An optimum population, Managerial Economics

An optimum Population

Countries are often described as under populated or overpopulated.  From the economist's viewpoint these terms do not refer to the population density (i.e. the number of persons per square kilometer), but to the relationship between the numbers of people and the supplies of land, capital and technical knowledge available to them.

"Under population" is an issue of concern because a thinly distributed population means relatively high transport costs.  This in turn has two effects.  First, trade and exchange are made more difficult; hence there is less specialization and more inclination to undertake subsistence production in agriculture and less specialized industry because of smaller market.  Secondly, the amount of social capital required per head of population is increased, so that it may not be worth building roads, dams, bridges or even schools and hospitals, or spending money on general administration for the small number of people in each area.

Excess or overpopulation may also make it extremely difficult for a country to "get started" on the path towards economic growth.  Because of excess population, there is poverty; because of poverty, people find if difficult to save and acquire capital equipment; therefore agriculture stagnates, education is limited, and health poor; the lack of capital and technical progress keeps incomes low, we thus have a 'vicious circle'.

It is therefore argued that if "under population" and "over population" can exist, somewhere in between there must be an "optimum" or best of population i.e. that size of population which with the existence stock of land, capital and knowledge, would give rise to the maximum output per capita are subject to constant change.  An increase in the national stock of capital, improvements in the techniques of production, and in the fertility of  land will all tend to increase the size of the optimum population.

Posted Date: 11/29/2012 5:07:21 AM | Location : United States

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