Relearning Economics Profile picture
Sep 2 12 tweets 3 min read Read on X
Elon Musk warns of "low birth rates."⚠️

But the real threat isn’t too few people, it’s the system’s limits.📈

The Limits to Growth study had the answer 50 years ago.

A thread.
🧵1/12 Image
Musk’s story: if population falls, economies collapse.

His "fix"? Have more children.

But this assumes growth = bodies. It misses the real constraint: the material system that supports those bodies.
🧵2/12
Back in 1972, Limits to Growth modeled the global economy as a system of stocks and flows:
–Population
–Resources
–Industrial output
–Food
–Pollution

The feedbacks between them told a stark story.
🧵3/12 Image
The key finding: unchecked growth runs into planetary limits.

Resource depletion + rising pollution = falling output and falling living standards.

Population growth doesn’t save you. It makes collapse sharper.
🧵4/12
And the data?

Multiple independent reviews show the world has tracked close to the “standard run” of the 1972 model.

Industrial output, resource use, population, all moving along the projected path.
🧵5/12 Image
So the problem isn’t "too few babies."

It’s too much extraction, too much pollution, too much dependence on exponential growth in a finite system.
🧵6/12
Musk imagines growth as linear: more people = more progress.

But in system dynamics, growth creates reinforcing loops that strain limits faster, unless you actively redesign the system.
🧵7/12 Image
The real solution flagged in Limits to Growth:

Shift resources from raw expansion to stabilizing feedbacks, renewables, efficiency, equity.
Stability, not endless population growth, sustains prosperity.
🧵8/12
This is why the obsession with birth rates is a distraction.

The danger is overshoot, not undershoot.

The challenge isn’t "too few workers", it’s building systems that work without infinite throughput.
🧵9/12
We’re seeing the warning lights now:
–Climate crisis
–Soil depletion
–Freshwater stress
–Pollution load

These weren’t “doomsday predictions.” They were system feedbacks unfolding.
🧵10/12
The choice isn’t "population collapse vs growth."

It’s collapse by overshoot or stability by design.

More people in an unstable system accelerates breakdown.
🧵11/12
So when Musk frets about low birth rates, he’s missing the point.
The future depends less on how many people exist — and more on whether we respect the system’s limits.
📖Check out my Patreon for this and more:
🧵12/12
patreon.com/c/relearningec…

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More from @RelearningEcon

Aug 28
MPT claims wages equal your individual contribution.

But the evidence doesn’t fit. CEO pay has soared while worker wages barely budged.

Either CEOs became omnipotent, or MPT fails.
🧵1/10 Image
Since 1978:
– CEO compensation rose ~1,200%
– Worker pay ~15%
– Productivity ~70%

MPT can’t explain this gap.

citations:
-barrons.com/articles/worke…
-mdpi.com/1911-8074/14/5…
-businessinsider.com/ceo-compensati…

🧵2/10
Across borders, identical jobs pay wildly different wages.

A McDonald’s worker in the U.S. earns 4–5× what a counterpart in Brazil does, even adjusted for Big Macs.

Institutions, not productivity, are the story.

citations:

🧵3/10crei.cat/wp-content/upl…
Read 10 tweets
Aug 27
Perfect competition is the textbook ideal:
– Many small firms
– Identical products
– Perfect information
– Free entry & exit

In this world, no firm has power. Prices are set by supply & demand.

But here’s the problem…
🧵1/9 Image
No real-world industry looks like this.

Firms spend billions on branding precisely because products aren’t identical.

Information is imperfect. Entry is costly. Exit destroys capital.

The assumptions erase how markets actually work.
🧵2/9
Textbooks still cling to it because it creates neat diagrams:
– Downward sloping demand
– Upward sloping supply
– Equilibrium at the intersection

But the model’s clarity comes from stripping away reality.
🧵3/9
Read 9 tweets
Aug 25
📌 Share buybacks: greedy short-termism, or part of a broader capital system?

The debate is noisier than it is clear.

Here’s a systems view.
🧵1/12 Image
Buybacks spark endless debate: are they corporate greed, or rational capital use?

Critics say they starve investment.

Defenders say they return cash to shareholders.
But the real story is more complex.
🧵2/12
My take: buybacks are like buying out a silent partner.
Equity is financing, just like debt.

When firms don’t need that equity anymore, they repurchase shares.

It’s a repositioning, not the end of investment.
🧵3/12
Read 12 tweets
Aug 21
📌 The "natural rate of interest" (r) is one of the most misleading ideas in macro.

If the natural rate is zero, then it isn’t a rate at all, it’s a fiction.

A thread.*
🧵1/10 Image
Wicksell’s idea: there exists some "natural" interest rate where saving = investment and inflation is stable.

Mainstream macro still clings to this.

But once you examine how credit economies work, the floor falls out.
🧵2/10
In a monetary economy, saving adjusts after investment, not before.

Banks create credit to finance investment.

That means interest rates don’t equilibrate saving & investment, they influence distribution, debt loads, & growth.
🧵3/10
Read 10 tweets
Aug 19
Since 2008, central banks created trillions in reserves through QE.

Textbook logic said this would unleash lending & cause hyperinflation.

It didn’t. Inflation stayed low for over a decade. Why?
🧵1/9 Image
Because reserves don’t flow into the real economy.
They sit at the central bank as electronic balances between banks.

QE swaps bonds for reserves, it doesn’t give households more cash.
🧵2/9
Banks don’t lend reserves to the public.
They lend when they find creditworthy borrowers.

QE didn’t change risk appetite or income growth, so lending didn’t surge.
🧵3/9
Read 9 tweets
Aug 15
Mainstream econ says:
Households save → banks lend savings → firms invest.

Robinson flipped it: investment comes first, savings follow.

Once you see how money & banking work, it’s hard to unsee.
🧵1/10 Image
The Goodwin growth cycle shows it:
Investment drives output & jobs → higher employment boosts wages → rising wages can squeeze profits → investment slows → cycle repeats.

It starts with investment decisions, not household savings.
🧵2/10
So where does the money for investment come from?

Not from a “pool” of prior savings.

Modern banks create credit.

When they lend, they create deposits, new money instantly funding investment.
🧵3/10
Read 10 tweets

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