The Labor Market

0:00Today, I think, a schedule of examinations, in which 250, SS-251, huh? Wait a minute, I'm just getting to that. And the schedule of the final examination, in which we are located, ignore it. I mean, you might, if you want to show up for the hell of it, you can do it. I'm not going to be there. The final will be next Monday at the same time, same spot, as Thursday, in other words, let me see, wait a minute, in other words, we have a class, yeah, we have a class now, right, we also have a class on Thursday, in room 503, on Monday, next Monday will be Thursday, in other words, Monday has been designated in the wisdom of Brooklyn Poly as Thursday, so we show up, we act as if it's Thursday on Monday, Monday, and it's going to be the final. In other words, it's going to be a two-hour class in room 503, keeping our fingers crossed that everything works out.

1:06Yes, in other words, from 2 to 4, in room 503, Monday, what's the date? Anyway, next Monday. Monday, May 3rd, yeah. 2 to 4 p.m., room 503. We're still in the labor market, we finished the union question, and now dealing with population. In other words, one of the things of course that determines the labor supply, the stock of labor, is how many people there are. So, quiet please. There's been a lot of nonsense spoken about population, I think I mentioned last time, I'll just review In the old, old days, the history of Western civilization, let's say, was considered the more people the better.

2:01In other words, higher populations were considered a test of whether the society is doing well. So the idea was to have increased population. Also of course, the ruling classes at the time, the feudal lords and the privileged merchants and the kings, etc. One of the more people, they had more cannon fodder, more people to march against Burgundy or whoever the enemy is around the hill. So the higher population means a bigger army. Then as I think I mentioned in the early 19th century, late 18th, actually 1798 to 1820 period, Reverend Thomas Robert Malthus, famous English Anglican churchman and economist, wrote his famous essay on population, giving rise to the theory called Malthusianism, an essay on population.

2:53And here we wrote this in a period when England had embarked on its industrial revolution, an industry was increasing tremendously, and standard living was going up a lot, and population was going up a lot. In other words, to put this, to oversimplify a lot, the population of Europe remain about the same from, say, 1000 AD to about 1750, with certain fluctuations, but basically remain about constant. See, we're used to a situation where the population grows every year. It didn't do that in the old days. So, then after the Industrial Revolution comes in about 1750, population of England started doubling after every 30 years or whatever. In other words, it started going up a lot, doubling in 50 years, whatever it was. And so Mouses is writing around here, observing a situation where the standard living was going up and the population was going up and he's very gloomy, everything is going to hell because population is pressing on the food supply.

3:46And he's writing this in a period, one of the few periods in population wasn't pressing on the food supply and he's gloom and doom itself, gloom and doom personified. So what he said was that the population tends to grow geometrically. What he meant by that is that every two people have four kids and this person has four kids or whatever, so it sort of grows exponentially or whatever over the years. You have a tremendous increase in population, something like fruit flies, you know, you give fruit flies their head and they quadruple every couple hours or whatever, it's not done at that rate. is that people, like animals or by food supplies or whatever, keep multiplying all the time. On the other hand, the food supply increases arithmetically. In other words, it only goes up a certain amount each year.

4:37So, as a result of that, the population tends to press, the famous phrase in Malfus, tends to press on the food supply, on the means of subsistence in food supply. So, population is always pressing on the means of subsistence, and this causes the wage rate always to be around subsistence level, just about enough to keep people functioning and reproducing, that's about it. So in other words, the standard of living can never go up for any length of time because people read faster and it presses the population right down again. So you have in other words that this is the wage rates, in real terms, not real wage rates, meaning corrected for inflation and price level changes.

5:22And if the man for labor goes up a little bit, let's say, and wage rates go up, very soon population will breed up until you're down again to the subsistence level. Ricardo then adopts this, Smith really adopts it more or less, Ricardo adopts it, and this gets into classical economics. And Karl Marx adopts it, let's see, what you have is basically the so-called iron law of People are always on the brink of starvation, in other words, because if they get a little bit more affluent, they breed more kids right away, and you're back down to the semi-starvation level. Population is then kept in check by various, what my mouth is called, checks, in other words, people are breeding like rabbits, and the population is kept down by famine, okay?

6:14by disease, which is more or less quite similar, and by war, where people are quarreling over the last piece of bread left or whatever, so they, so war, famine, disease, and keep down, keep down the population, keep the population level from going over the edge, actually goes over the edge and comes back again, so to speak. So this is a gloomy view of life in general, of course, and Malthus' only remedy for all this is what was known euphemistically as late marriages, known as abstinence, and late marriages, so that then you keep down the population level. As one might expect, there wasn't any mass adoption of this doctrine, in practice at least.

7:01So people might be Malthusian in theory, but in practice they didn't really follow this. The neo-Malthusians, who have more or less the same view as Malthus, except don't have a religious outlook, are of course in favor of birth control as a method rather than abstinence, rather keeping down the population. But the focus is more or less the same without the arithmetic geometric stuff, basically the idea being that the population keeps breeding, multiplying and separating, you have to have voluntary restraint of some sort, or even compulsory restraint to keep down a population. Oddly enough, by around the 1920s and 1930s, population growth was going down, as a matter of fact, to the extent that population in France, I think, was actually going down over the years.

7:51At this point, the population of Europe is leveling off and even going down after a couple of hundred years or a hundred fifty, yeah. Yeah, that certainly, that helped. World War I helped to reduce, yes, it helped to decrease the population a lot, no question about it. The, actually, in the Christmas Carol, Charles Dickens Scrooge, you're going to watch that on television or Reddit, Scrooge is the epitome of the Malthusian classical economists in work and anytime they ask Scrooge to give a dollar to the poor or something no, no, he says we have to reduce the surplus population and if you help anybody out it means you're delaying this beneficent process reducing surplus populations so the idea of the surplus population comes from Malthusian doctrine so this has been, yeah, you're right, World War I certainly And then by the 1930s, Western European governments began to give subsidies to get people to breed more kids because they were worried about cannon fodder again.

9:00How will France or Germany or whatever have enough people going in the army to fight? So they started having subsidies, bounties, per kid. After World War II, there was a big increase in number of kids, it was really, in the United States it was sociological, veterans came back and they started, there was a shift away from women working, there was a big increase in women working in the 20s and 30s. After World War II, there was a shift back to the home and family, etc., so-called baby boom came into operation, and a lot more kids were born in the 50s and 60s, big families became popular again, etc. By the 1970s, the late 60s, early 70s, the ZPG movement comes in, a bunch of neo-Malthusian hysterics who call it the zero population growth.

9:51And usually their forecasts are very similar to the guys who say that we're running out of oil in 10 years. It's very similar. They took the population growth, say, the rate of population growth in the 1960s, extrapolated for a hundred years, as if it's going to continue at the same rate, it came to conclusion in fifty years that we won't have any room to walk, you know, two quadrillion people and we couldn't move, that was basically the argument. And using computers, etc., doesn't deduce the naïve pay of this approach. And they started calling for zero population growth, for advanced birth control techniques, etc., etc. Economists, some economists are in the forefront of this, it's typical of the only economists came up, the distinguished professor, economist, Professor Boulding of the University of Colorado came up, he was a big ZPG person, he wanted to introduce a marketing approach too, he didn't see the true ZPG, or the militant ZPG, or the favorite compulsory birth control, in other

10:48words, allowing every woman can only have two kids, if you have a third kid you shoot the kid, or whatever the approach is, okay, these are the extremists, this has been done and I believe in some extent in China, at least under Mao, the compulsory, compulsory sterilization and compulsory infanticide, we can call it late abortion, I guess you can call it. At any rate, the, Bolden being a sort of free market economist comes up with a market approach to talk to two people for every woman, two kids for every woman. His approach is this, we shouldn't say every woman should have only two kids, that's sort of tyrannical, sort of despotic, sort of totalitarian.

11:33What we should do is this, every woman is conferred the right, at whatever age, the age of 10 or something, to give each female the right to have two kids. This right, however, is negotiable on the market, so that if you want to have three kids, you have to buy the right from some woman that doesn't want two kids, wants to have one or zero kids. They have a free market, quote-unquote free market, and baby rights, and this way you pay in the end a market price, the baby right is then determined by supply and demand, like taxi medallions are, we'll get into that today on Thursday, is determined then by supply and demand. Only an economist could come up with this nonsense, and it's true that it would be better from a libertarian perspective to have a free market and baby rights to have two kids for for every female. It's still totalitarian, however, it's only the icing on the cake.

12:23At any rate, the ZPG hysteria reaches maximum around, I would say, the early 1970s, just at the point when population growth began to decline. In other words, this is typical of what happens in social trends. Hysteria about a certain problem usually reaches maximum just after the problem is being eliminated. So when the 1970s census came out, it takes In the course of about two or three years of the process of census, they discovered by God and low and behold, population growth declined severely during the 1960s and reached a point where ZPG would arrive in about 20, 30 years or whatever. So as a result of this discovery, the ZPG has more or less died out in the last 10 years. It might always come back again, these things happen in fashions.

13:11So something like hemlines or whatever, every 10 years there's a different schtick here But at any rate, they're now getting to the point, now that we have more or less, we're getting to the point of ZPG, we're getting to the point of declining population growth. These same people were complaining about the no standing room, you have to have compulsory birth control or whatever, and I was saying, Jesus, there's a lot of problems with slower population growth. It means that the population gets older every year, and indeed it does. In other words, if you cut down the rate of population growth, this is the so-called population The age pyramid, if this is the number of people from 0 to 10 and 10 to 20 and 60 to 80 or something, and the width is the number of people, this is the age bracket, if you cut down, if you have a high population growth, it means you have a big base of the pyramid on the small top,

14:05if you have, if you cut down population growth, of course the average age is going to get older, obviously, so all of a sudden these same jerks are now saying, jeez, it means the average age is getting older, more old people to support, we have to shoot the old people now before we shot the kids, now we have to shoot the old people that's the latest problem on the horizon at any rate, also the mayors of different cities kept saying, no, there must be more people in other words, they had a census, every ten years there's a census the census says, I don't know, 3.2 million people in a certain city the mayor says, no, no, it's got to be 3.8 million because they get federal aid per person So every mayor of every city is constantly scouring, beating the bushes, calling for a recap, demanding more people. And these same people 10 years ago were calling for compulsory birth control, more or less, or something like it.

14:52At any rate, the major point here is that the whole population problem is overblown. It's not really much of a problem. And the C1, that's one of the best ways to look at it, is a concept called the optimum population point. The word optimum is a bad one, it implies that it's somehow the best population, but it's not supposed to mean that, but anyway, it's a useful way of looking at it. If you have a diagram on the y-axis as standard of living, or output per person, or productivity, or output of goods per person.

15:46Obviously you can't really measure it, but in some vague way you can understand it can be more or less. If the output per person is on the y-axis, the number of people is on the x-axis. And again, if you've got no people, if the whole world was wiped out by, let's say I had a neutron bomb, a giant neutron bomb wiped out, a neutron bomb, of course, is one that is beloved by many amongst the establishment of think tank types, it kills only people, it doesn't destroy any property, it only kills people, it makes it good. I could never figure out why, exactly, many of us, at any rate, if you have no people, the whole world will be wiped out by one giant plague, there will still be the factories and the land and the natural resources, there won't be no people, there won't be no production. Again, you start at the point of origin. Zero people, zero production.

16:31At any given time, in other words, given the capital investment and given the technological knowledge, at any given moment, you have something like this. If you add one more person, you get some production, etc. So you get to the point, an output per person, where it reaches a peak, and you get more and more people, and finally turns downward. This is, in a sense, average productivity. Remember, the average physical productivity. overall average physical productivity can never get negative, you can't have minus production. You keep adding people with a fixed amount of capital goods and resources, land and technological knowledge will start turning down. So this is essentially the average productivity curves. And we can say that for any given level of capital and technological knowledge that Those number of people which yield the maximum average productivity is the so-called optimum population point.

17:28Let's say for a certain country or a certain time it's two million. This is two million, this is the code optimum population. So that below that you have a lower productivity per person, and above that you have a lower productivity per person. So what we're saying is that at some point there's some kind of maximum. Now nobody knows what the maximum is, there's no way at any given time or any given country to figure it out. test, but you can sort of vaguely say, alright, this is more or less the situation, but somewhere around there, probably, and if you look at it this way, if, for example, tomorrow, half the people in the country died of a plague, and so there would only be half the people left, productivity of the person would go way down, because there wouldn't be enough people to man the various machines and the rest of it, and so the productivity of the person would go down.

18:16On the other hand, if you had a magic cloning system, like in the science fiction pictures and so on and so forth, everybody is automatically, instantaneously cloned, they have twice as many people and obviously they had nothing to do, there would be no way that they could fit into the current system and the productivity per person would go down too. So in other words, somewhere, we're somewhere in here, nobody knows exactly where we are at any given time, somewhere around the, near the peak or something. So that you then say, this is not a moral optimum, doesn't say this is the best population point, but it does say this, if your people are then confronted with some kind of a choice, In other words, they have more kids at a cost of a slightly lower living standard for the family. So in other words, and they can adopt, they can choose having more kids, they can choose having eight kids knowing that your income per kid will be going down.

19:01You're choosing to be a little bit further to the right, in other words, you're trading off between living standards for the family and having more kids. After all, having kids is presumably a positive benefit for the family, otherwise they presumably wouldn't have them. So in other words, they're trading off a psychic benefit of having a kid as against the possible psychic cost of the drop in the average living standard. And each family will make its own decision on that basis. So that's, I think, a much better way of looking at it. In other words, population usually fits in what economically desirable at the time. At any given point, they can trade off, every person or individual or family can trade off Living Standard and a number of people. Another thing, also very important to look at, is over time productivity keeps going up. As I said, real wage rates go up and employment goes up over time, capital keeps increasing.

19:56It gets better. So what you have over time is this sort of stuff. It's a family of curves which over time keeps increasing so that the productivity keeps going up and the optimum population point keeps increasing, so it goes up from here to here to there, etc., etc. So over the decades and the centuries the optimum population point keeps going up. Instead of more people being a threat, more people is a good thing even economically because you're able to provide more division of labor. If there's only one person left in the country, you have a neutron at play, one person is left, you wouldn't be able to produce much of anything, even with all this massive equipment. This optimum population point keeps going up over time When Columbus discovered America, there were about nobody knows exactly how many Indians there were here, there was somewhere, say a few million, say five million something like that The Indians were mostly living on a subsistence level, they indeed were living on a subsistence level

20:55because they're more or less adapted, the population more or less adapted for the available resources So you have five million Indians living at the subsistence level. We now have, and this is all of North America by the way, South, Central and Canada and the United States, about five million. Now we have in this whole area about 200 million, something like that. Almost each of which is living at an infinitely higher living standard than the five million over here when we got, when the Europeans got here. So in other words, what you have then is over time an enormous increase in population, each one at a much higher living standard. standards. In other words, the optimum population point keeps shifting upward and to the right as you have more and more capital equipment and more better technology and all the rest of it. So population, in other words, is not really an active force. It usually adapts over time to the available living standards, available resources. It's very much like energy

21:49things adapt. Oil does not become short because you find more oil, you get other energy sources. It's something similar in population, but usually what's happened in population growth in the underdeveloped countries, developing countries, whatever you want to call them, third world countries, there's been a fashion on this too, in the time I've been teaching economics, third world countries were originally called backward countries. This was considered discriminatory or nasty. The word backward was then outlawed, and then they were called undeveloped countries. This also was considered nasty, and then it was called developing countries, which is very peculiar because we're all developing, and you don't have to be, it's very odd.

22:36So now it's called third world, I guess it's just as good as anything else. Anyway, third world countries, what happened there was, usually again the population level was about the same. In other words, birth rates and death rates, this is what happened in England before 1750. In a sense they weren't pressing on means of assistance, well except they weren't, everybody's not at starvation level, it was a much higher level. At any rate, in a sense birth rates and death rates were about the same and population more or less remained about the same. And then what happened was, in England in the 18th century, what happened was a big drop in the death rate due to better food. In other words, they're eating better, nutrition was better, and therefore disease was kept under control. Disease is much less.

23:22Disease is largely caused, by the way, by bad, bad food. In other words, inadequate nutrition, one way or the other. And so, as nutrition got better, disease rates and death rates in Britain went way down. The same thing happened in third world countries in the 1940s and 50s. As Western medicine spread to the third world countries, death rates fell very sharply. So what you have is, here's the birth rate, population of course is determined by birth rate and death rate. Make it very simple, birth rate minus the death rate. In other words, the birth rate per thousand is five, and the death rate per thousand is four. You can have an increase in population of one per thousand. So the death rate suddenly fell, okay, and that was very sharply. More so in the third world in 1940, you have a very dramatic drop in the death rates.

24:10and birth rate continues on for a while. So what you have during this period is a tremendous increase in population and there are studies in Barbados in West India, Barbados in Jamaica, etc. You can see that happening as the death rate falls in the 40s and 50s and the birth rate remains the same. Big population increase and most people think that all of a sudden people breed faster. There's a tremendous increase in births. That's not the way it works. The birth rate remains about the same just as the death rate falls and so the population goes up. And then what happens after 20, 30, 40 years, after a transition period, people get used to a higher, want a higher living standard, the birth rate usually falls proportionately, so you wind up somewhere like here, back to an equilibrium level, so to speak, with people then voluntarily cutting their births in order to enjoy a higher living standard for the family.

25:00And this is what happened in England in the 19th century and what's happening now in third world countries, it's already beginning to happen, this process. It takes a little while but the thing is you can't just extrapolate population growth rates for hundreds of years. There's adaptation taking place all the time and this is one of them. So, it's happening now in the United States, after hysteria was taking over, by the 1960s, birth rates started to fall. As I say now, they're beginning to bellyache of an older population, as a result. This is one of the, anyway, there's no way of getting around this. If you cut the population growth, birth rates, I mean, the average age of the population is going up. So, at any rate, this is the, therefore, usually the situation is there's no real long-range worry about population.

25:54Population usually adapts to the resources and the standard of living available. And I hope this has learned to quiet. And as I say, the population history has really damped down for a while, but it can always pop up again. When it comes to the policy of China, how do you eliminate these grounds?

26:38The problem is really, in other words, if you take the, let's take another thing. If you take, yeah, I think they were sucked into it by Western Malthusians, demographers. Oh sure, yeah, but I mean the thing is that part of the living standard is having, for people who want to have kids, part of their living standard is having kids. In other words, the standard of living is a psychic question, not just strictly a material one. In other words, you're trying to fulfill various goals and objectives. If one of your goals is to have several kids, that's part of your living standards. You can't have an outside person arbitrarily say, we want to increase your living standard by forcing you not to have kids. To them, that's a real cut in psychic income. I mean, after all, the objective is psychic income.

27:23In other words, to fulfill whatever your objectives happen to be or your goals happen to be. The question is, can an outside group set your goals for you Another thing, if you look at population density, another way of looking at it is this. There is no correlation between population density, which the objective method is the number of people per square mile, and standard of living. In other words, if you were right or the Malthusians were right, it should be a higher the density, it should be a lower the standard of living. It doesn't work that way at all. In some cases, it's almost the opposite.

28:08For example, in the Western world, the highest density population is probably Holland, certainly Western Europe. Holland has a high standard of living and a high density. Holland is probably the highest density, one of the highest standards living in Europe. West Germany is a high living, high density population. The United States has a much lower density population than West Europe, on the other hand, has a higher density population than a lot of other countries. Switzerland is somewhere in the middle of density. Switzerland is a high density population. It's got a very high standard of living.

28:58As a matter of fact, you can tell the difference if you ever visit both the Alps and the Iraqis. It's very instructive. If you look at population density, the Alps are magnificently high. I like high density, at least up to a certain point, personally. I mean, if you live in Manhattan, you have to like high density anyway. In Switzerland, going to the Alps, every Alp is tilled, cultivated, there's a cabin everywhere, the cows are all on the slopes, it's great. You go to the Rockies, there's no people, not money, no people. You go from, you drive across the country from, we get to Nebraska, from Nebraska until the border of California, about 2,000 miles of zip, there's nothing there, no people, no houses, no trees, no nuts.

29:45And I also want to suggest that for the ZPG people who are worried about high population growth in the United States, what you have to do is to parachute them in Arizona and Wyoming and let them fend for themselves for a while. It's annoying, there's nothing else there, zip! Even in California, except for selected sectors, it's a very low density population. And again you have, in Asia, probably the highest densities in Hong Kong, enormous density, We have an extremely high standard of living for Asia, we have, those of you who have been to Hong Kong, I mean it makes Manhattan look like Wyoming, let's face it. Any time of the day and night, you go out in four in the morning, there's thousands of people bumping into you. Up the mountain slopes, there's apartment houses up to the peak of every mountain, rows and rows of apartment houses, fantastic.

30:37And that's it. So it's Japan is very high density and very high population and a very high living standard and also some of the highest, some of the poorest areas in the world are low density. Africa, which is a very low standard living, is usually very low density. The problem in Africa is that there are resources and no capital investments, even though there are very few people, they're starving. In other words, you have what you have, and mostly in Africa, the population density is very low, and standard living is very low.

31:24In many parts of South America also, South America has low density and low standard living. Brazilian interior, low standard of living, and people are all starving and low density. So what you have over the world is a high income, a high increase of income, increase of capital investment will attract more people. People then move from where they're starving to the areas where there's more opportunity like the United States in the 19th century or now. So the population flows to where they can flow, permitted by migration barriers, flows to where there's more opportunity and higher living standards. So in Singapore, very high density, very high standard of living, families and other people involved because if they weren't working in the factories, they were starving, literally.

32:13So it's considered better to have an eight-year-old working in a cotton spinning, et cetera, than an eight-year-old to die out. It's considered better by the kid himself and by the family. It's only outside intellectuals, even though it's going on, sociologists, journalists, and so on and so forth, who got the thing all screwed up, they never went to the rural areas. And this is one of the problems, by the way, with third world economists, I mean, American economists who go to third world countries, at least until quite recently, would never go to the rural areas. They'd just sit there in the capital city and get the government air-conditioned clubs and get the government handouts, you know, the government officials never went to the rural areas either. They didn't want to schlep up there in the jungles. So the misconception, misperception of what was going on is enormous. And at any rate, so this is pretty clear that there's no correlation between population density and standard of living, and so the focus on the population being the key element

33:10I think misconceives the problem. In the West Indies historically, when new entrepreneurial-type groups come in like Chinese and Lebanese emigrate to the West Indies, a result with no capital, they just come in So they get in there, they start being entrepreneurs and saving and investing and so they wind up creating more jobs and more employment and better working conditions than without them. So you have an increased population and a higher standard of living as a result of the increased population. This often happens in the Chinese, mostly in the rest of Asia, perform the same entrepreneurial role. Anyway, but I think you'll now find the new trends in China, I think they're getting away from us, folks radio, okay, birth control.