A Federated System with a Global Perspective: Part 1

This series of blogs was initiated by two conferences that were organized by my school, with a focus on the ongoing energy transition (decarbonization of the energy sources) from fossil fuels, which emit greenhouse gases that have a toxic impact on the climate, to sustainable energy resources that have fewer detrimental effects. One conference, titled “2024 NYC Solar + Storage Installer Workshop” was specifically targeted at local NYC solar and storage installers. I am referring to it as the “installers conference.” The second conference, titled “NYC Future Energy,” was targeted to a broader audience and I am referring to it as the “CCNY conference” to emphasize that this meeting was mainly organized by CCNY (City University of New York), one of the senior colleges of CUNY.

The last two blogs were focused on the installers conference, with an emphasis on the bidirectional movement of electricity between a centralized generation (electric utility) and distributed generation of electrical power. The bidirectional movement of electric power is often called “net metering.” This and the following few blogs will focus on the CCNY conference. The CCNY conference (NYC Future Energy Conference) was based on the US federated governance system, so there were representative leaders of organizations running throughout the federated energy management. These include the US Department of Energy, the Department of Energy Protection of the City of New York (DEP), the Sustainability Office of CUNY, CCNY’s Schools of Architecture and Engineering, Con Ed (the main public utility of NYC), and NYC community representatives and independent companies such as TRC. NYSERDA, the energy arm of NYS, was not included there but was present at the installers conference. The only representation that was missing in this discussion was the global component. Next week’s blog will be dedicated to this component of the federated energy management structure. The CCNY meeting also showed very active participation of students through a dynamic poster session. To my great surprise, contributions of electrochemistry and photoelectrochemistry, in which I have a lifelong interest, played a major role in these presentations.

All of this came about due to the changes that the energy transition is going through as we shift to electric power. Here is how this was recently summarized by the New York Times:

Many power companies were already struggling to keep the lights on, especially during extreme weather, and say the strain on grids will only increase. Peak demand in the summer is projected to grow by 38,000 megawatts nationwide in the next five years, according to an analysis by the consulting firm Grid Strategies, which is like adding another California to the grid.

“The numbers we’re seeing are pretty crazy,” said Daniel Brooks, vice president of integrated grid and energy systems at the Electric Power Research Institute, a nonprofit organization.

In an ironic twist, the swelling appetite for more electricity, driven not only by electric cars but also by battery and solar factories and other aspects of the clean-energy transition, could also jeopardize the country’s plans to fight climate change.

To meet spiking demand, utilities in states like Georgia, North Carolina, South Carolina, Tennessee and Virginia are proposing to build dozens of power plants over the next 15 years that would burn natural gas. In Kansas, one utility has postponed the retirement of a coal plant to help power a giant electric-car battery factory.

Burning more gas and coal runs counter to President Biden’s pledge to halve the nation’s planet-warming greenhouse gases and to generate all of America’s electricity from pollution-free sources such as wind, solar and nuclear by 2035.

Figure 1 – The new estimated surge in electric power use in the US (source: The New York Times)

As the NYT piece emphasizes, this comes from the mandated shifts in federal policies to sustainable energy sources. As most of us experienced recently, federal policies can change in an instant depending on who holds power and we have a presidential election in November this year.

Another big reason for the shift to electric power was mentioned in a recent article in the Washington Post: “Amid record high energy demand, America is running out of electricity,” which put part of the blame on the recent growth of artificial intelligence (AI), which requires a great deal of electrical energy to train:

Vast swaths of the United States are at risk of running short of power as electricity-hungry data centers and clean-technology factories proliferate around the country, leaving utilities and regulators grasping for credible plans to expand the nation’s creaking power grid.

The soaring demand is touching off a scramble to try to squeeze more juice out of an aging power grid while pushing commercial customers to go to extraordinary lengths to lock down energy sources, such as building their own power plants.

“When you look at the numbers, it is staggering,” said Jason Shaw, chairman of the Georgia Public Service Commission, which regulates electricity. “It makes you scratch your head and wonder how we ended up in this situation. How were the projections that far off? This has created a challenge like we have never seen before.”

To focus on the required changes that are now needed in the electrical grid to satisfy these needs, I will quote the changes to the mission statement of the organization that sits at the top of US federal energy governance: the Department of Energy (DOE):

On October 18, 2023, the Department of Energy (DOE) announced up to $3.5 billion for 58 projects across 44 states to strengthen electric grid resilience and reliability across the United States, all while improving climate resilience and creating good paying union jobs. These projects will leverage more than $8 billion in federal and private investments as part of the Grid Resilience and Innovation Partnerships (GRIP) Program, funded through the Bipartisan Infrastructure Law and administered by DOE’s Grid Deployment Office (GDO).

The GRIP projects will tackle a range of grid needs to increase resilience and reliability across the country, with a few major trends popping up across the various selections. They include:

  • Wildfire prevention and resilience: State-of-the-art technologies will protect the grid from wildfires and prevent wildfires caused by aging infrastructure. Smart grid investment will help predict, identify, and address problems earlier and improve real-time responses to threats.

  • Neighborhood resilience: Microgrids that expand renewables and distributed energy resources will allow consumers to keep the power locally on even when the grid experiences outages.

  • Lower energy bills and increased clean energy: DOE is making critical investments in our grid without passing costs down to consumers, all while enabling cleaner energy sources, less pollution, and an easier time installing solar panels or plugging in an electric vehicle at home.

  • Investments in disadvantaged communities: Through Community Benefits Plans, all GRIP projects have outlined strategies to leave lasting impacts on local communities beyond infrastructure upgrades alone, including locally focused economic development and thousands of good-paying, union jobs.

In addition, the DOE recently issued a blueprint of how to decarbonize the American building sector, the main energy user in most cities:

WASHINGTON, D.C. — The Biden-Harris Administration yesterday released Decarbonizing the U.S. Economy by 2050: A National Blueprint for the Buildings Sector, a comprehensive plan to reduce greenhouse-gas (GHG) emissions from buildings by 65% by 2035 and 90% by 2050. The U.S. Department of Energy (DOE) led the Blueprint’s development in collaboration with the Department of Housing and Urban Development (HUD), the Environmental Protection Agency (EPA), and other federal agencies. The Blueprint is the first sector-wide strategy for building decarbonization developed by the federal government, underscoring President Biden’s whole-of-government approach to cutting harmful carbon emissions and achieving the nation’s ambitious clean energy and climate goals.

One of the key issues that was discussed at the CCNY conference was how to price the new grid. California is experimenting with pricing that could make the transformed energy affordable to everyone:

The controversial plan to require California’s three biggest utilities to start charging their customers based on how much money they make has been shelved by state regulators — at least for now.

Instead, the California Public Utilities Commission is proposing a less radical — if not necessarily less controversial — approach to complying with a state law demanding that it examine new rate structures to reduce the burden of rising electricity rates, a problem that will only deepen as the state further embraces electrification.

That proposal? Reduce per-kilowatt-hour rates but institute a fixed charge of $24.15 per month for most customers of utilities Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.

The proposal would add smaller fixed monthly charges of $6 per month or $12 per month to customers who are signed up for two different special rate programs for low-income earners. This carveout for low-income ratepayers is distinct from the income-graduated proposals that were under consideration.

Fixed charges are common features of utility bills across the country, the CPUC noted in a fact sheet accompanying the release of its proposed decision on Wednesday. That’s because utilities pay for a lot of fixed costs that aren’t tied to how much electricity customers use, and fixed charges are one way to recoup those costs.

Future blogs will further explore this issue.

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Distributed Generation, Net Metering, and VDER

Figure 1 – Characteristics of 16 distributed generation utilities in the US (Source: “Quantifying net energy metering subsidies,” from the Electricity Journal; there may be a pay barrier for the full PDF article)

Last week’s blog started from the broader perspective of our personal decisions and how we ensure our energy supply without damaging the environment that we live in. I started to address this issue in response to a meeting that my university (CUNY) organized to help solar and storage installers do their work. The title of this conference was “2024 NYC Solar + Storage Installer Workshop” and it was a continuation of last year’s conference under the same name (2023 instead of ’24). That conference (given via Zoom) was targeted at “installers” but all of us count as decision-makers about installation. If you try to install solar cells yourself, you become an installer. A few days after that meeting, CCNY (City College of New York), a senior college in CUNY, organized a related meeting, this time in person, titled “NYC Future Energy” that I attended as well. That meeting is summarized here. As I proceed, I will refer to the first meeting as the installers meeting and to the second as the CCNY meeting. The two meetings will serve me in the next few blogs.

Last week’s blog started with individual decisions that we make to go solar and ended with an admission that collectively we don’t yet fully comprehend the best way to make the transition to distributed energy sourcing and we are experimenting with the details (at least in the US). One of the strongest incentives for many of us to put up solar collecting facilities (whether direct solar, e.g., photovoltaic or indirect, e.g., wind) is the payback from the utilities for excess energy that we are not using. The map that starts this blog shows in some detail the present situation in 16 US states.

If you are inclined to install a solar facility to supply you with some of your needed energy, have a look at “Steps for Going Solar” in last week’s blog. The first item on this list suggests:

  • Contact a solar installer – Receive at least a few different quotes to compare pricing, customer references, and financing options.

Don’t try to “economize” on this step, the process is complicated and confusing and seems “designed” to discourage self-help. The main presenters in the installers meeting were representatives from the NYC Building Department and the NYC Fire Department. You need to get permission to install the devices and the instructions on how to fill the forms are full of abbreviations that the installer must master. The reasoning is simple to explain, in the context of approval of the fire department, whatever you install cannot be an obstacle in case of a possible need for fire extinguishing. Conflicts here might cost lives.

An important incentive to install distributed energy in your house or your business is the desire to save money. When you are connected to the grid for your energy needs, your utility payment consists of two categories: fixed costs and direct payments to the utility for the amount of energy that you use. Your utility’s job is to supply you with as much energy as you need. If you replace utility supply with direct (or indirect, e.g., wind) solar energy, you depend on availability. To synchronize your energy availability with your energy needs, you will need either to equip yourself with an enormous energy storage capacity or use your utility for storage and be compensated for the energy that you send. As was mentioned in last week’s blog, the ability to return some of the energy to your utility and be compensated makes the connection with your utility bidirectional. As was also mentioned last week, the process of returning some power to the utility in exchange for compensation is called net metering.

The first two paragraphs of the introductory figure’s source describe net metering in more general terms than the short description that I provided in last week’s blog. It also comes from the perspective that net metering is a calculated subsidy for those who set up distributed generation (DG):

Net energy metering (NEM) is the policy available in many states that promotes customer-owned distributed generation (DG) resources (such as solar photovoltaic panels or PVs) by compensating DG owners for each kWh of generation at the retail rate. NEM policies were introduced when the costs of installing solar panels were much higher than they are today. The rapid adoption of PVs in recent years at an average annual growth rate of 30% from 2010 to 2018 demonstrates the effectiveness of NEM policies in helping this nascent industry take off1 .

However, as is generally true for most incentive payments delivered through rates, NEM policies create a subsidy issue from non-DG customers to DG customers. This is simply because most of the residential rates in the U.S. are volumetric in nature. Demand driven and fixed costs of power production and delivery are largely recovered on a $ per kWh basis. As a result, when a DG customer reduces their consumption of power from the grid, they bypass costs that are fixed and/or demand driven in nature, leaving non-DG customers with the burden of paying these grid costs.2 In addition, traditional NEM policy pays DG customers at the full retail rate for the export to the grid, even though exported DG power only avoids the generation cost but not the capacity cost of delivering services. NEM subsidies have grown with time as the number of customers on NEM has grown.

Distributed generation or DG, mentioned above, can be defined in the following way:

Distributed generation refers to a variety of technologies that generate electricity at or near where it will be used, such as solar panels and combined heat and power. Distributed generation may serve a single structure, such as a home or business, or it may be part of a microgrid (a smaller grid that is also tied into the larger electricity delivery system), such as at a major industrial facility, a military base, or a large college campus. When connected to the electric utility’s lower voltage distribution lines, distributed generation can help support delivery of clean, reliable power to additional customers and reduce electricity losses along transmission and distribution lines.

In the residential sector, common distributed generation systems include:

  • Solar photovoltaic panels
  • Small wind turbines
  • Natural-gas-fired fuel cells
  • Emergency backup generators, usually fueled by gasoline or diesel fuel

In the commercial and industrial sectors, distributed generation can include resources such as:

  • Combined heat and power systems

  • Solar photovoltaic panels

  • Wind

  • Hydropower

  • Biomass combustion or cofiring

  • Municipal solid waste incineration

  • Fuel cells fired by natural gas or biomass

  • Reciprocating combustion engines, including backup generators

Non-DG customers never approved such a subsidy, however, and figuring out how to structure the back payment (for power returned to the utility) is a work in progress. In last week’s blog, I started to describe the attempts in my state (NY) to create back payments that will retain some of the benefits and incentives for DG. Not surprisingly, changes in the payment structure have become a political issue. The NYS system is abbreviated as VDER (Value of Distributed Energy Resources). The broad outlines of VDER were described in the last blog, which ended with a description of the present state of the calculation (Phase 2 version). Below is a short description of how to do the calculation:

Solar Value Stack Calculator Rev 3.1
(VDER Phase Two) [XLSB]

Use the Phase Two Calculator for projects that qualified after July 26, 2018. Projects qualify when they make their 25% upgrade payment to the utility. If no utility upgrade costs are required, projects qualify when the interconnection agreement is fully executed.

Of course, when I tried this, I got a very complicated Excel spreadsheet to fill out that probably only a professional installer would be able to accomplish.

The CCNY conference included input from CUNY, NYC, and the Federal government, on how to construct a model grid. Such a construction can serve as a guideline for the ongoing energy transition. It includes the development of decarbonized electricity use that is affordable, economically viable, and resilient. Some of these issues were addressed in previous blogs but changes in our understanding require constant revisits. Stay tuned.

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Solar Installations: Net Metering and VDER

Figure 1 – Bi-directional electric grid (Source: Ipsun Solar)

The top picture in this blog illustrates a possible future electric grid that is designed to encourage the shift to decarbonized sustainable energy. Most sustainable energy sources are directly or indirectly (e.g., wind) based on solar energy, which exists independent of consumer needs. The future grid is designed to synchronize the time cycle of sustainable energy sources and consumer needs between buildings, cars, and utilities. As shown in the picture, the synchronization is based on the bidirectional flow of the electricity. The next few blogs will address various aspects of the proposed transition. The new formation is also designed to address other questions of the energy transition, including resiliency to blackouts (powering the house for a short time with a car battery), energy saving (providing refunds for unused energy), and spreading loads more evenly throughout the day to reduce demand for expensive power at peak times.

My attention to this issue increased as a result of a 2024 NYC Solar + Storage Installer Workshop that my university (CUNY) organized. The program of the workshop is shown in the following link. Since the energy transition is a process of constant change, all of us are in a constant learning mode of how best to navigate the required changes. A single workshop cannot address everything but this is a repetition of a similar workshop from last year. A previous blog (April 18, 2023) describes what I learned at last year’s workshop. Two guest blogs by Phil Gallagher (June 21, 2022, and March 21, 2023) describe his experiences of installing photovoltaic cells in his house, including his interactions with the electrical utility company Con Edison and professional installers. An older (2014) link by the sustainability arm of CUNY outlines recommended steps for installing solar cells to power a home in NYC. It addresses the bidirectional flow of both electricity and money between a customer and Con Edison, which was (and still is) the largest utility in NYC. The bidirectional flow at that time was based on net metering. As we will see below, the rules have changed in NYC over the last 10 years but net metering is still a dominant mechanism for bidirectional electricity flow in many states. I will start with the 2014 citation of New York State’s solar map cited above, which includes the bidirectional flow of power (between utility and customers) with the recommended main steps for installing solar power in a building:

Steps for going solar:

1) Contact a solar installer – Receive at least a few different quotes to compare pricing, customer references, and financing options. For a list of participating NY-Sun Incentive Installers, go to: ny-sun.ny.gov/pv-installers.

2) Sign utility interconnection (net metering) paperwork – Your installer will help determine what paperwork needs to be signed to notify your utility and local building department you are going solar. It is important to receive approval from the utility before installing the solar system to understand if there will be utility grid upgrades and additional costs.

3) Utility installs a net meter – Your electric meter will be switched to measure energy flowing both ways. This occurs within 2-4 weeks of the net metering application being approved, and can happen before the solar installation.

4) After the solar install – Please wait for interconnection approval from your utility to turn on the solar system. This is usually a letter or an email. Before your utility can grant approval, your installer must first obtain all jurisdictional permits and inspections, and provide the utility with a completed verification test form. Typically, the utility will witness the installer perform an on-site verification test for systems 25kW and greater.

5) Turn on the solar system and generate renewable energy! Please be aware meter readings are sometimes estimated when the utility cannot access the meter. Energy savings may not appear until meters can be read.

I will now shift fully to the bidirectional electricity flow between customers and power companies.

Net Metering:

Net metering is a billing arrangement between solar energy system owners (you) and utility companies. It allows solar panel owners to feed excess electricity they generate back into the grid in exchange for credits. These credits can be used to offset future electricity consumption when their solar panels are not producing enough energy to meet their needs. Net metering ensures that solar panel owners are fairly compensated for the surplus electricity they contribute to the grid.

How Net Metering Works:

The process of net metering involves the installation of a bidirectional meter that measures both the electricity supplied by the utility company and the surplus electricity generated by the solar panels. When the solar panels produce more electricity than is being consumed, the excess is fed back into the grid, and the meter runs in reverse, effectively giving credits to the homeowner. During periods when solar production is insufficient, such as at night, these credits are used to offset the electricity drawn from the grid.

Net Metering Policy and Availability:

Net metering policies vary by state. Some states and their public utilities have established favorable regulations that support net metering, while others may have limitations or different structures in place considering the recent NEM 3.0 law that was passed in California. It is essential for homeowners to research and understand the specific net metering policies and incentives available in their area. Consulting with local solar installers or utility companies can provide valuable insights into the net metering options and requirements in a particular region.

Net Metering is not available in all states:

Net metering is not available in all states and some states do not regulate net metering at a state level, rather it is managed to the utility level. As of 2020, 34 states plus Washington D.C. and four territories have some form of net metering policies available. Six additional states do not currently offer net metering but offer other compensation outside of net metering. Five states do not currently have net metering laws and net metering policies and decisions are taken into account at the utility level.

Although more than half of the states have net metering policies, each net metering policy can be unique. Net metering policies can vary greatly, from being compensated for the full retail cost of the solar exported, receiving an amount less than the full retail cost, or not being compensated for any electricity that they send back to the grid. Solar policies can change and utilities have different policies as well. Your local solar installer should be able to provide you with the most up-to-date net metering policies for your area.

Figure 2 shows a map of the bidirectional mechanisms between utilities and customers in US states:

Figure 2 – Net Metering by State/Territory (Orange: state-mandated rules for certain utilities, Green: Transitioning to compensation other than net metering, Purple: State-mandated compensation other than net metering, Blue: No state-wide rules but some utilities do offer net metering) (Source: Solar Power World)

As shown in Figure 2, NY (my state) recently changed its bidirectional electricity flow mechanism to a different system, called VDER, which is explained below:

The New York State Public Service Commission (PSC) established the Value of Distributed Energy Resources (VDER) or the Value Stack, a new mechanism to compensate energy created by distributed energy resources (DERs), like solar.

The Value Stack compensates projects based on when and where they provide electricity to the grid and compensation is in the form of bill credits. This is determined by a DER’s:

  • Energy Value (LBMP)
  • Capacity Value (ICAP)
  • Environmental Value (E)
  • Demand Reduction Value (DRV)
  • Locational System Relief Value (LSRV)

Additionally, certain Community Distributed Generation (CDG) projects may have a Market Transition Credit (MTC) or Community Credit (CC). These elements recognize the benefits that DERs provide to the grid and society, including avoided carbon emissions, cost savings to customers and utilities, and other savings from avoiding expensive capital investments. Solar Value Stack Calculator To estimate a solar project’s revenue under the Value Stack, use the Solar Value Stack Calculator

Solar Value Stack Calculator

NY-Sun developed the Solar Value Stack Calculator to help contractors better estimate compensation for specific solar projects. The calculator combines the wholesale price of energy with the distinct elements of distributed energy resources (DERs) that benefit the grid: the avoided carbon emissions, the cost savings to customers and utilities, and other savings from avoiding expensive capital investments. Select the calculator that best fits your project.

We periodically update the calculator—please revisit this page regularly to ensure you are using the most recent version.

As is indicated in the last line, the system is still changing. The outline of what is needed to be an installer in NYC will be explored in the next blog.

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Florida and NYC: Rational Places to Live? 

Many people blame Hillary Clinton’s 2016 loss on her description of half of Trump’s supporters as “deplorables,” a term under which she included people who are racist, sexist, homophobic, xenophobic, Islamophobic, etc. One word she didn’t include in her description is irrational. In a blog titled “Human Reactions to the Climate Shift” (November 1, 2022), I accused unspecified people of irrationality based on their rush to move to states with projected high climate change impacts. I used Arizona as an example. This blog is a continuation of that theme, using contrasting trends in NYC and Florida as examples.

Figure 1 ranks major coastal cities around the world based on their vulnerability to sinking due to human-caused issues. The infographic clarifies, “Land subsidence refers to the gradual sinking of an area of land, often caused by the over-extraction of groundwater or the compaction of the ground from the massive weight of buildings above it.” One American city is on the list of the top 10 most vulnerable. Houston, Texas is number 8, with a peak subsidence velocity of 8mm/year and a median velocity of 3mm/year. The government of Indonesia has already decided to move the capital from Jakarta (number 5 on the list) to a much less vulnerable location.

Figure 1 – The world’s 10 fastest-sinking coastal cities (Source: Visual Capitalist)

Figure 2, below, is taken from a Nature paper that shows new estimates for coastal sinking in the US, using new estimates of sea level rise. The cities shown are: Boston, MA; NYC, NY/Jersey City, NJ; Atlantic City, NJ; Virginia Beach, VA; Wilmington, NC; Myrtle Beach, SC; Charleston, SC; Savannah, GA; Jacksonville, FL; and Miami, FL. One can see that the prospects for Florida (especially Miami) are not encouraging. The prospects for New York City are significantly better.

10 east coast US cities most exposed to sea level rise

Figure 2 – 10 East Coast US cities most exposed to sea level rise. (Source: Nature)

On the graph, each city is characterized by three columns (from left to right: areas, population, and properties exposed to sea level rise). Each column is additionally divided into two segments (data for 2020 on the bottom and 2050 on top).

A recent NYT op-ed by Vishaan Chakrabarti, titled, “How to Make Room for One Million New Yorkers,” describes an architectural plan to considerably increase living space in New York City without using areas prone to flooding. Figure 3 shows the unused areas in the plan. The essence of the plan is summarized below:

We found a way to add more than 500,000 homes — enough to house more than 1.3 million New Yorkers — without radically changing the character of the city’s neighborhoods or altering its historic districts.

Next, we excluded parts of the city that might be at risk of flooding in the future.

In the remaining areas, we identified more than 1,700 acres of underutilized land: vacant lots, single-story retail buildings, parking lots and office buildings that could be converted to apartments.

Figure 3 – Areas of proposed new housing (Source: NYT)

For reference, the flood map of NYC looks like this:

Figure 4 – NYC flood map (Source: Business Insider)

In contrast to the NYC plan, Figure 5 shows an area of Miami, Florida where some American billionaires have built houses. A quick look at it, combined with the data in Figure 2, makes its vulnerability to floods obvious.

Photo of Miami's "Billionaire Bunker"

Figure 5 – Miami’s “Billionaire Bunker” (Source: Forbes)

Below is a description of the area:

Locally known as “Billionaire Bunker”, Indian Creek Island on Biscayne Bay on the backside of Miami Beach is by almost every measure the most exclusive, secure, and celebrity-saturated residential enclave in America (sorry Hamptons and Palo Alto). If it had its own zip code, it would be the most expensive as well, with most properties trading hands these days for north of $40 million.

The trend of moving to Florida is not restricted to billionaires:

Freudman is one of many people who have moved to Florida in recent years. The state’s population grew 1.9% from 2021 to 2022, according to Census Bureau estimates, making it the fastest-growing state in the country. Warm weather, more affordable housing, and the lack of a state income tax are among the perks drawing movers to Florida. But some newcomers say there are also downsides to the Sunshine State, including high insurance and healthcare costs, severe weather, and a “vacation feel” that eventually wears off.

While Freudman and his wife Eva don’t regret their move, he said they’re torn on whether they want to stay in Florida long-term, particularly if they have children.

These areas that are especially vulnerable to climate change are already seeing impacts that might slow Florida’s attraction to newcomers. Home insurance bills are going up and coverage is going down:

Mark Friedlander, a spokesman for the Insurance Information Institute, a trade group, said home insurance premiums had cumulatively risen 32 percent from 2019 to 2023, while rebuilding and replacement costs had gone up 55 percent. Analysts for the group estimated that in 2023, home insurers experienced their biggest underwriting loss — the difference between collected premiums and paid-out claims — since 2011. Behind the loss were huge storms that caused more than $50 billion in damage that insurers had to pay for.

The housing market in Florida is already in trouble and the sale of condos is dramatically falling:

…even as prices dropped in some of its major metros and the number of “motivated” sellers in the state—those willing to accept a lower offer in order to sell quickly—is currently the highest in the country.

House prices at the state level have been steadily growing in the past months, with the median sale price for all homes in Florida being $404,100 in January, up 4.5 percent year-on-year, according to Redfin data.

Whether these trends indicate a return to rationality within US internal migration remains to be seen.

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The End of the Anthropocene?

Timeline of epochs

 Figure 1 – Timeline of the aeons, eras, periods, and epochs (Source: World Economic Forum)

Over the last two weeks or so, the papers were full of existential issues. At the top (so it seemed) was President Biden’s advanced age. The State of the Union, Thursday, March 7th, and the Republican response showed us that age can be an important issue on the other end—you can also be too young for the job. Super Tuesday, on March 5th, was another important subject that week. Fifteen states held their votes for the two main parties’ presidential candidates for the November election. President Biden and ex-president Trump overwhelmingly won, and Nikki Haley gave up her candidacy. So, the country will have a repeat of the 2020 election between Biden and Trump. Recent polls show that the main issue that preoccupies the public is President Biden’s age, in spite of the fact that the age difference between the candidates is only four years. Some details of the poll’s findings are cited below:

Widespread concerns about President Biden’s age pose a deepening threat to his re-election bid, with a majority of voters who supported him in 2020 now saying he is too old to lead the country effectively, according to a new poll by The New York Times and Siena College.

The survey pointed to a fundamental shift in how voters who backed Mr. Biden four years ago have come to see him. A striking 61 percent said they thought he was “just too old” to be an effective president.

A sizable share was even more worried: Nineteen percent of those who voted for Mr. Biden in 2020, and 13 percent of those who said they would back him in November, said the 81-year-old president’s age was such a problem that he was no longer capable of handling the job.

The misgivings about Mr. Biden’s age cut across generations, gender, race and education, underscoring the president’s failure to dispel both concerns within his own party and Republican attacks painting him as senile. Seventy-three percent of all registered voters said he was too old to be effective, and 45 percent expressed a belief that he could not do the job.

Over the last two weeks, there were also important foreign issues to be discussed. High among them were the continuing wars between Israel and Gaza (since the unprovoked attack on October 7th, and the Russian invasion of Ukraine, which is now more than two years old).

However, I have heard no discussion of global issues such as climate change (only two sentences by President Biden during his more than 1 hour-long State of the Union speech). Also unmentioned have been the global consequences of the recent pandemic, including a comparison of the US’ post-pandemic economy and other developed countries. In addition, I have been following the global decline of fertility rates and the mixed consequences of immigration: facilitating a demographic transition while also sparking backlashes dangerous to democracy (such as replacement theory, which I discussed in last week’s blog).

From my perspective, however, the announcement that topped the news was one that a group of geologists decided that this is not the time to “celebrate” the planetary history transition from the Holocene to the Anthropocene epoch.

Over the last 12 years, I have written repeatedly about this discussion (just put the word Anthropocene in the search box to scan previous blogs on the topic), and I started all my climate change classes with a description of the proposed transition. I, like everybody that I chatted with, was sure that the transition would be approved. We were wrong. Below is a section of the NYT article that describes some of the background and the conclusions of the discussion:

Is it time to mark humankind’s transformation of the planet with its own chapter in Earth history, the “Anthropocene,” or the human age? Not yet, scientists have decided, after a debate that has spanned nearly 15 years. Or the blink of an eye, depending on how you look at it. A committee of roughly two dozen scholars has, by a large majority, voted down a proposal to declare the start of the Anthropocene, a newly created epoch of geologic time, according to an internal announcement of the voting results seen by The New York Times. By the definition that an earlier panel of experts spent nearly a decade and a half debating and crafting, the Anthropocene started in the mid-20th century, when nuclear bomb tests scattered radioactive fallout across our world. To several members of the scientific committee that considered the panel’s proposal in recent weeks, this definition was too limited, too awkwardly recent, to be a fitting signpost of Homo sapiens’s reshaping of planet Earth.

“Human impact goes much deeper into geological time,” said another committee member, Mike Walker, an earth scientist and professor emeritus at the University of Wales Trinity Saint David. “If we ignore that, we are ignoring the true impact, the real impact, that humans have on our planet.”

That’s why several experts who have voiced skepticism about enshrining the Anthropocene emphasized that the vote against it shouldn’t be read as a referendum among scientists on the broad state of the Earth. “This was a narrow, technical matter for geologists, for the most part,” said one of those skeptics, Erle C. Ellis, an environmental scientist at the University of Maryland, Baltimore County. “This has nothing to do with the evidence that people are changing the planet,” Dr. Ellis said. “The evidence just keeps growing.”

The figure at the top of this blog is the same as the one that I used in a previous blog that discussed this transition (January 10, 2023). I chose this figure because it shows the full scale of our history–from the exact starting point (the creation of the Earth as a planet in the solar system) to our own, relatively minuscule epoch, the Holocene. The Holocene is usually defined in the following way:

The Holocene is the name given to the last 11,700 years* of the Earth’s history — the time since the end of the last major glacial epoch, or “ice age”.

What is often missing is how this definition came about:

In 1833 Charles Lyell proposed the designation Recent for the period that has elapsed since “the earth has been tenanted by man.” It is now known that humans have been in existence a great deal longer. The term Holocene was proposed in 1867 and was formally submitted to the International Geological Congress at Bologna, Italy, in 1885. It was officially endorsed by the U.S. Commission on Stratigraphic Nomenclature in 1969.

I was 30 years old when the US Commission on Stratigraphic Nomenclature endorsed the Holocene. If we followed the Holocene precedent, which is now confirmed to be the only epoch for humanity, the defining start time of the Anthropocene—had it been approved—would coincide with the Trinity test, the first experimental nuclear explosion, on July 16, 1945, in New Mexico (see the movie “Oppenheimer”). We should wait until the end of the Anthropocene to confirm its existence. However, there is a good chance that we will destroy ourselves by that time and nobody will be left to do that job. Maybe it’s time to take epoch-naming decisions that involve humans away from geologists by creating a more representative forum.

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Immigration and Politics

My previous blog emphasized the importance of immigration in equilibrating demographic transition in many countries with below-replacement fertility rates. However, reliance on immigration for population growth makes it a major political issue. This blog starts to explore the political ramifications. This issue attracts great attention in the US and other countries and this is a global “mega” election year, with 25% of the global population expected to participate in the voting process. The global election picture is shown in Figure 1.

Figure 1 – Expected national elections in 2024 (Source: Statista)

The situation in the US, which is expecting a presidential election in November, is summarized in the NYT piece by Paul Krugman:

Modern nations can’t — practically or politically — have open borders, which allow anyone who chooses to immigrate.

The good news is that America doesn’t have open borders, and there is no significant faction in our politics saying we should. In fact, immigrating to the United States legally is fairly difficult.

The bad news is that we’re having a hard time enforcing the rules on immigration, mainly because the relevant government agencies don’t have sufficient resources. And right now, the reason they don’t have those resources is that many Republicans in Congress, while fulminating about a border crisis, appear determined to deny the needed funding.

Their position is rooted in extraordinary political cynicism, and they aren’t even trying to hide it: Donald Trump has intervened with Republicans to block any immigration deal because he believes that chaos at the border will help his election prospects.

The broader international situation is summarized in this Financial Times piece:

International migration to rich countries reached an all-time high last year, driven by global humanitarian crises and demand for workers, the OECD said on Monday. The Paris-based organisation estimated 6.1mn new permanent migrants moved to its 38 member countries last year, 26 per cent more than in 2021 and 14 per cent higher than in 2019, before the pandemic brought an enforced pause to much cross-border movement. Preliminary figures for 2023 suggested a further increase, the OECD said, indicating that last year’s surge was not solely a post-Covid rebound. This total did not include a further 4.7mn displaced Ukrainians who were living in OECD countries as of June this year; an increase in temporary migration for work; or a record 1.9mn permits issued to international students — with the greatest number of new students going to the UK. Both humanitarian and labour-related flows of people look set to continue at high levels, with the latter accounting for a growing share of total migration, driven by a widespread scarcity of workers, the OECD said.

Previous blogs focused on some of the impacts of declining populations. The global population transition features some countries where the fertility rate is well below replacement and others where it is above replacement. There are examples of poor and rich nations in both of these categories.

The increased reliance on immigration is a serious threat to many in both poor and rich countries. Not surprisingly, however, the threats are different. Emigration from poor countries to rich ones is often selective. Rich countries with serious fertility deficits encourage well-educated immigrants, a process often described as a brain drain. As mentioned in previous blogs, over the last 30 years, almost all countries have instituted compulsory education. The prospect of economic progress through education has become universal but for countries with limited resources, the process is expensive. Rich countries with decreasing populations can offer much better compensation to educated immigrants, as compared to their native countries, a strong incentive to immigrate. The Yahoo article below offers recent coverage of this issue:

In the global context, attracting and retaining specialized talent is paramount for economic growth. Recent immigration policy changes, such as Ireland’s expanded employment permits and the EU Blue Card enhancements, demonstrate efforts to facilitate foreign national movement. The introduction of remote work visas and visa waivers by various countries further showcases a concerted effort to attract and accommodate foreign talent, underscoring the strategic measures in place to address the complex issue of brain drain on an international level. U.S. has been a focal point in context of emigration. In 2022, the workforce in the United States consisted of approximately 28.4 million immigrant employees, showcasing a notable increase of nearly 7 million from the 21.5 million recorded in 2010. Comparatively, there were approximately 129.4 million native-born workers in the same year. Among the various industries, the educational and health services sector employed the highest number of immigrant workers, totalling 5.2 million individuals, which accounted for 18.2% of all foreign-born employees.

In the first blog in this series, I showed that below-replacement fertility is not a “prerogative” of rich countries anymore; it is starting to affect poor countries as well. Part of the reason is that most immigrants from poor countries to rich ones are relatively young, within the reproductive ages of females. This starts to be an important factor in the declining fertility of these countries. A recent article by the New York Times uses Bosnia as an example of such dynamics:

Nowhere, however, have demography and the politics around it been as fraught as in Bosnia, a small, ethnically fractured nation. Like many poorer countries, it has a high rate of emigration, which surged during the 1992-95 war. But it also has an extremely low birthrate, a phenomenon usually associated with richer countries.

 An additional strong driving force for people to immigrate from their native country to a “better” place is their governments’ failure to govern effectively. One important indicator of a failed government is uncontrolled inflation. An infographic of global inflation rates  was recently published based on IMF (International Monetary Fund) data. The ten countries with the highest inflation rates are Venezuela (230%), Zimbabwe (190.2), Sudan (127%), Argentina (69.5%), Turkey (54.3%), Egypt (25.9%), Angola (25.6%), Iran (25%), Ethiopia (18.5%), and Pakistan (17.5%).

Given my Holocaust history (put the word in the blog’s search box), I find that the most frightening aspect of the public attitude’s increased role in global immigration is not focused on poor countries but on rich ones. It has to do with “replacement theory.” The background of the various aspects of this theory (a better word for this should be “attitude”) is summarized in the two excerpts given below:


The idea of “replacement” under the guidance of a hostile elite can be further traced back to pre-WWII antisemitic conspiracy theories which posited the existence of a Jewish plot to destroy Europe through miscegenation, especially in Édouard Drumont‘s antisemitic bestseller La France juive (1886).[51] Commenting on this resemblance, historian Nicolas Lebourg and political scientist Jean-Yves Camus suggest that Camus’s contribution was to replace the antisemitic elements with a clash of civilizations between Muslims and Europeans.[16] Also in the late 19th century, imperialist politicians invoked the Péril jaune (Yellow Peril) in their negative comparisons of France’s low birth-rate and the high birth-rates of Asian countries. From that claim arose an artificial, cultural fear that immigrant-worker Asians soon would “flood” France. This danger supposedly could be successfully countered only by increased fecundity of French women. Then, France would possess enough soldiers to thwart the eventual flood of immigrants from Asia.[52] Maurice Barrès‘s nationalist writings of that period have also been noted in the ideological genealogy of the “Great Replacement”, Barrès contending both in 1889 and in 1900 that a replacement of the native population under the combined effect of immigration and a decline in the birth rate was happening in France.[53][51]

BritannicaWhat and where it is taking place

Replacement theory, in the United States and certain other Western countries whose populations are mostly white, a far-right conspiracy theory alleging, in one of its versions, that left-leaning domestic or international elites, on their own initiative or under the direction of Jewish co-conspirators, are attempting to replace white citizens with nonwhite (i.e., BlackHispanic, Asian, or Arab) immigrants. The immigrants’ increased presence in white countries, as the theory goes, in combination with their higher birth rates as compared with those of whites, will enable new nonwhite majorities in those countries to take control of national political and economic institutions, to dilute or destroy their host countries’ distinctive cultures and societies, and eventually to eliminate the host countries’ white populations. Some adherents of replacement theory have characterized these predicted changes as “white genocide.

The replacement fantasy received much wider attention in the early 21st century with the publication of Le Grand Remplacement (2011), by the French writer and activist Renaud Camus. He argued that since the 1970s, Muslim immigrants in France have shown disdain for French society and have been intent on destroying the country’s cultural identity and ultimately replacing its white Christian population in retaliation for France’s earlier colonization of their countries of origin. He also asserted that the immigrant conquest of France was being covertly abetted by elite figures within the French government. Camus’s sobriquet for his conspiracy theory, the “great replacement,” proved attractive to many right-wing activists and scholars in France, and his rhetoric and the substance of his theory were eventually adopted by leaders within the mainstream of French political conservatism, including Marine Le Pen, the leader of the right-wing National Rally (formerly National Front) party. The great replacement was soon espoused by right-wing parties and extremist groups in other European countries—notably including Hungary, where it was explicitly endorsed by the country’s authoritarian prime ministerViktor Orbán.

Replacement theory has been widely ridiculed for its blatant absurdity. It has been just as widely condemned for its encouragement of racist violence through its toxic allegation that nonwhite immigrants (as well as the Jewish figures who allegedly direct their immigration) pose an existential threat to whites. The latter criticism has been tragically validated by the occurrence of several mass murders in the United States and other countries by white racists who clearly indicated their adherence to replacement theory before or after their attacks.

Within the US, opponents of immigration often claim that only criminals leave their native countries to prey on the peaceful citizens of rich countries. Given a massive influx of 1.6 million immigrants in 2023 (legal and illegal), it is not difficult to cherry-pick “proof” of this concept. Such a case emerged with the killing of the University of Georgia nursing student. Below is what MSN wrote about the political ramifications of this case:

Donald Trump’s presidential campaign moved quickly to tie the killing of a Georgia nursing student, allegedly by a Venezuelan migrant who entered the country illegally in 2022, to the surge of undocumented immigrants at the southern border under the Biden administration. His campaign posted a video that, with pounding music, combines news clips about the case with clips of Biden administration officials assuring people that the border was secure…

2020 study, published by the Proceedings of the National Academy of Sciences, analyzed 200,000 congressional speeches and 5,000 presidential communications on immigration since 1880, when a wave of Chinese immigrants led to the Chinese Exclusion Act of 1882 that barred Chinese laborers. When lawmakers spoke about immigration, their speeches were twice as likely as their speeches on other topics to mention words related to crime.

Moreover, the study found “stark differences” in how lawmakers discussed European and non-European groups, with “more implicitly dehumanizing metaphors” used to describe Chinese, Mexicans and other non-Europeans. “There is also a striking similarity in the use of explicit frames, with a greater emphasis on ‘crime,’ ‘labor,’ and ‘legality’ for the non-Europeans and less on ‘family,’ ‘contributions,’ ‘victims,’ and ‘culture,’” the study said.

In next week’s blog, I will try to shift my emphasis to our more general rational decision-making capabilities.

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Remedies for Negative Economic Consequences of Global Population Decline

Last week’s blog outlined the main economic consequences of the declining global population. This blog looks at some of the possible remedies. Two recent publications summarize some such efforts, which come in the form of improved productivity and accelerated robotics developments.

Fortune magazine examines productivity:

To economists, strong productivity growth provides an almost magical elixir. When companies roll out more efficient machines or technology, their workers can become more productive: They increase their output per hour. A result is that companies can often boost their profits and raise their employees’ pay without having to jack up prices. Inflation can remain in check. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, has likened surging productivity to “magic beanstalk beans for the economy. … You can have faster income increases, faster wage growth, faster GDP without generating inflation.’’ Joe Brusuelas, chief economist at the tax and consulting firm RSM, said, “The last time we saw anything like this was the late 1990s.”That was when a productivity surge — an early payoff from the sudden embrace of laptops, cellphones and the internet — helped allow the Federal Reserve to keep borrowing rates low because inflation remained under control even as the economy and the job market sizzled.

Statista outlines robotics developments in the US:

  • The United States is expected to generate the highest revenue in the Robotics market, with projections indicating a figure of US$7.85bn in 2024.

  • Within this market, Service robotics is set to dominate, with a projected market volume of US$7.20bn in the same year.

  • Looking ahead, the revenue is anticipated to experience an annual growth rate (CAGR 2024-2028) of 4.41%, resulting in a market volume of US$9.33bn by 2028.

  • It is worth noting that these figures pertain to in the United States, making it a significant player in the global Robotics market.

The United States is experiencing a surge in the adoption of robotics technology across various industries, revolutionizing productivity and efficiency.

Figures 1, 2, and 3 summarize the important data in these areas.

Graph of labor productivity, 2010-2022

Figure 1 – Recent labor productivity in the US (Source: Jabberwocking)

As mentioned above, the constant increase in productivity over the last 10 years is associated with computers, software, and robotic penetration of the workplace. The last three years have been marked by COVID-19, the displacement of workers, shifts to online, and the development of artificial intelligence to assist and sometimes displace direct human activities.

Graph of labor productivity, capital productivity, and K/L ratio

Figure 2 –  Labor and capital productivities in the US (Source: ResearchGate)

As the Fortune piece above explains, labor and capital productivities are closely correlated. However, they are defined and measured differently. Their definitions are given below:

Labor productivity

Labor productivity is a measure of economic performance that compares the amount of output with the amount of labor used to produce that output.

Capital productivity

Capital productivity is the measure of how well physical capital is used in providing goods and services. Productive use of physical capital and labor are the two most important sources of a nation’s material standard of living.

Read this paper by Paul Romer for a comprehensive discussion about the links between labor, capital, and productivity.


The International Federation of Robotics discusses the present state of robotics in the US and globally, as summarized in the following paragraph:

In the last six years, (2010-2015), the US industry has installed around 135,000 new industrial robots. The principal driver in this race to automate is the car industry. During this same period, (2010-2015), the number of employees in the automotive sector increased by 230,000.

Figure 3, taken from the same source, shows that the use of robotics in some other developed countries penetrates further than it does in the US.

Graph of multipurpose industrial robots in Japan, Republic of Korea, USA, Germany, France, Slovakia, Spain, and Italy

Figure 3 – Penetration of robotics in a few developed countries.

Increasing productivity, whether directly—through an increase in labor productivity—or indirectly—through capital productivity—can compensate for decreased labor. The purchasing power will increase if productivity is shared with labor compensation.

As discussed in previous blogs, the world is now in the middle of a transition. The global population is shrinking but  an increase in immigration will balance some of the impacts. The next blog will focus on the political ramifications of these developments.

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Economic Consequences of Population Decline

Image of family walking down declining graph of population as if it were stairs.

Cost of declining population (Source: Financial Times)

I have repeatedly discussed the economic consequences of global or country-specific activities throughout the 12 years of this blog. To my memory, the concept was never explained either by me or by any of the guest bloggers. In all cases, economic activity was always discussed in terms of GDP (Gross Domestic Product). This blog and the next one will be focused on the economic consequences of a declining population and what can be done to mitigate the negative impacts.

I will start with a short explanation of the concepts of GDP and GNP, using an accessible source of information for those of us who are not economists and want to know more.

Again, I will start by asking AI (through Google) to give us its take on the topic and the source of its information. In this case, the source the AI is using is a publication by the International Monetary Fund:

GDP measures the monetary value of final goods and services—that is, those that are bought by the final user—produced in a country in a given period of time (say a quarter or a year). It counts all of the output generated within the borders of a country. GDP is composed of goods and services produced for sale in the market and also includes some nonmarket production, such as defense or education services provided by the government. An alternative concept, gross national product, or GNP counts all the output of the residents of a country. So, if a German-owned company has a factory in the United States, the output of this factory would be included in U.S. GDP, but in German GNP.

In what follows I will use the concept of GDP.

Wikipedia has an entry dedicated to the economic consequences of population decline. Last week’s blog addressed some of the consequences of decreased fertility and the resulting changes to the population pyramid. These include the rise in the dependency ratio (the ratio of the nonworking segment of the population to the total population), crises in end-of-life care for the elderly, and the decline in military strength caused by a smaller pool of young adults who can be recruited (whether voluntarily or by mandate).

Wikipedia’s full list of a declining population’s negative impacts on economic growth is given below. The identity that defines GDP in terms of population is:

                             GDP = total population × GDP/person                                                   (1)

As populations grow more slowly, assuming no changes in growth of GDP/person, GDP will also grow more slowly.

The equation above shows that if the decline in total population is not matched by an equal or greater increase in productivity (GDP/capita), and if that condition continues from one calendar quarter to the next, it follows that a country would experience a decline in GDP, known as an economic recession. If these conditions become permanent, the country could find itself in a permanent recession

The possible impacts of a declining population that leads to permanent recession are:

  1. Decline in basic services and infrastructure.  If the GDP of a community declines, there is less demand for basic services such as hotels, restaurants and shops. The employment in these sectors then suffers.[7] A falling GDP also implies a falling tax base that would support basic infrastructure such as police, fire and electricity. The government may be forced to abandon some of this infrastructure, like bus and railroad lines, and combine school districts, hospitals and even townships in order to maintain some level of economies of scale.[8]
  2. Rise in dependency ratio.
  3. Crisis in end of life care for the elderly.
  4. Difficulties in funding entitlement programs.
  5. Decline in military strength.
  6. Decline in innovation. A falling population also lowers the rate of innovation, since change tends to come from younger workers and entrepreneurs.[10]
  7. Strain on mental health. Population decline may harm a population’s mental health (or morale) if it causes permanent recession and a concomitant decline in basic services and infrastructure.[12]
  8. A recent (2014) study found substantial deflationary pressures from Japan’s ageing population [13]
  9. A Slovenian study from 2015 found that population ageing leads to higher rates of unemployment and less entrepreneurial activity.[14]

The Wikipedia definition of productivity refers to the GDP/person in Equation 1 above. A much better definition of economic productivity comes from the US Bureau of  Labor Statistics, which defines productivity as the ratio between input and output and distinguishes productivity on different levels:

  • Individual worker’s productivity
  • Company’s productivity
  • Industry or sector productivity
  • Business sector productivity
  • National productivity

On the national level, the input can be defined in terms of labor productivity (based only on the part of the population that works) and capital productivity (which includes the infrastructure that assists in producing the output).

The last two items in the list provided by Wikipedia (deflation and unemployment) are less intuitive and they are based on a single publication each ([13] and [14] refer to the article’s references). They are much too broad to be associated only with population decline and they will not be discussed further.

A much more serious issue associated with the Wikipedia list is that it is limited to suppliers to the GDP. The main reason is that the definition of GDP is limited to suppliers. It is connected to the demand side of the economy only through the connection to the prices that suppliers can ask for their goods. By not including the demand side of the economy, the list eliminates much of the resulting feedback of supply and demand.

Another issue not included in the Wikipedia list is the time dependence (i.e., the rates) of the population decline, the changes in the resulting population pyramids, and the lifetime of the infrastructures constructed to serve the population. A good example is the impact of the changes to the population pyramid on item 3 in the Wikipedia list. The increase in the non-productive elderly segment of the population compared to the productive younger segment will obviously have a negative impact on supply. But the growth of that segment will also increase the demand for healthcare. The fact that in democratic countries this segment of the population is fully entitled to vote on every level, and thus will require economic support, makes the increasing demand an important element in the allocation of resources.

Different rates of population decline and the lifetime of the infrastructure constructed to serve this aging population can be seen in the disequilibrium of supply and demand in housing that in many cases results in the creation of ghost towns. A good example is the abundance of ghost towns in Japan, where the decline in fertility is among the largest in the world:

The shrinking population in rural areas coupled with brain drain to the major cities has left behind numerous “ghost villages” scattered throughout the Japanese countryside.

In January, Prime Minister Fumio Kishida’s administration launched a programme that aims to revitalise rural areas by offering families relocating from Tokyo to the countryside 1 million yen per child. Though many have questioned its ability to lure people away from the capital.

According to official statistics, there are about 8.5 million abandoned homes – known as akiya – in Japan, but estimates suggest the true number could be closer to 11 million. Akiya are expected to become only more common as the population greys, with the government projecting them to make up 30 percent of the entire housing stock within the next 10 years.

Ghost towns can form for other reasons than declining population. They can be caused by nuclear disasters (Fukushima), bankrupt mines, or a decline in other economic factors that initially justified a real-estate boom. However, in many places, declining population is the main driving force behind the abandonment, especially in rural areas.

Next week’s blog will be dedicated to the steps that are being taken to mitigate some of the negative impacts of declining populations.

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Population Pyramids

The two previous blogs focused on global fertility decline. We are in the middle of a global transition from an increase to a decline in population; the population is estimated to peak around mid-century. Last week’s blog covered some of the driving forces behind this transition. Over the next two weeks, I will discuss the economic consequences of this transition and the resulting political consequences.

Consequences that will be discussed as part of the economic consequences will include a rise in the dependency ratio, a crisis in end-of-life care, and a decline in military strength. All these impacts result from changes to the age distribution of the population. The age distribution of the population is described in the form of population pyramids. This blog will focus on some of the consequences of the population decline on the population pyramids.

I discussed population pyramids in an earlier blog (January 21, 2014). Before, fertility rates below replacement (2.1) were limited to rich countries; now, as we saw in the last two blogs, below-replacement fertility is expanding around the world and it’s time to return to this issue.

Figure 1 – 2017 Population pyramids of three countries with different fertility and growth patterns (Source: Visual Capitalist)

Figure 1 shows the 2017 population pyramids of three countries with different population growth patterns. The Democratic Republic of Congo has a fertility rate well above replacement, resulting in a fast growth rate (in 2022 estimated growth was 3.25%). The United States’ fertility is well below replacement (1.6), with a recent net growth rate of 0.53% that comes mainly from immigration. Lastly, we have Germany, whose fertility rate is almost identical to that of the US (1.62) but has an almost zero recent growth rate (0.03%). The data for the US and Germany were taken from Table 1 in a recent blog (January 30, 2024). In both the United States and Germany, immigrants constitute significant parts of the population pyramid.

Figure 2 shows the contributions of both the immigrants and the US-born to the population pyramid of the US (2022). I was not entirely clear from the MPI (Migration Policy Institute) description of the immigrants’ contribution how they factored in the inclusion of naturalized and authorized (green card) immigrants vs. illegal immigrants. As was mentioned in the first blog in this series (January 30, 2024), in the US there are presently close to 50 million immigrants (not born in the US). A rough estimate is that about 1/3 of these immigrants are not naturalized. Summing up the number of immigrants in Figure 2, one arrives at a number close to 40 million people. This roughly corresponds to authorized and naturalized immigrants (it takes many years between authorization and naturalization).

Figure 2 – Population pyramids of immigrants and US-born Americans (Source: Migration Policy Institute)

Below is what MPI writes about the immigrant population:

Immigrant population: The shape of the age-sex pyramid of the immigrant population is very different from that of the native-born population for a number of reasons. First, many migrants migrate to find work abroad, so a high number in the economically active 20-to-54 age bracket is not uncommon. As can be seen here, the majority of immigrants in 2022 were adults between the ages of 20 and 54. Second, in general, children are less likely to migrate by themselves and adult immigrants tend to migrate with few or no children. This helps explain the relatively small amount of people ages 20 and younger. There is another reason, however: the children born in the United States to adult immigrants are included in the native-born population estimates. Third, people are less likely to migrate at older ages. In the foreign-born age-sex pyramid, there are fewer people in the retirement-age groups (65 and over). This low number of older immigrants also has to do with some returning home for retirement and the death of some older immigrants. All of these factors give the foreign-born age-sex pyramid its “diamond shape,” making it significantly different from the native population pyramid. About 46.2 million immigrants resided in the United States in 2022.

In terms of economic impact, the rise in dependency originates from the relative decline of the working segment of the population as a percentage of the general population. It is also important to keep in mind the corresponding decrease in the non-working segments, including youth and the elderly. Almost all rich economies are committed to supporting both their old and young populations at a variety of levels. This support takes various forms that impact the well-being of a country. I dedicated many of my previous blogs to describing the difficulties the American education system now faces because of declining enrollments. Education is part of the support system for the young that every country is committed to on various levels. Social Security is part of insurance that many countries use to support the elderly (based on their contributions during their working times). Healthcare, in many cases, is a mechanism that countries use to support both the old and the young. The next blogs will expand on these issues.

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Driving Forces of Population Decrease

Last week’s blog summarized the data for the global transition to a declining population, driven mainly by a major decline in global fertility rates. As I mentioned in that blog, the trend is not new and was discussed in earlier blogs that you can find through the search box. For many years, this decline was limited to rich, high-income countries. Data in last week’s blog show that the population decline is no longer limited to high-income countries but is now spreading through middle-income countries (see updated classification on the World Bank website), with India, the most populated low-income country, reaching the benchmark fertility of 2.1. Table 1 of last week’s blog summarizes the relevant data for 20 key countries in which the total population reaches more than 50% of the global population, all showing declining fertility rates lower than or equal to 2.1.

To get into more specific driving forces of this transition we can narrow the selection of countries to three: India, China, and the US. Together, the total population of these countries (greater than 3.1 billion) exceeds one-third of the global population. Additionally, each country represents the most populated country of one key income level: India – low income; China – middle income and US – high income.

Before we get into details, it will help to explore the general understanding of the global fertility decline through an NIH publication (US National Institute of Health). I will cite below the introductory paragraph:

There is a concern about declining birth rates in both the developing and developed world (www.rand.org). Fertility rates tend to be higher in poorly resourced countries but due to high maternal and perinatal mortality, there is a reduction in birth rates. In developing countries children are needed as a labour force and to provide care for their parents in old age. In these countries, fertility rates are higher due to the lack of access to contraceptives and generally lower levels of female education. The social structure, religious beliefs, economic prosperity and urbanisation within each country are likely to affect birth rates as well as abortion rates, Developed countries tend to have a lower fertility rate due to lifestyle choices associated with economic affluence where mortality rates are low, birth control is easily accessible and children often can become an economic drain caused by housing, education cost and other cost involved in bringing up children. Higher education and professional careers often mean that women have children late in life. This can result in a demographic economic paradox.

In this blog, I will focus on two issues that are mentioned above: women’s education and the extra options and opportunities it provides, and parental decisions based on a couple’s well-being as they age and need additional support. 

Women’s Education

The following article is a follow-up to the 1995 Beijing Declaration and Platform for Action, which formalized the international community’s commitment to advancing education equality for women around the world. The paragraph below cites the introductory summary:

ACCESS TO PRIMARY EDUCATION Spurred by international commitments made in the context of the Education for All movement as well as the Millennium Development Goals, the vast majority of countries have made significant progress in terms of making primary education financially accessible: 89% of low-income countries, 97% of middle-income countries, and 100% of high-income countries have made primary education tuition-free. There are only seven countries in the world that report charging tuition fees for primary education: Comoros, Guinea, Papua New Guinea, Somalia, South Africa, Zambia, and Zimbabwe (see Map 1). Similarly, most countries have adopted policies to keep children in school at the primary level: there are only 15 countries that have not made primary education compulsory (see Map 4)(15).

Figure 1, taken from the same publication, shows the global spread of compulsory primary education, as of 2014.Global map of compulsory primary education Figure 1 – Global map of compulsory primary education, 2014 (Source: WORLD Policy Analysis Center)

Compulsory primary education is considered to be a higher standard and more specific measurement in terms of content and timing than literacy, which, at its lowest level, is defined as the ability to read and write. Figures 2 and 3 show the recent changes in literacy in India and China.

Bar chart of literacy rate in India from 1901-2011, divided by genderFigure 2 – Literacy rate in India, 1901-2011 (Source: Semantic Scholar)

Statistic: Adult literacy rate in China from 1982 to 2020 | Statista
Figure 3 – Literacy rate in China, 1982-2020 (Source: Statista)

The literacy rate in China is now approaching 100% for both genders, a figure identical to that of high-income countries.

Generational Support Through Health Care

The second driving force that I will examine below is the generational support necessary for health care as we grow older; there is an increased demand for and an uncertain supply of caregivers. The best indicator of this driving force is the changes that take place in life expectancy as determined at birth. Figures 4 and 5 show the changes in two different regions. Figure 4 shows the changes that have taken place over my lifetime in India, the most populated country in the world. It is a low-income country whose fertility rate is sharply declining and has reached a replacement level of 2.1 on its way down. The life expectancy trajectory is almost a reflection of the decrease in fertility rate.

Line graph of India life expectancyFigure 4 – Life expectancy at birth in India, 1941-2019 (Source: X @OurWorldInData)

Figure 5 shows the changes that are now taking place in this indicator in Africa. The Visual Capitalist infographic at the top of last week’s blog lists the 10 countries with the highest fertility rates (well above replacement level). Some of the later high fertility rates are a result of the devastating impact that the AIDS/HIV epidemic inflicted on many countries in Africa toward the end of the last century; among other factors, many have opted for more children to replace those who have died. The impact of this epidemic shows up on the life expectancy curve but only in the form of a kink on the graph on the way up, which strongly indicates that collective healthcare is finally penetrating the continent. This also gives reasonable expectations that such healthcare is starting to replace generational dependence.  The data in Figures 1, 4, and 5 strongly suggest the further expansion of a global fertility decline.

Line graph of Africa life expectancy, 1950-2020Figure 5 – Life expectancy in Africa, 1950-2020 (Source: Statista)

The kink in life expectancy around the end of the 20th century is mainly due to the spread of HIV/AIDS. Future blogs will focus on the consequences of declining fertility. These include changes in the age distribution (population pyramids) due to changes in fertility and contributions from immigration. I will also look at some of the economic consequences of declining populations and their impacts on the political leadership of some countries that will hold key elections in 2024.

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