Good call

Simon Johnson:

One danger inherent in pushing for high growth is that it is always possible to juice an economy with short-term measures that encourage a lot of risk-taking and leverage in the financial system. Deregulation in the 1990s and early 2000s did exactly that, leading to slightly higher growth for a while – and then to a massive crash.

Following the plan

The wife is away for a few days, so I sat down and wrote up a short list of things I really don't want to forget: get the mail, get the paper, feed the dogs, feed the birds, and the like. Writing it down helps me remember.

So this morning I walked the driveway and got the paper. And early this afternoon I walked it again for the mail. No mail. Must be too early, I figured.

So I went down again, late afternoon. No mail. Well it's not too early now, I figured. Must be some other problem.

Oh yeah, today's Sunday. No mail on Sunday.

It was written down, you know? It was on the list, so I checked the mail on Sunday.

Twice.

Recession? Neh

Two measures of employment:

Graph #1: Two Measures of Employment (Percent Change, Monthly)
The red one is Copyright, 2016, Automatic Data Processing, Inc. ("ADP")

If it is reasonable to expect a premonition of recession in the form of a year-long (or longer) decline toward zero, then it is reasonable to say that this graph does not see a recession starting in the next year or two.

Argument the other way? Off the top of my head, if you want to pull teeth, you can see red rise above blue in 2006, just at the start of a two-year decline to zero. And you can see red again rise above blue in recent months (Nov 2016 - March 2017). That could be telling us something. But there is no red data from before 2002 to show anything similar.

Or you could see increase from 2012 to a high point in early 2014, and "decline toward zero" since then. But the rate of decline (if it is a decline) is so slow it might take 20 years to reach zero.

One nice thing about this indicator is that it is monthly.

See also My recession indicator says "not yet" from six months back.

In reply to Mark Thoma

Half a dozen years back there was so much right-wing chatter about the threat of inflation (from quantitative easing) that it seemed the chatters wanted hyperinflation, just to show they were right about the economy.

It is a mistake to focus on one economic issue. It is a mistake, no matter the issue and no matter what wingnut is focused on it. It's not quite so bad these days, not yet at least, and I'm not sure it's only a left-wing phenomenon, but these days the chatter seems to be about impending recession.

In this case, it is definitely a left-wing phenomenon. "Maybe I’m wrong that hypocrisy doesn’t seem to bother Republicans these days," Mark Thoma says. Hey, whatever. At least he's not hiding it. But politics interferes with economic analysis, and weakens it.

Apart from Thoma's one-line conclusion -- "It would be hard to be less prepared for a recession than we are right now" -- there are a dozen paragraphs in the article. Six of the last seven of those discuss Republicans. And the seventh covers what will happen "if Congress overcomes gridlock and pursues austerity as a way of achieving its ideological goals under the false cover of helping the economy". Make that seven of the last seven.

Thoma's article is mostly politics. But he does have an interesting analysis and two good paragraphs about a change in the behavior of the unemployment rate. The unemployment rate. Thoma says:

Instead of reaching a low point and then leveling off for a period of time, it has tended to “bounce” off the low point and almost immediately begin rising again.

And if that is the case, then

The question is, if we are at or very near a new low point for the unemployment rate, how long will it last before it begins rising again?

Very interesting. But it is disappointing to see Mark Thoma fail to explain why we now get the bounce. And fail to consider whether the behavior of unemployment may have changed again, since the crisis and all. And it is most disappointing to see him treat such changes as acts-of-God. Reminds me of what "Adam Smith" said in The Roaring 80s:

Kenneth Boulding, the distinguished economist, wrote that in the Great Depression, economists wrote about unemployment as if it were a bad hailstorm; then the Keynesian revolution gave some hope that nations could do something about the 'economic blizzards' that had previously been considered as random as the weather.

Thoma says

Without much room to cut interest rates, and without support from the Trump Fed for other stimulative measures, there’s little the Fed will be willing and able to do in response to economic problems.

Rather than dwelling on dead ends, Mr. Thoma, look for alternatives.


Instead of depending on interest rate policy to encourage or discourage growth, take a moment to notice that half the time, interest rate policy and the tax code are at odds with each other. The tax code always encourages economic growth. The tax code never discourages credit use.

As an alternative to giving people a tax break for paying the interest they owe, why not offer a tax break for making extra payments on that debt? Give a tax break that accelerates the repayment of debt rather than encouraging indebtedness. Such a tax break could work better than raising and lowering interest rates. It is an alternative policy that could be used to help solve the problem that we are "without much room to cut interest rates".

The basic principle that underlies all of economic policy is this: We encourage economic growth by encouraging credit use. At one time, and for a long time, this principle led to effective policy. It no longer does. Why? Because credit use encourages debt accumulation.

Debt accumulation is an unintended consequence of pro-growth policy. But we have no policy designed to offset this unintended consequence. So debt has grown excessively.

On behavioral economics

Good post: Tejvan Pettinger's Applying economics in everyday life. It is a collection of short notes on various topics. For example:

Behavioural economics and bias

Traditional economic theory assumes man is rational. However, the work of behavioural economics suggests we can be prone to bias and irrational behaviour. For example, we may be prone to a present bias where we overvalue pleasure in the short-term and ignore long-term implications. For example, consuming demerit goods like alcohol or not saving sufficiently for retirement. The insight of present bias suggests we make decisions our future self would not make. If we become aware of these bias and irrational behaviour, then we can make better decisions which improve our long-term welfare.

See: Behavioural economics

I followed that last link:

Behavioural economics

Behavioural economics examines the psychology behind economic decision making and economic activity. Behavioural economics examines the limitation of the assumption individuals are perfectly rational.

And that's probably a good thing. But I always say I don't like "behavioral" economics because it is about manipulating people's behavior. Doesn't sound like that, from what Pettinger says. Sounds like an attack on "rational expectations". But read a little more:

Concepts in behavioural economics

Bounded rationality – making decisions based on limited information and from a narrow range of heuristics (simple rules)
Choice architecture – The theory consumer choice is influenced by the ways goods are presented. For example, complementary goods placed together can help sales. Related to concept of nudge.

Ah, the nudge. That comes later in the "Concepts in behavioural economics" list:

Nudges – Factors which encourage consumers to change behaviour through small suggestions

There ya go: Behavior modification. Fuck that.

Thinking in the can

Brad DeLong: How to Think Like an Economist (If, That Is, You Wish to...)

It's an awkwardly constructed title. The "that is" should come first or last inside the parentheses. When you separate the "if" from the "you wish to", the power of those four syllables is weakened immeasurably.

Also, since parentheses set off minor ideas, the "..." doesn't belong in there. (Or if you do put it there, maybe you shouldn't close the parentheses...

An awkward title, but the first six words drew me to it. DeLong opens with a grand introduction:

I have long had a "thinking like an economist" lecture in the can. But I very rarely give it. It seems to me that it is important stuff—that people really should know it before they begin studying economics, because it would make studying economics much easier. But it also seems to me—usually—that it is pointless to give it at the start of a course to newBs: they just won't understand it. And it also seems to me—usually—that it is also pointless to give it to students at the end of their college years: they either understand it already, or it is too late.

By continuity that would seem to imply that there is an optimal point in the college curriculum to teach this stuff. But is that true?

JFC, he's setting up a Laffer Curve to describe the "optimal point in the college curriculum" to give his lecture-in-the-can.

Oh, and the last time I saw anybody use the word "newbie" they spelled it "newbie".


"Every new subject requires new patterns of thought," DeLong says. Not sure what he means. Creative spelling, maybe?

What is a "pattern of thought"? I look at patterns all the time in the lines on my graphs. One line goes up, or it goes down, or it doesn't; and the other line does something similar, or it doesn't. Those are patterns. But what the hell is a "pattern of thought"? Maybe it's like being in a rut?

After a semicolon, DeLong finishes his thought:

every intellectual discipline calls for new ways of thinking about the world.

Well, I'd hesitate to disagree with that. But I still don't know what he is talking about, apart from vague generalities.


After too much of this grand emptiness, DeLong gets around to describing economics:

While economics is not a natural science, it is a science—a social science. Its subject is not electrons or elements but human beings: people and how they behave...

I disagree. Economics is not about human beings. Economics is about monetary balances. Most economic quantities are measured as monetary balances. DeLong continues:

While economics is not a humanity, it is humanistic. Its subject matter is made up not of quarks or molecules or animals but of people. And to understand people you have to get inside their heads: understand their hopes, fears, desires, reasoning, plans, expectations, and actions. Thus one of the principal intellectual moves in economics is one that is totally absent from the natural sciences: it is for you to imagine yourself in the place of the people you are studying. Thus economics often turns into an exercise in introspective psychology.

I get very uncomfortable when someone starts talking about getting inside my head. I worry that they might want to understand my behavior so that they can change me, to get me to do something else instead: drink Mountain Dew instead of coffee. Or smoke Marlboro instead of Winston. Or get people to stop smoking. Or get people to think Donald Trump has a personality disorder, or doesn't have. Or, however you want to manipulate society, instead of just letting people be.

Whatever economics is, what it should be is the study of what's wrong with the economy, of when it went wrong, and of how we can fix it. It's not about people. It's about piles of money: monetary balances and, in particular, monetary imbalances.


Just one more thing.

DeLong talks about "The principal things to remember that flow because economics is a social and not a natural science". First on his list:

Because economics is a social science, debates within economics last a lot longer and are much less likely to end in a clear consensus than are debates in the natural sciences. The major reason is that different people have different views of what makes a free, a good, a just, or a well-ordered society. They look for an economy that harmonizes with their vision of what a society should be.

In other words, you've got a bunch of self-interested assholes with "different views" and they base their science on their views, when really they should base their views on their science.

There's no such thing as a free shipping

I hadn't done it in 30 years. Maybe I was over-confident. I "carefully" started the brass fitting into the plastic connection on my Miracle Grow garden sprayer, grabbed a wrench, and tightened it up. Then I looked at what I had in my hands.

The fitting turns a corner going into the sprayer. It was cross-threaded to death. I spent an hour trying to make it right. Then I went up to my local hardware store to buy a new one. They didn't have the Miracle Grow sprayer.

I settled on a Green Thumb sprayer. It was like 15 bucks.

That was yesterday, day before. I used it this morning for the first time. (No problems with the brass quick-connect this time.) I like the sprayer. I think I like it better than the Miracle Grow sprayer. Still too soon to say.

After I cleaned it and put it away I sat down to re-read the cleaning directions. But the directions I sat down with were in Spanish. Instead of getting up, I looked the thing up on the Internet. Found this:

Yup. That's the one. And I found this:

Yup. That's what I paid.

Then I wondered if it was cheaper at Amazon Prime. Found this:

Free shipping. But the sprayer costs $10 more at Amazon. And I can get it in only 2 days instead of 20 minutes.

My wife loves Amazon Prime. So do I. But not always.

Sleight of Amazon

Why can't I find something for $20 or $25 that I can use to sharpen my mower blades? Turns out, I can:

It looks like this:

Ordered it right away. While I was waiting for the two shipping days to come and go, I thought: Gee, that was quick. I didn't shop around at all.

Hey. The price was what I was looking for. And in my mind I can justify spending that much money for a tool I may or may not ever use.

But I did have two days. So I did my shopping around after the fact, and found the sharpener at Smith's. Different part number. Same part. Half the price.

Shipping is free at Amazon, but the sharpener costs twice as much.

Averages, above-average averages, and below-average averages

Yesterday I said

When economists talk about "the Great Moderation" they refer to a time when growth was more consistent. Not necessarily high or low. Just not a lot of variability. However, if the reduction in variability occurs primarily because the "high points" of growth are lower than in the past, then the low volatility of the Great Moderation will primarily be the result of consistently low growth.

I was thinking something like this, from VOX:

the nature of the volatility reduction associated with the Great Moderation is linked to the features of expansion phases, in particular, to the absence of high growth recoveries.

But I made a graph, and now I don't know. I broke Real GDP per Capita into three periods on the graph:

1. Before the Great Moderation (1948-1984)
2. The Great Moderation (1985-2007)
3. After the Great Moderation (2010-2017)

Quarterly data. I left out the crisis years 2008-09 as not relevant to the topic of volatility reduction.

For each period I figured the average rate of growth. This allowed me to split the data into two groups for each period: values above the average, and values below the average. Then I got averages for those two groups. I put all three average values on a graph, for all three periods. The period averages are shown in blue. The averages of "above average" values are shown in red. And the averages of "below average" values are shown in green:

Graph #1: Economic Performance Before, During, and After the Great Moderation

The blue line shows the average growth of Real GDP per Capita. A little better before the Great Moderation than during it, and a lot worse after.

More noticeable, however, are the changes in the red (above average) and green (below average) period averages. The "good" performance during the Great Moderation definitely indicates "the absence of high growth recoveries". But the "bad" performance definitely indicates an absence of severe recessions as well.

The "bleedin obvious" I guess.


Nice conclusion, Art. And all you had to do was leave out the severe 2008-09 recession.


// The Excel file

How does growth affect volatility?

How volatility is calculated

Low volatility, interrupted by periods of high volatility

Under the heading Possible end in Wikipedia's Great Moderation article, we read that some economists have said the Great Recession brought an end to the Great Moderation. Some, but not all. According to the article,

Todd Clark has presented an empirical analysis which claims that volatility, in general, has returned to the same level as before the Great Recession. He concluded that while severe, the 2007 recession will in future be viewed as a temporary period with a high level of volatility in a longer period where low volatility is the norm, and not as a definitive end to the Great Moderation.

I thought that was interesting. I looked up the link the article provides to a paper by Mr. Clark. In his opening, Todd Clark writes:

This article conducts a detailed statistical analysis of the putative rise in volatility and its sources to assess whether the Great Moderation is over. The article concludes that, over time, macroeconomic volatility will likely undergo occasional shifts between high and low levels, with low volatility the norm.

Writing in 2009, Clark said the Great Moderation will probably continue, interrupted by periods of high volatility.

Very interesting. Clark's view of the future is compatible with mine:

A Greater Moderation

While making my recent graphs of RGDP per Capita trends, I noticed that the trend line after 2007-2009 completely hides the data from the 2009-2016 period. First I was worried about creating confusion because the data points were not visible. Then I started thinking about "volatility".

I avoided the confusion (I hope!) by bringing the data line to the foreground and making it dotted. But I was left thinking about the volatility. So now I'm making the dotted line continuous again and putting it back behind the red lines where it is partly hidden by them.

I also made the black line thicker this time so you can see it behind the red:

Graph #1

You can see white space between the black and red in the early years. Not so much white between them since the 1970s. None since the mid-1980s. And then after the 2007-2009 gap in the red lines, the black would completely disappear behind the red if the black line wasn't thick. After 2007-2009, the volatility is gone!

//

Using quarterly data for RGDP per Capita, selecting subsets for effect, and looking at the standard deviation of the subsetted data, yes: Volatility has decreased more, since the crisis:

Graph #2

Not sure why people think moderation of economic growth is a good thing.

You are here

Graph #1

(again, shorter)

It seems there are two ways to think about how things will look if the decline continues. This is the wrong way:

Graph #1: Showing the Most Recent Trend Continuing

If we stay on track with the 2009-2016 trend, by the year 2100 RGDP per Capita will reach the level it would have reached by 2050 if we had stayed on track with the 1949-1973 trend.

But Graph #1 does not show the continuation of decline. It shows only the continuation of the low-growth trend that resulted from the decline. The decline is the change in the rate of growth, from 2.4% to 2.1% to 1.34% and, unless things change, to a growth rate lower than 1.34% in the foreseeable future. And then again. That is the decline.

This is the right way to look at the decline:

Graph #2: A Continuing Decline in the Rate of Growth

The Future of Real GDP per Capita

Scott Sumner says "the neoliberal reforms after 1980 helped growth". He writes:

I am not denying that growth in US living standards slowed after 1973, rather I am arguing that it would have slowed more had we not reformed our economy.

One may wonder how much more the economy might have slowed if not for those reforms. Perhaps here we have an answer: 0.76% more.

Graph #1: Natural Log of Real GDP per Capita (black) with Trend lines
2.4% Annual Trend Growth Rate for 1949-1973
2.1% Annual Trend Growth Rate for 1974-2007
1.34% Annual Trend Growth Rate for 2009-2016

Trend growth slowed 0.3% annual after 1973, from 2.4% to 2.1%. When the effects of the neoliberal reforms (or whatever) failed after 2007, trend growth slowed an additional 0.76%, falling to a 1.34% annual rate. The combined decline in the trend growth rate is 1.06%, more than a full percentage point below the 1949-1973 rate.

Based on these numbers, Sumner's story says growth would have slowed 1.06% without the neoliberal reforms, but instead slowed only 0.3% because those reforms were put in place.


In Sumner's next post after the one I quoted above, he considers the question Why did growth slow after 1973? His answer echoes that of Robert Gordon, who says "the life-altering scale of innovations between 1870 and 1970 cannot be repeated." An empty explanation.

Scott Sumner adds to Robert Gordon's story, diluting the meaning with extra words. "Here’s what I think happened," Sumner says:

There were a few underlying technological developments in the late 19th century that dramatically affected living standards in the 1920-70 period, when they were widely adopted in advanced economies. I would certainly include electric power and the internal combustion engine. I also think indoor plumbing is underrated. Imagine having to rely on outhouses in cold climates... Many key products were first invented in the late 1800s or early 1900s (electric lights, home appliances, cars, airplanes, etc) and were widely adopted by about 1973. No matter how rich people get, they really don’t need 10 washing machines. One will usually do the job. So as consumer demand became saturated for many of these products, we had to push the technological frontier in different directions. And that has proved surprisingly difficult to do.

Well, they had indoor plumbing in ancient Rome. But Scott Sumner's "surprisingly difficult to do" tells us no more than Robert Gordon's "cannot be repeated". The question "Why?" remains. And then, "Why 1973?"

More to the point, Sumner's explanation does not account for the second slowdown, the 2007-2009 slowdown. He has a different story for that one. Not enough money, he says. Print more money, he says. Increasing the Fed's balance sheet from 800 billion to 4.5 trillion was not enough, he says.

Two slowdowns, two explanations. But we don't need two explanations. "One will usually do the job."

The greatest weakness in Sumner's story is a weakness he shares with almost all modern-day economists: His argument is a hodgepodge of unrelated tales. In this case, a lack of invention after 1973, plus saturated demand, plus a difficult technological frontier. But then after 2007, tight money was the problem: 4.5 trillion, and still too tight.

The question "Why?" remains.

There is no "big picture" any more, no one overall theory that explains what's wrong with the economy. There has been no big picture since Keynes was rejected by the moderns. Only a hodgepodge of unrelated tales.

What's wrong with our economy is the excessive accumulation of private debt. That was the problem in 2007-09, and in 1973-74, and before, and since. One problem. One problem that never gets better and always gets worse. One problem, ignored by economists who know which side their bread is buttered on.


I can never resist the opportunity to criticize Scott Sumner's economics. But that's not what this post is about. This is not about the decline of economics. It's not even about the reasons for the decline of economic growth. This post is only about how big the decline of growth has been, and how things will look if the decline continues.

It seems there are two ways to think about how things will look if the decline continues. This is the wrong way:

Graph #2: Showing the Most Recent Trend Continuing

If we stay on track with the 2009-2016 trend, by the year 2100 RGDP per Capita will reach the level it would have reached by 2050 if we had stayed on track with the 1949-1973 trend.

But this graph does not show the continuation of decline. It shows only the continuation of the low-growth trend that resulted from the decline. The decline is the change in the rate of growth, from 2.4% to 2.1% to 1.34% and, unless things change, to a growth rate lower than 1.34% in the foreseeable future. That is the decline.

This is the right way to look at the decline:

Graph #3: A Repeating Decline in the Rate of Growth

Two factors affect the up-and-down on this graph: the changing slope of the red lines, and the drop after each red line stops. Two factors affect the left-and-right: the length of the red lines, and the duration of the gap between the red lines. Obviously I made these things up.

The black dots indicate the original source data. After the black dots die out in 2016, it's all just a guess. The last five red lines, including the one that started in 2009, are each shown as 20-year trends. You could change them if you want.

The gaps between the red lines, each is one year longer than the gap before. The gap you can't see (1973-74) is one year. And the 2007-2009 gap is two years. These are actuals. I stuck with the pattern and made the next gap three years, and the next gap four years, and like that. You can change them if you want.

If you change these things, you will stretch the graph out, left-to-right, or shorten it, left-to-right. But you won't change the up-and-down pattern. To change the up-and-down pattern you have to change the growth rates (the slopes of the red lines) or the drops after the red lines stop, or both. You can change those too, if you want, but you should be realistic.

The red line slopes 0.3% less after 1974 than before. Hard to see. After 2009 it slopes 0.76% less than before. Those are actuals. I was going to keep making the number bigger for the future slopes, but I decided against it. Instead, I went with the 0.76% additional decline each time. No one knows what those actuals will turn out to be, but assuming the most recent actual change each time provides a realistic estimate.

For the vertical drop at the end of each red line, I did something similar: Each drop is the same size as the 2007-2009 drop. That's as realistic as I can be here, estimating the future.

// The Excel file

Real GDP per Capita growth: Three Trends

The previous post shows Real GDP with lines that represent growth trends for three different time periods. The topic of the post was the relation between economic growth and population growth.

But come to think of it, RGDP varies when population varies, and a change in population growth would change the trend of RGDP. So I want to take another look at the changes in Real GDP growth trends, this time excluding the changes in population. To do it, I'll look at Real GDP per Capita.

I'll make some other changes, too. Rather than using "billions of 2009 dollars" and showing the numbers on a "log scale", I'll get "log values" from FRED and plot them normally. That eliminates the Log Scale Axis Labels problem I had last time. And because the values are logged, the trends will be straight lines rather than exponential curves. So I can use Excel's "linear" trendline option and keep things nice and simple.

I'll use annual values instead of quarterly, to reduce the work involved. The purpose of the graph is to get a general idea about how the trends have changed, and the annual values are good enough for that. Annual frequency with "end of period" aggregation because, for GDP, it just seems right.

Here's my data source:

Graph #1: Natural Log of Real GDP per Capita, 1947-2016

In order to define trend regions, I divided the dataset into three sections. The break points between sections are so arbitrary they made me hesitate -- hesitate enough to miss a day's posting. But then, missing a day's posting got me working again, "arbitrary" be damned.

I'm ending the first section at 1973 and starting the second at 1974. I'm ending the second section at 2007 and starting the third at 2009. In each case the section ends at a relative high value and the next section begins at a relative low. To be consistent, I started the first section at the relative low in 1949.

Because of these decisions, not all the data points are used to determine the trends. The data points not used are shown in black on the following graph; the points that are used create three separate red lines which represent the source data for the three trend calculations:

Graph #2: Subsetting the Data for Determination of Trends

Once the data was split up into subsets, adding trend lines was easy.

For the next graph, the data not used is not shown. The data that is used is shown in black. And the trend lines are red. The year values are not shown, as adding those values messes up the trendline equations:

Graph #3: Determining the Trends

This one's a little hard to read because the trend lines are too long. I'll fix that, below.

The equation for the first period (1949-1973) shows a slope of 0.024, indicating 2.4% annual growth. For the second period (1974-2007) the equation indicates 2.1% annual growth. And for the third period (2009-2016) the equation indicates a 1.34% annual growth rate.

For both the second and third periods the R-Squared value is 0.9889, pretty close to 1.0. For the first period, R-Squared is somewhat lower, at 0.9571. As I understand it, this means the first-period trend line is somewhat less accurate than the other two. The trend line doesn't match the data as well.

I want to suggest a reason for the mismatch: The first period was not part of the so-called "Great Moderation". The Great Moderation was a time of moderate variability in the data. (The "standard deviation" was less.) With less variability in the source data of the later periods, the trend line should be a better match. And we find that it is. So I think the lower R-Squared of the first period is a result of the fact that the data values varied more in that period, and not that there is something wrong with the trend.


I took the three trendline equations from Graph #3 and changed them to display more decimal places, for greater accuracy when I use those equations to create my own lines. Making my own lines to show the trends gives me greater control over where the lines start and end. Also, I can show the years on the x-axis without messing up the trends.

Graph #4: Three Trends of RGDP per Capita

This graph looks lot like the "three trends" graph for Real GDP in the previous post. But this graph shows that even when the changes in population are set aside, long-term decline of economic growth is evident.

// The Excel file

Does GDP growth influence population growth?

For 22 years beginning in 1952, the economy grew at something like a 4% annual rate. For 24 years beginning in 1984, the economy grew at something like a 3% annual rate. And for all the years since 2009, the economy has grown at something like a 2% annual rate:

Graph #1

Assume it is true that population growth influences economic growth. Suppose it is also true that economic growth influences population growth, and look at the graph.

The graph shows the beginning of a very long long-term decline.

// The Excel file

Why is he talking about population?

Why population? Because, to my mind, apart from fiddling with immigration policy and such, population growth responds primarily to economic conditions. Population growth slowed in the 1930s? Because the economy was slow. Population growth picked up in the 1950s? Because the economy picked up.

I don't see it on my graphs, but I want to suggest that the U.S. population growth (not counting immigration) has been in decline since 1980 because the U.S. economy has been in decline since that date. Or maybe the date should be 1974. Or maybe 1966.

Can't see it on the graphs because the data from before 1960 is not comparable.

Such a decline in population growth would be evidence of economic decline. Come to think of it, so is the argument that we need to increase immigration in order to boost economic growth. Or maybe that last one is just evidence of the decline of economic argument.

But if the "natural" rate of population growth (which excludes immigration) has declined in response to a declining economy, then the correct response would be to reverse the economic decline. To reverse the decline of population growth by increasing immigration is the wrong response. It camouflages the economic problem and confuses the economic analysis. It does not solve the economic problem.

That's why I'm talking about population.

The "Natural Rate" of Population Growth?

The population growth rate graph, again:

Graph #1: A Natural Rate of Population Growth?

I put a line on there in red, suggesting what looks to me to be a "natural" rate of population growth since the 1960s, or anyway a rate from which the actual rate is sometimes disturbed and to which it apparently desires to return.

Don't be outraged; it's just an impression.

Anyway, when I look at the blue line after 1960 I see what looks like one particularly large and long-lasting disturbance:

Graph #2: A Large Disturbance beginning around 1990

For some reason, I had in mind that this large disturbance was a result of immigration as opposed to the other thing. I don't know why I thought immigration, but I did. For the longest time.

Maybe I read it somewhere, and then forgot. Anyway, I finally tracked it down and yes, it looks like immigration caused that disturbance. The next graph is part of an image presented by weforum:

Graph #3: from World Economic Forum

There looks to be a pretty consistent uptrend since about 1950 on this graph. But just around 1990 there is one particularly large spike. It shows a tripling, from about 600 thousand to about 1800 thousand immigrants, and it attributes the spike to "IRCA legislation".

I looked it up. IRCA is the Immigration Reform and Control Act of 1986. So yeah, immigration in this case. But I still see it as a disturbance or deviation from the "natural" tendencies which arise as an outgrowth of economic conditions.

Population growth responds to economic conditions

It is often argued that the economy's performance depends upon population growth. No doubt, but economic forces typically work in both directions and, if that is true, then it is also true that population growth depends upon the economy's performance.

Googling us population historical data excel turns up World Population Data (3) as the first result. Their population.xls file contains a worksheet named US Population Data - Filled in which will serve my purpose. The initial notes say

Before 1960, 10 year census data was filled in assuming constant annual growth during that decade. From 1960, Current Population Survey estimates are used.

So the data for the time of the Great Depression time is not perfect, but I probably won't find anything better. They provide this graph:

Graph #1: From the Population.XLS file

You can easily see a slowdown of population growth from 1930 to 1940. That's gotta be a result of the Great Depression. Malthusian. Here is a plot of the growth rate:

Graph #2: Population Growth Rates, based on the data from Graph #1

You can see the low of the 1930s, a low which supports the view that population growth responds to economic conditions. And you can see the high of the 1950s, likely in part a result of the improved economic conditions of that time.


Diane J. Macunovich writes:

Many factors can influence a couple’s decision to have a child, but a large body of work suggests that economic factors—especially women’s wages and young adults’ relative income—have played a major role in U.S. fertility trends. “Relative income” refers to a person’s earning potential relative to his or her desired standard of living.

If your "desired standard of living" is high, you might be inclined to put off having children and instead devote more time to your career. That would tend to push the economic trend and the population trend in opposite directions. No doubt it's a factor.

I think more in terms of our expected standard of living -- low during the Great Depression, high after a victorious end of WWII. These would tend to push the economic trend and the population trend in the same direction.

Both tendencies exist, no doubt. But it seems to me that major events (like the Great Depression and the end of World War Two) would give a general push in one direction or another. People do always have their own goals and their own desires, but for a large number of people these would tend to average out. So the general trend of population growth in an economy like ours must be subject to the push of major economic events.