The population brain versus the population's brains: how entrepreneurs confound population planning

Abstract

PurposeThe purpose of this paper is to examine the full opportunity cost of population policies by contrasting standard models of optimal population, which consider individuals to be homogeneous laborers, with a view that considers individuals' capacity for entrepreneurship. This paper therefore examines this relationship between population and economic growth with entrepreneurship considered.Design/methodology/approachThe paper draws on James Buchanan's dichotomy of the organismic theory of government finance vs the individualistic theory and applies this dichotomy to population planning. This framework reveals entrepreneurial capacity is only compatible with the open-ended individualistic view. Lastly, the paper utilizes considers the number of potential entrepreneurs lost to China's one child policy and considers the case of Jack Ma as a concrete example of the potential opportunity cost of policies which seek to curb population growth.FindingsThe analysis shows it is impossible for either natural scientists or economists to determine a welfare-enhancing population policy. Creative and entrepreneurial individuals contribute to the economy in ways not captured by standard models. The implication is policies seeking to curb population growth may inhibit economic growth by reducing potential entrepreneurs. Politicians cannot measure the opportunity cost of forgone entrepreneurs, and therefore the costs of such policies are unseen.Originality/valueWhile economists have examined the potential gains from creativity, this contribution is unique in that it highlights the inherent open-endedness involved in entrepreneurship means the opportunity cost of a forgone individual cannot be know because market conditions created by entrepreneurs do not exist absent the entrepreneurs.