Human beings are inputs, but birthrates don’t matter. The latter is evidence that two seemingly opposing ideas can be true at the same time.
Economists and politicians fear falling birthrates. Near monolithically of the belief that demand powers economic growth, they worry that fewer humans will result in reduced demand. No, only reduced production will shrink demand.
Economists then worry that reduced demand will result in less government revenue to fund government consumption that those same politicians and economists once again imagine adds to economic growth. They couldn’t be more incorrect. Keynesian ideas generally are.
To help understand why see Luckin, the Chinese coffee chain that was inspired by the arrival of Starbucks in China. Luckin has thrived in China on the way to becoming the country’s largest coffee chain, and has recently opened two stores in the U.S. Many more are on the way. This will be good for Starbucks and the U.S. coffee industry much as Starbucks was and is good for China’s coffee industry. Successful concepts beget other successful concepts, along with the competition that lifts the competitors.
Luckin requires customers to order their coffee drinks on an app. Once the order is placed, customers receive a text with information about pick-up time, only to collect their orders from the Luckin counter at the texted time. Notable about order and pick-up is that it all happens without any human interaction. Which is the point.
Luckin is growing by leaps and bounds by shrinking. Fewer humans producing more and more coffee drinks for a growing customer base.
Such is the genius of technology. It doesn’t render humans unemployed as much as it amplifies their employment. With machines doing what used to require a lot of human effort, fewer humans are positioned to specialize in the production of growing amounts of the products that animate Luckin: coffee drinks.
It’s something to keep in mind as the birthrate worriers promise Armageddon born of not enough babies. They’re missing the exciting future that awaits.
While fewer babies are being born at least for now, the productivity of those babies will eclipse that of past generations. And it won’t even be close.
Precisely because the workers of tomorrow will have machinery producing alongside them that will be the human equivalent of hundreds and realistically thousands of humans today, the productivity of the humans going to work each day will soar. Luckin is one of many examples of this truth. And we’re just getting started.
Eventually the app-style ordering that powers Luckin’s productivity will make the present appear slow by comparison. What will the advances be? If the answer were obvious, we’d all be billionaires.
All we know now is that successful businesses get that way by not standing still. Just as Luckin is an effect of Starbucks in China, it’s a safe and happy bet that Luckin’s arrival in the U.S. will have a prominent impact on the growth of Starbucks. They’ll teach each other how to best utilize human capital elevated by mechanized capital.
It all speaks to why the birthrate-obsessed can and should relax. While it’s certainly true that people drive innovation and productivity without which there’s no progress, the fewer people showing up to work tomorrow will once again be positioned to produce and innovate at levels that will make the present appear primitive by comparison.
As for demand, say it repeatedly that there’s only production. Nothing else. And production is set to explode precisely because human productivity will explode. Which means demand will skyrocket.
Birthrate worriers are incorrect because a focus on demand is wrongheaded. Keynesian notions of consumption generally are.
