How important is the population size in terms of economics?

A country’s population size has been an important factor in terms of economic and political matters. Governments have different measures and opinions about their countries’ population sizes. Usually, there is one golden rule: when the resources are scant, a reduction in the population size is more likely to be favoured, and vice versa. In the past, land and human were the two major factors of production, governments had to balance the two factors; nowadays, capital and entrepreneur are another two factors, these two factors are unlike land and are not limited by humans, as when the population size is increasing, capital per capita will not be limited. To judge the importance of the population size in an economy should be considered with two sides: one is the demand side, the other is the supply side.

Firstly, when the size of the population is increasing, it is very likely for the potential production frontier to shift outwards. Moreover, the quality of labour forces is another important factor in determining the potential output of one economy. This is why almost all countries want to increase spending on increasing the scale of education provision and improving the quality of education. In addition, many governments are urgent dealing with the age population issue in their countries, as the ageing population is not good for training young new labours and could influence the productivity of the economy over the long turn. Of course, the payment of pensions is another issue that governments have to face. When the importance of capital and technology becomes more and more significant, some production processes become much easier and do not require highly skilful labours; however, in the research and development fields, extremely well-educated and skilful labours are highly demanded. Therefore, on the supply side, the quality overwhelms the quantity of labour forces, and the skill requirement in the labour market could have a widening gap.

On the other hand, the demand is highly dependent on the size of the population. Unlike the supply side, I think that the quantity will overwhelm the quality of consumers, as I expect that the costs of production in the future will continuously decrease and the prices for the majority of products will become more and more affordable. When the prices are low in general, the quantity becomes extremely important. Therefore, a large population could provide a huge market that generates very high revenues for companies.

Overall, I think that the quality of the population (for example, education, training and other characteristics) becomes more important in terms of determining the potential overall production of the economy than the size of the population, but the size of the population determines the potential consumption of the economy.

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