that the places with the densest populations, such as China and India, are poor.

The overall population density of a nation/state isn't as significant as the density of cities located within. Macau is the densest Chinese city at 21,224 sq/km, far below that of Manila (43 079). Both China and India have large expanses with low population densities. While in the US, New York City has a population density of 10,431 sq/km, Arthur County, Nebraska has a population density of .239 per sq/km. Which figure is the most relevant in this discussion?

"growth in utility drops substantially in the short run as many people move to areas with high real GDP; hence these areas be-come more congested and become worse places to live (lower amenities). "

Um, so why should people in those areas want to make their area worse just so that they can be somewhat more productive after 2100? Especially when the worse now is a more reliable prediction than the better after 2100 due to future uncertainty?

So NIMBYs are good now?

Try to integrate your beliefs.

You are shockingly bad at logic.

NIMBY's are quite often good for their locale. For example, the EPA is NIMBYism for the US. Forcing heavily polluting industries to either clean up or move overseas. There is logically more pollution in China today than there would be if the US didn't have strong environmental pollution laws.

"Try to integrate your beliefs."

Try to understand basic logic and make compelling arguments, instead of making dumb posts in a half-ass attempt to score rhetorical points.

Flail all you want. This was the NIMBY argument:

"why should people in those areas want to make their area worse just so that they can be somewhat more productive after 2100?"

No mouse it wasn't a NIMBY argument. A NIMBY argument is when you are attempting to prevent an unpleasant development (usually new construction) happening in your area and the logical outcome will be that the construction will instead occur somewhere else.

First, this is not construction, second it's not an attempt to push the immigration somewhere else. The counter argument would be for the would be immigrants to develop their own country. Not to immigrate to another country instead. Third, it's not even an argument against some level of immigration, it's an argument against immigration to such a high level that the US becomes as dense as India or China by the year 2100.

Frankly, there's close to zero logic in any of your responses.

Correction:> That should be the year 2200.

I'm hearing you prove my point. NIMBYs don't want construction, or people, they want them to be someplace else.

"I'm hearing you prove my point. "

So you're actually going with the: "The voices in my head agree with me" argument?

Population density is easy to calculate; people / land area. However, we are more comfortable when there's a larger living area available to each one of us. Population density may not be the most revealing parameter today because it may overestimate or underestimate the living area available to each person.

Population density can be overestimated. Take a 30 story apartment building. Population density is quite high but 200 people can be living in total comfort in their apartments. Take a slum, 100 living on the land that the apartment tower occupies may yield a lower pop. density but the living conditions are much worse.

Population density can be also be confounding because in poor countries streets can be as low as 10% of urban land while in rich countries streets can be 35+% of urban land. With low street area there's more livable area for people, but mobility goes down the drain. Old European cities may have the same street area as NY, it's only split in smaller streets.

People is not static. I live in an apartment building in a small city center which population density should be relatively high. However, I work in a large office in the suburbs where congestion is unknown. The population density may be calculated based on where I live not on the relaxing office where I work. Yes, people talk about daytime population density: https://www.tandfonline.com/doi/full/10.1080/21681376.2018.1455535

In biology the concept of clumped population distribution exists. For example, birds live together. If you divide the population of a flock by 1 sq km, it may mean nothing because the animals are very close. It can happen the same with humans, density should be observed at the micro-scale for which a 69*69 miles cell is too large to capture our way of life.

So, can you really compare the population density of a city with vertical development (offices & apartments) including subterranean transport infrastructure with another poor city with low street area where the people works and lives in the same place?

Innovation and GDP may be correlated to population density. But perhaps there's an optimal point beyond which a more dense population negatively affects GDP. The apparent high density of rich places may not exist at all because people has lots of space to live.

we are more comfortable when there's a larger living area available to each one of us.

There's a nice spot between Shageluk and Takotna, Alaska. By your lights you would be very comfortable there with a very large living area available. What possible drawback could there be?

We are mostly and indoors species. The big outdoors is NOT a living area, at most it is a fight-for-survival area =)

Perhaps your subspecies is restricted to an indoor environment. That's sad. Nonetheless, even your apartment/office/small city center is dependent on the big outdoors for its very existence. And the fight-for-survival complex is just as present in an urban milieu as it is in a wilderness, maybe more so.

While we're dependent on the big outdoors in an ecological sense, when I'm actually in the big outdoors, there are no grocery stores, no doctors, it's hard to get a date, and bears want to eat me. We live in close proximity to each other for a reason: man is a social animal, and wealth depends on specialization and exchange (of goods, services, and ideas).

The crux of this whole conversation: The Goldilocks Complex. Humans, or at least the humans that read and comment to MR, need other humans at a reasonable distance, not too far, not too close. A human needs a barista within easy walking distance but not in the next apartment. A human needs most of all a parking space next to the front door of the supermarket or health club but not a two mile drive to get there. The real Utopia is total comfort, convenience, entertainment and security. That's the goal.

"Economists Predict the Far Future"

'economists' have a horrible track record of predictions and lack credibility.

An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today

And pity the sorrowful corporate & government economists -- big staffs, sophisticated computer models, tons of historical data, prestigious university degrees -- and still they forecast about as well as groundhogs.

Actually every scienctific field has a horrible track record of future predictions. With maybe the exception of meteoroligists - but even they are capable of max. 1 week- 1 month term forecasts, long term climate models suck ever since they were invented. But then - would it make sense to have such intricate things as the stock market, if we knew what will happen to them tomorrow? Of course not, that's what makes economics fun.

Yes, Ed Lorenz's "Limits of Predictability".

You might like this too:

Irreducible imprecision in atmospheric and oceanic simulations

- James C. McWilliams

From the paper:
"..., I advocate the hypothesis that plausible, chaotic AOS models have important levels of irreducible imprecision due to structural instability resulting from choices among a set of modeling options that cannot be clearly excluded. The level of irreducible imprecision will depend on the context, and this level is likely to be greater the more chaotic and multiply coupled the targeted flow regime is."

https://www.pnas.org/content/104/21/8709

"if migration restrictions are lifted, then people today move to the high-productivity regions such as Europe and the United States and these regions become denser and so remain the high-productivity regions in the future. World welfare in this scenario goes up by a factor of three"

This statement suppose that people all over the world has the same IQ, which is obviously (and perhaps unfortunately) not true

The students in the Economics 305 class meeting at 10:00 this morning in Overton Hall at the University of Kansas don't all have the same IQ either. So what?

Because lower mean IQ means more criminality and high time-preference, and higher mean IQ means less criminality and low time-preference. We call these areas "good school districts," and price them accordingly.

So Ivan Boesky, Micheal Milken, Al Capone, Bernie Madoff, Ken Lay, Elizabeth Holmes and Bernie Ebbers are low IQ?

Ivan Boesky doesn't lower your property values or necessitate metal detectors in your school. Also, you seem perplexed by the concept of "mean."

Al Capone doesn't really belong in that group.

https://en.wikipedia.org/wiki/Expectancy-value_theory

A white mass murderer like in New Zealand last week does not disprove anything about the statistical differences between black and white crime rates.

In a zombie epidemic, the densest populated areas are the first to fall.

Or any epidemic. Or any cascading failure event that become inevitable in complex interrelated systems.

A country can be rich because it has high natural resources per person. Some Middle Eastern oil producers demonstrate this. I think the Japanese have a lower standard of living than Americans despite having higher average IQ because they have fewer natural resources per capita. Population growth reduces natural resources per capita and can reduce living standards.

Natural resource exploitation is dependent on technological development. Before the War Between the States, if you wanted oil you were required to go harpoon a whale. Later the technology to drill for and refine oil was developed and god-forsaken places like west Texas and Saudi Arabia were found to be filled with natural resources that previously didn't exist. Fort Dodge, IA, once noted as simply a spot where plants would grow, became the world capital of sheetrock manufacture because it was located over a previously unexploited deposit of gypsum. This doesn't seem to have much to do with the population of the area, although it seems to be sufficient to operate the plants that produce the product.

I think in a pre-modern setting, resources / capita holds a lot more water than today. It's basically a feudal argument: peasant+land. But it was already untrue in the 19th century.

Nowadays nearly all the value added is downstream of primary resources. Having the culture and institutions that allow co-operative enterprise explains far more of the variance than resources / Capita.

I'm really not sure that's true at all.

There's no relationship between GDP/Capita and primary resource production as a share of GDP. Indeed; once you take out Qatar and a few petro-states the relationship is negative!

California is something like 3% primary industry, including oil and forestry and agriculture.

Canada, Australia, Norway, Alaska etc all seem to benefit from being stable countries (states) with high resources (land) per capita.

"Indeed; once you take out Qatar and a few petro-states the relationship is negative!"

Do you have a source for that? I'd like to look at what the data says.

I think this is fairly well-established in development literature; "the resource curse" etc. I'll check for a link.

You can certainly get wealthy "resource" states: Qatar, Australia, Norway, (Alaska), but you can also get a LOT more poor or middling ones: most of Africa, Russia, Venezuela, etc Furthermore, you have a very large number of wealthy non-resources states to deal with: Japan, Finland, Singapore, etc.

Once you do the controls, "resource" states seem to be no more likely to be rich than "non-resource" states, iirc.

This may be a modelling artefact that all poor states are necessarily primary industry (agriculture). But even if you look at just mining, oil, and forestry per capita, they don't predict total GDP/Capita at all well. The best one can say for resource endowment is that it is a modest uplift, and at worse that it engenders weak (extractive) institutions a la Acemoglu.

Background on the "paradox" of resource endowment:

https://en.wikipedia.org/wiki/Resource_curse

World Bank paper: finds no relationship overall (negative for some sub-sets, positive for others)

http://siteresources.worldbank.org/EXTPREMNET/Resources/EP83.pdf?bcsi_scan_76a858e05751204b=j7Yi+T2xv2yTpwnzYHIdc/lNoiwlAAAAUxzIDw==&bcsi_scan_filename=EP83.pdf

Per the paper you cited:

" The results here align with others who have stressed that intangible wealth in the form of governance quality is a key determinant to the
outcome of natural resource abundance as a blessing or a curse. "

I agree with their conclusion.

Yes. I tend to agree too.

Insofar as governance has been mostly "poor", we get the apparent "resource curse".

The rule of law, to the extent it exists in the minds of the people, is the ultimate determinant of economic success.

Crime, in all it's forms, destroys economic activity.

Biobots have a great advantage, they eat dirt, have opposeable thumbs, and follow brain patterns. The singularity hates mechanical bots, they are a complete pain. Expect to be enslaved, expect to become productive. Try to avoid the Matrix thing.

Keanu Reeves in the Matrix is in the cocoon. But the only mechanical system the singularity needs is to wheel his cocoon to the assembly line and plug Keanu in for eight hours, then wheel him back. We want to avoid this, but it is tempting because the singularity can get the earth covered in ice, and save us all in one huge hive at the equator.

The density argument ignores networks, more particularly, human networks.

Density assumes equal connection among the nodes, equal opportunities, certain types of income distribution, etc.

If you want to read a good book on networks in general, and human networks in particular, I would recommend: the newly released "The Human Network: How Your Social Position Determines Your Power, Beliefs and Behaviors" by Stanford Professor Matthew O. Jackson.

Read the chapters on homophile and the chapter on Immobility and Inequality: Network Feedback and Poverty Traps.

India is trapped by a caste system, with network effects, as is China, which is reinforcing its heirarchical party system with a system of social credits which will give opportunities to the elites and their children.

The only thing worse than a caste system, or a single party state, is a tax system which perpetuates elites through generations. I understand you need the money for the kids college bribery admission fees.

computer said homophile, but the word is homophily. Their or there.

The only thing worse than a caste system, or a single party state, is a tax system which perpetuates elites through generations.

I'd say the income tax is a tax on becoming New Money, and the estate tax is a tax on New Money becoming New Old Money. Also, the 2008 bailout was an instance of the government intervening to prevent the rich from becoming poor, which is at least as important as allowing the poor to become rich. Freedom to fail.

I have zero problems with families piling up inter-generational wealth. So long as creditors are allowed to attach the trust this is a problem that solves itself.

Step up basis, man; it beats W-2 any day of the week.

The populist remedy, therefore, would be to eliminate taxes on capital gains. Like some pointed out when Warren Buffett said his taxes were too low because he paid the same rate as his secretary, the real problem is that Warren's secretary's taxes are too high.

Where do you get the idea of eliminating taxes on capital gains. How about treating income as income, regardless of the source. That seems more populist.

Because income taxation isn't a tax on being rich; it's a tax on becoming rich. Therefore, if you want to democratize elite, New Money status, the income tax should be eliminated. And, it follows, if you want more New Old Money, you should eliminate the estate tax. And finally, you should oppose government interventions that prevent the rich from becoming poor. Then the problem you seem determined to worry about--entrenched, non-meritorious elites--solves itself.

The problem he’s worried about is that professionals who work hard make more than academics like him.

The market is a disgusting phenomenon to Bill, one in which a skilled laborer in manufacturing without a high school diploma earns more than he does, and even worse a smart professional without a PhD earns literal multiples of what he earns in a year.

Thus, like Skinner in The Simpsons, he believes The System is Wrong. And so he rages about wealth.

You can always spot an academic. It’s clear from his envy and rage, stemming from his inferiority complex.

I’m willing to put money on it, if Caplan will intermediate. Bill is an academic and/or earns less than the household 95th percentile income.

I’ll give Bill a windfall: $100 at 10-1 odds if I’m wrong.

Although I have taught law and a graduate course in a nationally ranked business school, I practiced law in private practice. Since you know nothing about me, you can conjecture what you wish.

But, what you say tells me all I need to know about you.

By the way, Hmmm, my income has exceeded your threshold, not even including my wife's contribution. But, that doesn't make me a better person or smarter, either.

Anti, I don't follow your arguments.

If you think of an income tax, from your argument, as a tax on the growth of income, that tax applies to both the new rich, and, new earnings from the old rich. The rule applies equally.

But, more puzzling is your claim that estates should not be taxed, because that applies more to the old than to the new wealth, and both equally.

"I am your density."
https://www.youtube.com/watch?v=s7A5xLk3hIs

Did the Lucas Prize judges esteem Desmet, Krisztian Nagy, and Rossi-Hansberg for the insight they brought to discussions of just how migration and migratory patterns are to persist throughout an age of Technogenic Climate Change, the effects of which could well last four or six centuries with novel complications along the way?

Does their esteemed "theory" account for the climatological and meteorological disruptions already among us and coming our way with increasing ferocity? (Floods, droughts, storms, insect invasions, food chain collapses, VAST losses of real estate, et cetera.)

"China and India weren’t relatively poor in the past, however, and they won’t be relatively poor in the future."

You have to go a long way back to find a time when India and China weren't relatively poorer than, say, England. Maddison's estimates are that England was 3x as rich as India and China before the industrial rev.

If we go back far enough we can pretend what we want, especially if we want to be nice to the emerging 3rd world powers.

In general nowadays: big countries, more people, more money, more corruption, more bureaucracy.
Will this change in the future?

I thought I was taught that the modern capitalistic economy emerged after the Black Death killed off so may people without destroying the capital stock that labor became the expensive factor of production. So wages rose and that lead to the development of capital intensive, labor saving methods of production. If this analysis is correct it is just the opposite of this analysis that density and growth go together.

But at a minimum it should call this line of analysis into question.

Ergo, if the plague and small pox epidemics had been even more fatal the industrial revolution and capitalism would have occurred sooner and more completely. Apparently the adoption of double entry bookkeeping, the printing press and the mechanical clock had little to do with it.

Right, and if 320 million people in the US is good, then 500 million would be fantastic, 1 billion would be Utopia, and 2 billion would be the literal Kingdom of Heaven.

I think it comes down to quality, not quantity, which is why people leave high-density cities in the developing/failing world to come here.

People are going to high-density cities in all parts of the world. That's why they're high-density cities.

You have an uncanny ability to spot the point not actually being made. Yes, people are moving to higher-density Port-Au-Prince. It doesn't mean it's on a par with higher-density Tampa, FL.

The basis for this whole post is just embarrassing. They've taken a single variable driving growth (ideas), and decided they are entirely from network effects driven by physical density. Its monomaniacal and is exactly why economists have a bad name.

Their model is falsified by their own data! If "ideas" from dense cities and cultures drove productivity, why didn't the Chinese and Indian pre-modern metropolis have all the "ideas" for modernity and adopt it first? Errm....

Economics is downstream from Politics, which is downstream from Culture, which is downstream from Genes-and-Environment. But the real world is both too unpleasant and too hard for these economists, so they have a make-believe one where it's all some mix of education and investment...

"Their model is falsified by their own data! If "ideas" from dense cities and cultures drove productivity, why didn't the Chinese and Indian pre-modern metropolis have all the "ideas" for modernity and adopt it first? Errm...."

+1

Culture is not downstream of genes in any significant way (as long as one has human genes to start with of course), though the physical environment does have an effect on culture, just as it does on genes in the long run

There are a finite number of possible cultures which are compatible with any Genes-and-Environment complex. The latter entirely determine the scope of cultural expression.

The sense of downstream is "bound" rather than "determine" here. If a culture doesn't represent a stable strategy for transmission of genes, it will be supplanted by a culture which does. Or die out.

That "finite number" appears to be extremely large. Human cultures have been around for tens of millennia and we are not in any danger of running out of viable cultures.
And barring local catastrophes which temporarily overwhelm them, cultures not favorable to human survival do not come into existence in the first place, much like certain possible atomic isotopes don't exist because they are too from from even metastabity (e.g., you won't find a hydrogen atom with ten neutrons and one proton)

It's amazing how rare sensible views like this are around here. Stunning really.

Another point: "free markets and capitalism" are *themselves* ideas that did not emerge in the densest regions, and if you follow Alex's formulation on how pivotal those were - and I don't and its seems falsified but let's say we did for a second - those ideas were themselves more transformative in the distribution of technological and economic growth than the *entire* effect from population density, by far.

So, even allowing Alex's formulation, what's the bet that those two are the last possible ideas of this sort that are more transformative and powerful than the density effect, and which aren't particularly likely to arise in dense regions? It seems pretty high, unless you are so hubristic to believe the capitalism is "The End of History" (that is, that capitalism and free markets are the last possible major economic transformation that has a strong path effect on ideas as a whole). It seems like the more likely stance is not that there was some "out-of-equilibrium" phase, but that there will be no equilibrium.

Interesting Theory, but I think Alex is wrong to suggest that China and India were late to adopt capitalism. The 1950-1980 period of dumb policies (in both countries, china was worse) was the out-of-equilibrium phase and economic liberalisations are nothing but a return to the capitalist norm (as there is no alternative :) ).

India's policies were just dumb; China's were one of the worst crimes against humanity ever committed. It's amazing China has now gotten ahead of India and remained there for 30+ years.

China's IQ was considerably better and the country was more centralized which allowed it to implement fast catch-up policies, especially in infrastructure.

"In a paper that just won the JPE’s Robert Lucas Prize, Desmet, Krisztian Nagy and Rossi-Hansberg model the evolution of the world economy over the next 400-600 years!"

"… if migration restrictions are lifted, then people today move to the high-productivity regions such as Europe and the United States and these regions become denser and so remain the high-productivity regions in the future. World welfare in this scenario goes up by a factor of three."

I can only conclude that, in the present state of the field of economics, it is possible for raving lunatics to win prestigious prizes.

Ugh, I find the argumentation in this post very frustrating. I am sure that others have pointed this out, but this "the institutions of free markets and capitalism necessary to leverage ideas into output", seems to be given not quite enough weight. Sure everything else follows if you assume that India and China adopt "the institutions of free markets and capitalism necessary to leverage ideas into output", which I assume includes "the rule of law". But that is a big assumption, especially for mainland China.

Does this argument really make sense when economic rents accrue to land owners? Or does it make sense precisely because economic rents accrue to land owners?

It seems weird to keep arguing for higher levels of immigration into nations that tend to have persistent housing shortages in the cities where most of the additional immigrants are likely to end up. But it should provide even more of a financial windfall for folks who own property in those metros.

"As Paul Romer, and others, have emphasized, ideas are the ultimate source of wealth and more people means more ideas. "

More effective ideas with a stable pro-growth culture encourage wealth formation, but it's not the only thing that matters.

If it were purely density that mattered, Canada, the US and Australia wouldn't have higher GDP / capita's than most countries in the world.

Perhaps we can learn from the termites whose population density has allowed them to achieve technologies far more advanced than our own

"In comparison, most of today’s high-productivity, high-density locations in North America, Europe, Japan, and Australia fall behind in terms of both productivity and population."

They seem to be saying that those places have too many migration restrictions, which is hampering their productivity growth. Japan, sure. It's not clear to me that it's a valid observation about the other places; Australia famously does wall itself off from various economic refugees but has nonetheless experienced substantial immigration (28% born overseas). Europe is trying to put a stop to refugees from Africa and the Middle East but has let citizens of EU countries have substantial freedom of movement. The US is about 12% foreign born. That's lower than it was in say the early 1900s but I'd have to think is high by historical standards. If nothing else better transportation makes it easier to cross an ocean than it was in 1500. So I'm thinking that we're seeing more migration now than we were hundreds of years ago.

Nonsense!

With scientific information growing worldwide much faster than economic growth rates (up to around 8+%: or at least 7% discounting for junk science), one can suspect that population density is irrelevant and local culture behavior about the adoption of the new technology is the rate-limiting step.

It was political/cultural control by centralized planning nuts in both India and China that had prevented economic development. Just a few people believing silly ideas that sell combined when combined with popular cultural beliefs can block innovation and economic growth.

Israel is more innovative than all the Muslim countries combined and that is just cultural and the fact that innovation is being blocked by belief systems.

Even in the US, we have small groups that are modern day Luddites that are blocking innovation and economic growth in some sub-sectors of our economy. For example, we have almost zero offshore aquaculture while in the rest of the world it is growing at very rapid rates. Meanwhile, we import 90% of our seafood (most of which is farmed: 20 billion/yr market) with the largest extended economic zone (EEZ) for offshore farming. A small group of activist blocks permisstions and uses law suits to stop progress for the last half a century.

You cannot mention "density" without defining area boundaries. Manhattan's density and the NY urbanized area have very different population densities. Best to be clear. Manhattan's density benefits persist because the urbanized area is permitted to grow at its low-density edges. Most large metro areas grow this way -- at the low-density edges.

I thought the information superhighway was supposed to mean distance no longer mattered? Anyway if the theory says Nigeria should be more innovative than Canada and it isnt, it should get there over time. I know where to invest! /s

How important will density be as the world becomes more connected?

With higher rates of automobile usage people can live further away from work, shopping, etc. leading to lower densities, though their economic contributions can be substantially higher. Manhattan has half the population density that it had 100 years ago, though real GDP/capita is probably 10x higher.

Similarly, with telecommunications and the internet, someone can be a hermit in Alaska and perform many job functions for a Florida-based firm.

Well before 400-600 years from now I imagine that there will be a very small number of jobs that require people to be centralized like in Industrial Age cities. There may be a preference to live in cities at that point in time (i.e. community, culture, climate), but that "density" probably won't be a large factor in economic growth. Connectivity, which "density" has strongly been correlated with, will probably continue to shift towards telecommunications/internet.

From this standpoint, migration would play a less important role in economic development. Someone trapped in Haiti could be reasonably productive as long as there is telecommunication infrastructure and there aren't restrictions on telecommuting or e-commerce. It will be awhile before this is fully actualized, but we are moving in this direction.

Someone else is also thinking of demographic and economic issues over the next few centuries as well. Call it malthusian industrialization: http://www.unz.com/akarlin/where-do-babies-come-from/

Alex seems to have established a pattern on MR to write about nonsense. We should ponder what kind of society would *care* about some predictions from 400 years ago. The word unfalsifiable comes to mind. I see a huge increase in wealthy ignorants, a society more functioning by fad and meme popularity that fact. Given the challenges facing us (mostly self-inflicted), why would anyone believe it is a given that there will be a (at least loosely coupled) global economic system in 400 years? I'd say the jury is still out.

Another problem with this density argument is that it presupposes that increasing density will be increasingly manageable. This may not be the case.

Megacities already have significant problems with maintaining cost structure of infrastructure and affordable housing, and there are a fair few Tyler posts on MR recently about the problems this has posed for innovation in New York city (Amazon pushback, and pot legalisation pushback by race huckters), Bay Area (that whole screed by the bitter startup wannabee that cheap cost of living and a nice lifestyle to attract the optimates has been lost), and the list goes on.

There's a good possibility that'll get harder in the future, and blunt returns to investment in dense areas, and so this postulated pathway of "more dense locations become more productive over time since investing in local technologies in dense areas is, in general, more profitable".

There may be cultural and human capital differences in how well increased density works. We may want to compare Gongdong with NYC over the coming years.

"In a paper that just won the JPE’s Robert Lucas Prize,..."

I've got $200 that says I know more about world economic growth in the 21st century than Robert Lucas does:

http://longbets.org/194/

P.S. So yes, the paper is laughable. (Though I probably should read it sometime. ;-))

It is rare to see one paper embody so much of what is wrong with the practice of economics. Unwarranted assumptions that oversimplify to the point they are not even talking about anything resembling the world we live in, then feeding a bunch of questionable statistics through a complicated model based on those simplifications, and proclaiming that they have projected a trend out 400+ years and therefore can opine on a contentious political issue of the day. And lots of fancy equations!!

This one has it all! And a prestigious prize, to boot!

Borjas' "We Wanted Workers" is infinitely more relevant and truthful than this overblown pap.

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