How contraception built the Tiger economy…

Contraception, apparently. According to Malcolm Gladwell, it’s what Harvard academics David Bloom and David Canning argue for some years now. When all other explanations are spent, it is the dramatic fall in the birth rate just after the Tiger generation that released a major amount of resources from sustaining a non working population and made way for economic growth rates double that of the EU average. Hat-tip to Fews Orange!

“The introduction of demographics has reduced the need for the argument that there was something exceptional about East Asia or idiosyncratic to Africa,” Bloom and Canning write, in their study of the Irish economic miracle. “Once age-structure dynamics are introduced into an economic growth model, these regions are much closer to obeying common principles of economic growth.”

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  • Pete Baker

    Mick

    Malcolm Gladwell also blogs.. and he’s got several posts there dealing with this article and the reaction to it.. might be worth scanning through… all the way through to the most recent entry

  • Slugger O’Toole Admin

    Fascinating.

  • Donall Garvin

    I’ve looked at the report and it seems to explain to a large extent the Celtic Tiger.

    A similar study by Dr. Steven D. Levitt (co-author of the book “Freakonomics”) showed that the reduction in crime in the 1990’s could be attributed to the introduction of abortion in the 1970’s in America.

    The introduction of the pill in the US and UK in the 1960’s is said to have had a large impact on growth.

  • seabhac siulach

    If that linkage of falling birthrate to rapid economic growth held true universally, then it would surely be replicated in other economies worldwide…yet it is not.
    For example, birthrates have collapsed in many parts of Eastern and Central Europe but there has been little evidence that they are all following the sustained ‘Celtic Tiger’ rate of growth (at least not the established economies of Germany and Italy, where birth-rates have hit all time lows). Surely, it is an over-simplistic view which does not take into account the special circumstances of the 26 counties at the time the ‘Celtic Tiger’ took off, principally, a large, young, educated, english speaking workforce, a very generous tax system, ‘flexible’ politicians, etc. Imagining that low birth-rates are a panacea takes no account of the subsequent cost to economies and societies (in later years) of low birth-rates, i.e., higher immigration, pension crises, etc.

  • Alan

    “Imagining that low birth-rates are a panacea takes no account of the subsequent cost to economies and societies.”

    It’s the bulge effect that seems to produce the growth, rather than consistent low birth rates, surely.

  • seabhac siulach

    “It’s the bulge effect that seems to produce the growth, rather than consistent low birth rates, surely.”

    Yes…but, if so, then how does one explain Spain, which had a large birth-rate in the Franco years, and now has one of the lowest birth-rates in Europe, did not see anything like the same effect. The same would go for the former communist Eastern European countries which had large birth-rates up until the fall of communism in 1989.

  • Henry94

    Donall

    A similar study by Dr. Steven D. Levitt (co-author of the book “Freakonomics”) showed that the reduction in crime in the 1990’s could be attributed to the introduction of abortion in the 1970’s in America.

    In November 2005, two Federal Reserve Bank of Boston economists published a working paper (Foote and Goetz 2005 [3]) which showed that the results in Donohue and Levitt’s abortion and crime paper were due to statistical errors by the authors – in particular the omission of certain statistical controls that Donohue and Levitt had claimed to have used and using the total number of arrests and not the arrest rate in explaining changes in the crime rate. The Economist remarked on the news of the errors that “for someone of Mr Levitt’s iconoclasm and ingenuity, technical ineptitude is a much graver charge than moral turpitude. To be politically incorrect is one thing; to be simply incorrect quite another.

  • JR

    The Tiger economy of the South was constructed by government policy on taxation, investment, education , it’s ability to bring in foreign investment,etc. Charles Haughey and his cabinet peers are responsible for the forward thinking economy boom.

  • wild turkey

    ‘the ideas that make us comfortable are the ones to beware.’received wisdom is that a considered education/training programme combined with a tax regime to attract off shore (ie USA) investment, laid the foundation for the celtic tiger.

    previous posters have mentioned both levitt and gladwell. below is a truncated NYT article (in its entirety because i cant get the link to work) re a debate around levitts assertion about the relationship between abortion and lower crime rates.

    anyway to stimlate debate on this issue, NYT article follow below

    The Miracle That Wasn’t
    By JOHN TIERNEY

    It is an inspirational urban lesson from the 1990’s: take back the streets from squeegee men and drug dealers, and violent crime will plummet. But on Thursday evening, the tipping-point theory was looking pretty wobbly itself.
    The occasion was a debate in Manhattan before an audience thrilled to be present for a historic occasion: the first showdown between two social-science wonks with books that were ranked second and third on Amazon.com (outsold only by “Harry Potter”). It pitted Malcolm Gladwell, author of “Blink” and “The Tipping Point,” against Steven D. Levitt, an economist at the University of Chicago with the new second-place book, “Freakonomics.”

    Professor Levitt considers the New York crime story to be an urban legend. Yes, he acknowledges, there are tipping points when people suddenly start acting differently, but why did crime drop in so many other cities that weren’t using New York’s policing techniques? His new book, written with Stephen J. Dubner, concludes that one big reason was simply the longer prison sentences that kept criminals off the streets of New York and other cities.
    The prison terms don’t explain why crime fell sooner and more sharply in New York than elsewhere, but Professor Levitt accounts for that, too. One reason he cites is that the crack epidemic eased earlier in New York than in other cities. Another, more important, reason is that New York added lots of cops in the early 90’s.
    But the single most important cause, he says, was an event two decades earlier: the legalization of abortion in New York State in 1970, three years before it was legalized nationally by the Supreme Court.
    The result, he maintains, was a huge reduction in the number of children who would have been at greater than average risk of becoming criminals during the 1990’s. Growing up as an unwanted child is itself a risk factor, he says, and the women who had abortions were disproportionately likely to be unmarried teenagers with low incomes and poor education – factors that also increase the risk.
    It’s a theory that doesn’t sit well with either liberals or conservatives, and Professor Levitt hastens to add that the reduction in crime is not an argument for encouraging abortion – he personally has mixed feelings on whether abortion should be legal. But he says the correlations are clear: crime declined earlier in the states that had legalized abortion before Roe v. Wade, and it declined more in places with high abortion rates, like New York.
    Some criminologists have quarreled with his statistics, but the theory was looking robust at the end of the debate in Manhattan. Mr. Gladwell, while raising what he called a few minor quibbles, seemed mostly persuaded by the numbers.
    “My first inclination,” he joked at the beginning of his rebuttal, “is to say that everything you just heard from Steven Levitt, even though it contradicts things I have written, is true.”
    That’s my inclination, too, as a less successful exponent of the same theory. In retrospect, the New York crime story looks like a classic bit of conventional wisdom, as the term was originally defined by John Kenneth Galbraith: an idea that becomes commonly accepted because it is “what the community as a whole or particular audiences find acceptable.”
    Unlike the abortion theory, which was raised in the 1990’s and angrily dismissed, the tipping-point idea jibed reassuringly with everyone’s beliefs and needs. Urbanites and politicians welcomed a new reason to crack down on street nuisances. Journalists wanted a saga with heroes. Criminologists and the police loved to see their new strategies having dramatic results.
    I still think the police made some difference, and not merely because there were more of them on the streets. One veteran cop told me that traditionally only a quarter of the officers had done their jobs, and that the heroic achievement of Commissioner William Bratton and Mayor Rudolph Giuliani had been to get that figure up to 50 percent.
    But it now looks as if the good guys did not take back the streets all on their own, and the moral of the story is less about safe streets than safe beliefs. Professor Levitt’s abortion theory is not appealing. But the ideas that make us comfortable are the ones to beware.

  • JR

    The fall in birth rate or use of contraception was due to fall in the catholics church influence on people.

  • idunnomeself

    the rapid fall in the birth rate may well be a causal factor in teh ‘Celtic Tiger’ (although migration isn’t featuring in the theory- what use lots of young people if they leave)

    but that doesn’t mean that fall was due to the sudden availability of contraception

  • Crataegus

    I would have thought it was the other way round. Too busy to conceive, and with rising house prices both partners forced to work.

    I have also heard that the boom was initially due to the planning permission given to thousands of bungalows. Collectively these increased the assets of the country by billions.

    Whatever the reason enjoy the good times while they last but are they good times for all?

  • abucs

    i think it makes some sense that the more workers there are and the less dependants the higher the quality of life.

    But it is a trick you can only pull once.

    Society has a way of evening out so that house prices, minimum wages, living costs etc etc raise so much that you then need to continue the low birth rate policy just to get by.

    As well, to continue growth, you then get into an endless situation of HAVING to attract enough migrants to keep the whole thing going and growing.

    Then you have the future social issue questions on is it fair that the prior citizens have wealth and the new ones start off with zilch and have to do all the work to get it.

    What is life all about anyway ?

    Taken to its logical conclusion, kids would be banned.

    P.S. i’d guess the reasons for the Republics’successes are many and varied and probably include the above in some way.

  • Crataegus

    Abucs

    You have stirred an old thought. It often occurs to me that what I would regard as wealth and well being is very different from economic growth. For me cheap houses and low mortgages and everyone spending a bit more time with their family are a better set of values than running around like headless chickens doing two jobs to pay the mortgage. Growth simply measures production and not necessarily well being. If a tornado hits Castle Crataegus then is fixing the damage really growth or is it simply standing still? The cost of housing is an appalling burden on the young and will cripple their finances for decades.

  • Garibaldy

    Surely being in the EU was the single biggest factor, through the access to structural funds and it enabled the tax breaks etc to be effective for a huge market of hundreds of millions.

    Crat, on the debt thing. It’s already clear that the children of people in their 20s and 30s will inherit their parents’ debts in a big way, if this doesn’t happen sooner. Easy credit keeps the system going, but the possibilty – or if one wanted to be Marxist about things, inevitablility – of a serious crash makes the whole thing very vulnerable. The yanks pulled the Japanese and South Koreans out of a big hole in the late 1990s that had a great deal to do with credit. What will happen if it is unable or unwilling to do so next time is anybody’s guess.

    This contraception idea is slightly silly.

  • Crataegus

    Garibaldy

    I agree beware property bubbles.

    Personally I think it will crash (here and there) simply due to debt. Bad signs are when rents can’t cover the investment and people are investing in the hope that capital growth will yield profit. Also when the average household cannot afford an average house based on a 15 – 25 year (normal) mortgage secured on the principle salary you are over exposed. We live with the economics of Narnia.

  • Dread Cthulhu

    Garibaldy: “Crat, on the debt thing. It’s already clear that the children of people in their 20s and 30s will inherit their parents’ debts in a big way, if this doesn’t happen sooner. Easy credit keeps the system going, but the possibilty – or if one wanted to be Marxist about things, inevitablility – of a serious crash makes the whole thing very vulnerable. The yanks pulled the Japanese and South Koreans out of a big hole in the late 1990s that had a great deal to do with credit. What will happen if it is unable or unwilling to do so next time is anybody’s guess. ”

    And the Mexicans more recently, for that matter.

    Guess those silly old Yanks do have their uses…

    The real problem will be what happens when the US suffers its “inevitable” crash.

    Garibadly: “This contraception idea is slightly silly. ”

    Don’t confuse relation for correlation. Also, just because there is a correlation doesn’t mean its the sole factor or even the most important one.

  • Mick Fealty

    Abucs,

    “But it is a trick you can only pull once”.

    True. Though there is a shadow effect one generation later.

    Gari,

    If there was no correlation Bloom and Canning would not have anything to report. The other factors mentioned: education, high value inward investment, infrastructural investment, access to wider martets through the EU and a low tax regime (courtesy of FG’s ‘Tallaght Strategy’ as much as the FF government of the time) all maximise the effect of this particular ‘demographic gift’.

    What’s interesting is that this is a macro theory that appears explain not simply Ireland’s case, but other countries whose economic recovery is even more spectacular. There is probably more work to be done to see to what degree (if any) the dropping of the birth rates in some way triggered the economic policies above.

    But the figures themselves are difficult to argue with.

  • Garibaldy

    Mick,

    As other people have pointed out here the former Soviet bloc, and in particular Russia, have falling populations without any sign of an economic miracle. On top of that, the growth of the economy in the early modern period was substantially linked to population growth. And there’s good evidence that much of the economic growth after WWII was related to population growth as well.

    Let’s not forget that many of the policies discussed above have their origins in the 1950s, when people were writing books like “The Vanishing Irish” (possibly the disappearing Irish). These fears had nothing to do with contraception – quite the opposite. On top of that, a lot of the liberal policies were of course the products of changing climates globally that had very different circumstances to Ireland.

    Macro-economic thoeries nearly all have their very obvious flaws. This has quite a few

  • hovetwo

    IIRC Garret FitzGerald suggested that the demographic shift (unskilled seniors being replaced and then some by high-skilled graduates) was adding ~ 1% pa to economic growth over many years.

    Not enough to cause or explain the Tiger economy, but certainly a strong feature.

    As has been referenced here, demographics alone don’t explain the phenomenon. The ability of Ireland’s baby boomers to stay at home marks them out from previous generations – driven by the access to markets, low tax rates, English speaking, educated workforce – I mean, if you were a US investor in the ’90s, it wasn’t a hard decision.

    PS As for Levitts argument on abortion, it goes something like this: poor people commit crimes, poor people have abortions, therefore the more abortions, the fewer poor people will be around to commit crimes. On Levitt’s stats many thousands of abortions would be required before one murderer was pre-emptively terminated. As he says himself, to use abortion as an instrument of social policy would be a conclusion of Swiftian proportions – there had to be an Irish angle.

    PPS the incidence of effective contraception apparently correlates most strongly with the increase in female literacy (although tell that to the French in the 18th century).

  • abucs

    Crataegus,

    “It often occurs to me that what I would regard as wealth and well being is very different from economic growth”.

    That seems like a very succint way of putting it.
    I agree with you.

  • abucs

    P.S. i guess that economic growth is the indicator and yardstick by which we now judge and elect politicians. (in most places).

    No doubt it has produced more material things and lifted living standards. But will it continue to ?

    I think there’s also a case that it can produce more inequality and raises the bar for the amount needed to work in order to ‘grow your individual share’, unfortunately sometimes at the expense of family.

    It’s a bit like someone deciding to stand on their tiptoes on the terraces at the football. They are in a better position to see the match until everyone else does the same thing then everyone is stuck straining their feet so as not to be in a worse position than when they started.

    i don’t want to rubbish economic growth per se, it is a vital factor and we need it to some degree but i think a truly ‘enlightened politician’ would be someone who will be able to take everyone off their toes rather than getting us all to stand higher up.

    Because we are hooked on voting for politicians though who promise more wealth through economic growth i wonder if we are doing ourselves any favours or if we’d even be able to spot that ‘enlightened politician’ in the first place.

    Things have a way of progressing and magnifying in a particular direction without much control or choice. Will be interesting to see where it leeds us all. With luck there might be a silver lining to that cloud that’s starting to form for the next generation.