Retiree ratio followup

More Yglesias fixation...

Today he takes on the idea (also put forward by me) that high birthrates are needed to support retirees. First, he writes:

This [argument] seems a bit strange to me, however, since the people urging us to panic about low birthrates are almost always conservatives who oppose the existence of [Social Security and other entitlement] programs.

Well, it's worth noting that government social insurance programs are not the only way that the young support the old. The main method of young-old wealth transfer continues to be the family. And when you have a few kids supporting tons of old people, it drains resources from your economy whether they support them via Social Security or by having grandma and grandpa live in the spare bedroom. The key fact here is that old people consume but do not work.

Next argument:

If it’s true—as I’m inclined to think it is—that slower population growth rates are likely to increase average living standards then people could still be made better off even with smaller transfer payments.

But this is far from clear. Economic growth typically requires investment, and when you have a lot of old people consuming and not working, there are fewer resources left over for investment. Thus, unless magical new technologies fall from the sky, a high retiree ratio will make it harder for living standards to go up.

Third argument:

I think part of what drives these anxieties is the intuition that if birth rates fall and fall eventually the human race will dwindle to nothing. But in practice, if you take a country with low birthrates that chooses not to compensate with immigrants—Japan, in other words—I think the situation will stabilize.

In the long run, one of three things happens on the average: 1) the human race explodes to fill the entire Universe, 2) the human race dwindles to nothing, or 3) the human race stabilizes at some long-run average. (1) and (2) seem pretty unlikely, so the question here is whether we think the human race should oscillate around the steady state - with birthrates rising and then falling and then rising again - or whether we think it would be best to converge smoothly to the steady state. I vote for smooth convergence, since that will lead to more social and economic stability. And if we're going to have smooth convergence, that means that countries with higher than replacement fertility will have to bring their fertility down, and countries with low fertility will have to bring theirs up, until everybody is right around 2.1.