Wealth & Poverty Review Elon Musk Gets an A in Econ. Janet Yellen Gets a D-63 million more Americans would increase GDP per capita by $20,000 and GDP by $12 trillion. Originally published at Substack
Former FED chairwoman and current Secretary of the Treasury Janet Yellen recently argued against overturning the Roe v. Wade decision legalizing abortion. “I believe that eliminating the right of women to make decisions about when and whether to have children would have very damaging effects on the economy and would set women back decades.”
Elon Musk recently declared in a Wall Street Journal interview: “There are not enough people. I can’t emphasize this enough. There are not enough people. And I think one of the biggest risks to civilization is the low birthrate and the rapidly declining birthrate. And yet so many people, including smart people, think that there are too many people in the world and think that the population is growing out of control. It’s completely the opposite. Please look at the numbers. If people don’t have more children, civilization is going to crumble. Mark my words.”
The CDC and the Guttmacher Institute estimate that 63 million abortions have occurred since the 1973 Supreme Court decision. Yellen sounds a lot like Thanos, who also debuted in 1973 in a Marvel comic book. He is best remembered in Avengers: Infinity War, “It’s a simple calculus. This universe is finite, its resources finite. If life is left unchecked, life will cease to exist. It needs correction.” He then proceeded to wipe out half of all life, devastating civilization.
Yellen further noted that “denying women access to abortion increased their odds of living in poverty or need for public assistance,” likely a reference to a September 2021 amicus brief filed by more than 150 prominent economists. These economists have done a pretty good job identifying the costs associated with having children, which is no surprise. Kids always cost money, at least until they’re in their 20s. What the “prominent” economists failed to do was to also recognize the benefits. Consequently, their report only covers 50 percent of the assignment. They would get a D- in Econ 101 for this paper. It’s the mistake the great 18th century French economist Frédéric Bastiat, best known for his book The Law, wrote about in his first chapter, “That Which is Seen, and that Which is Not Seen.”
In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause—it is seen. The others unfold in succession—they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference—the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee.
The Wall Street Journal also notes that Ms. Yellen “overlooks the lost productive contribution of children who were never born. People are assets, the source of inventions and new businesses. Human capital is crucial to economic growth and a dynamic society.” The brilliant economist Julian Simon couldn’t agree more.
The Unseen Benefits
How can we measure the unseen benefits of 63 million more Americans? One way would be to look at the relationship between growth in population and growth in GDP per capita. From 1972 to 2021 U.S. population increased by 123 million from 209 million to 332 million. During this same period real GDP per capita increased by $38,861 from $30,360 to $69,221. Real GDP per capita increased by $316 for every additional one million people ($38,861 ÷ 123).
Adding these 63 million missing persons at $316 per million would put current GDP per capita almost $20,000 higher at $89,125.
U.S. population grew at compound annual rate of around 0.95 percent from 1972 to 2021. Contrast this to the 1.5 percent rate from 1950 to 1972. Adding an additional 63 million over the last 50 years would put us at 395 million today instead of 332 million, giving us a manageable annual growth rate of 1.31 percent.
Another important consideration is total GDP. If GDP per capita was $20,000 higher and we had 63 million more people, our total GDP would be $35.2 trillion, over $12 trillion (52 percent) higher that our actual GDP of $23 trillion.
So who are these 63 million missing people? Julian Simon provides a clue. One spring day in 1969 he experienced an epiphany. He writes that:
I visited the U.S. AID office on the outskirts of Washington, D.C., to discuss a project intended to lower fertility in less-developed countries. I arrived early for my appointment, so I strolled outside in the warm sunshine. Below the building’s plaza I noticed a road sign that said “Iwo Jima Memorial.” There came to me the memory of reading a eulogy delivered by a Jewish chaplain over the dead on the battlefield at Iwo Jima, saying something like, “How many who would have been a Mozart or a Michelangelo or an Einstein have we buried here?” And then I thought, Have I gone crazy? What business do I have trying to help arrange it that fewer human beings will be born, each one of whom might be a Mozart or a Michelangelo or an Einstein—or simply a joy to his or her family and community, and a person who will enjoy life?
Elon Musk and Julian Simon are right. Janet Yellen and Thanos are wrong. More human beings create much more wealth for all of us to enjoy, if given the freedom to innovate by learning and discovering new valuable knowledge to share in free markets. Invest in people. We pay the highest dividends.
You can learn more about these economic facts and ideas in our forthcoming book, Superabundance, available for pre-order at Amazon. George Gilder calls it a “supremely contrarian book” which overturns “the tables in the temple of conventional thinking” by deploying “rigorous and original data and analysis to proclaim a gospel of abundance. Economics—and ultimately, politics—will be enduringly transformed.”