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Monday, July 21, 2003

From the Dungeons of Brad's Comments Section

My recent comments about the asymmetries of demographic transitions continue to reverberate in Brads comments section. Firstly Elliott Oti takes me to task about Nigeria:

Edward Hughes wrote:
"Society A, with lots of young non-workers can borrow on the anticipated future earnings of the young non-workers, and invest some of this in education. Society B can only effectively dis-save, or send the educated young out to work in more productive societies to send money back to employ less well educated migrants to care for their ageing parents."

I disagree here. Societies with an excess of young workers (case in point: Nigeria where 50% of the population is under 15, and 75% is under 25) are effectively large colonies of children and youths. Children have accumulated no capital. They have no experience or skills. They can offer nothing except unskilled manual labour. In agrarian communities this is fine. In the so-called modern economy, this is a disaster.

To put it somewhat simplistically, Nigerians cannot borrow against earnings of future generations because (i) there are no sources of capital to a first approximation, short of printing money, in a country where 75% of the population are either unskilled penniless youths or underage dependents (ii) until such a point in the future where the demographic outlook for Ngeria alters to include less dependents and more producers, a return on investment is not guaranteed. And the carnage AIDS is causing to life expectancy in sub-Saharan Africa is pushing that picture in the wrong direction.

Elliott is of course right in one sense. my answer is it's all a question of scale, and where you are in the transition. Clearly the biggest obstacle to take off among the LDC's is the enormous quantity of children under 15. But this I imagine we all understand. Elliott is undoubtedly right about Nigeria at present. But at some stage or another Nigeria will have a demographic transition, and will likely enter a stage of economic growth, and possibly prosperity. But those societies which we are talking about have already past through this, they are now ageing, almost elderly societies, and it is not clear that they will ever be young again. So maybe it would be better to compare Germany and Japan with Brazil or India which both might be about to 'take off', at least demographically.

Then Kevin wades in, rightly drawing attention to my subjective 'emotiveism':

The (mostly rhetorical, I suspect) issue of whether we care more for our children than our parents isn't really the point here. When Social Security and related programs were instituted, far more of the elderly were directly dependent on and living with their adult children than is now the case. With the program now older than most of us, it is an institution with its own political inertia. The points about various government programs, federal (mostly elderly) vs state (mostly children) may be correct, but there is the huge problem of tallying up private transfers. But again, there are institutions in place which take decisions out of the hands of individuals, make them collective, and provide them with constituencies which makes a simple majoritarian decision to change them unlikely. This is so much more complex than "whom do you love most?" that the question is almost a red herring.

Again, Kevin is absolutely right. Both Brad and I have fallen into the trap of talking about love, maybe we're just ageing romantics at heart. Really what we should be talking about is bonding and kinship. Love, I guess, is purely subjective, and emotive. Kinship is widely and rigourously studied by anthropologists. Brad's throwaway did indicate what might be considered an American view. Certainly it helps explain the notorious 'labour market flexibility' you enjoy. As my fellow Spainsh resident Antoni Jaume points out - "the grand-parents can help in bringing up their children offspring. Allowing both parents to realize money remunerated works at a lower cost than if they resorted to external nursing" - it's easier for Americans to leave the 'old folks back home' than it is for South Europeans. This factor may also help explain the high return rates of would-be migrants from Southern Europe to the New World. Not 'sentimentality', but different kinship bonds. This, among other things, is why I find it difficult to do economics without sociology, anthropology and demography.

On the other hand the point about changes in familiy structure in the US since the time the social security system was created is an important and interesting one.

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