I disagree that there is a significant correlation between expanding population and an expanding economy. In fact there are plenty of examples of countries whose economy expanded way faster than their population, which implies that factors other than population dominate economic growth. (If population was the dominant factor in economic growth, we would see a consistent correlation between the two.)
Every day we read articles about how AI is going to drive massive improvements in productivity, killing millions of jobs in the process. If we really believe this is true, then a shrinking population is what we want, to "soak up" those destroyed jobs. A bonus of massive productivity increases is that real property transactions as a percentage of the economy will shrink too, softening the blow of contraction there.
Real estate is not the first industry to be threatened by changes in the economy! Creative destruction is part of our economic story and there is no inherent reason real estate should be immune from that, or that we should feel special concern about that industry among all others.
In short, I see no reason to believe that a shrinking population necessarily creates a shrinking economy. "Contraction economics" sounds cool but it's just a new name for what happened to the buggy whip industry, the telegraph industry, the canal industry, etc. And yes, maybe the real estate industry too.
EDIT to add: In my opinion a more significant future for economics is accounting for externalities that have typically stayed off the books, like clean water, clean air, a stable climate, etc. Economics has typically modeled economies as open systems, that is, there are "inputs" like raw materials and energy sources, that create economic outputs. But we've conquered the Earth now... with the exception of insolation, the global economy is a closed system. Every ounce of raw material and every joule of energy creates a complementary cost somewhere else in the system. Unless we can account for that, we will fool ourselves about the actual net value we are creating.
"I disagree that there is a significant correlation between expanding population and an expanding economy."
In any functioning economy there is obviously a correlation.
Bodies have jobs, generate income, and they buy stuff meaning GDP.
Government spends on social services per body, meaning GDP.
Not only are 'warm bodies' a part of economic growth ... 'warm bodies' are the very basis of economic growth in most of the West! If you take out population growth from US economic data, it looks a little more like Europe. If you normalize for lower rates of children ... that explains a huge amount about lagging economic growth in the West.
Populations that require homes, cars, services, food, mortgages - that's what drives the economy.
So to your point - in a dysfunctional scenario, more bodies means problems, but overall no.
How do you think America became the most powerful entity in the Western world and in some ways in the world? And not Sweden?
The story of American economic growth from 1777 onwards includes a lot of things, but if you measure up against Europe, what mostly stands out is body count.
Also - remember that growth is measured in GDP, not 'efficiency' - so as AI does 'more for less' it's technically 'bad' paradoxically, for the economy, as you point out. But as long as we figure out a way (any way!) for the surpluses to be distributed, they will be spent, hence 'growing economy'.
Canada's economic strategy is fully based on body count. The nations banks drive our strategy, and they can't grow any more through competition or innovation - they can only grow through more mortgages, which come from more bodies. So they push for large scale immigration, which is in their self interest.
'AI' is not how the economy will grow.
A sea of new homes, out to the horizon, with a Starbucks on every corner, an IKEA in every neighbourhood, a Toyota in every driveway, and a dozen prescriptions per home ... this is how our current economy 'grows'.
How many of those economic growths situations weren't linked to local population growth, but were linked to global population growth and populations emerging from poverty?
Population correlates directly with some economies: food, housing, etc. I think most of our measures of an economy (GDP? VTI?) aim to get as many people in as many human-only productive jobs as possible. (I apologize for leaving "productive" open-ended)
”If we really believe this is true, then a shrinking population is what we want, to "soak up" those destroyed jobs”
The number of jobs is highway correlated with the number of people (most jobs exist to serve the population). So, population decline won’t help keep (relative) unemployment numbers down.
One prominent recent example that destroys the myth that economic expansion is very tightly bound to population expansion, is the US.
2008 pop: 304m people. 2018 pop: ~327m people. A 7.5% increase in population across a decade.
2008 GDP: $14.72t ($17.64t inflation adjusted). 2018 GDP: $20.5t. Approximately a 17% real increase in GDP.
The US added an economy close to the size of Germany in just ten years while only adding 23m people (Germany's population is 83m). That's courtesy of increasing output per capita far more than it is population growth.
They can be correlated without being a tight linear relationship.
If every two people in a group have exactly one transaction, then adding 20 people to a group of 100 will create more new transactions than you'll find in a group with just 20 people.
To be fair, when I google for research on correlations between economic growth and population growth, I get a jumble of papers on opposite sides - some pro-natalist and some anti-natalist and some agnostic. (Maybe one camp is considered far more authoritative than the others?)
Maybe it's a nontrivial relationship if it exists, though I'm not convinced anyone knows definitively how the relationship plays out.
The fact that the slope of the growth line is not 1 does not imply that economic expansion is not tightly bound to population expansion, or that economic expansion could continue under population contraction. Consider the simplest possible linear model Y = beta * X + noise where beta != 1; to say nothing of nonlinear models or interaction effects between population growth and other factors. Surely output per capita matters, and the true data generating process is far more complex, but you have not come close to demonstrating population growth and economic growth are decoupled through this example.
It's easy to grow fast while borrowing heavily, and that should be taken into account when looking at growth curves for various economic regions. Oil prices have also dropped from around $100 to $60 iirc.
Every day we read articles about how AI is going to drive massive improvements in productivity, killing millions of jobs in the process. If we really believe this is true, then a shrinking population is what we want, to "soak up" those destroyed jobs. A bonus of massive productivity increases is that real property transactions as a percentage of the economy will shrink too, softening the blow of contraction there.
Real estate is not the first industry to be threatened by changes in the economy! Creative destruction is part of our economic story and there is no inherent reason real estate should be immune from that, or that we should feel special concern about that industry among all others.
In short, I see no reason to believe that a shrinking population necessarily creates a shrinking economy. "Contraction economics" sounds cool but it's just a new name for what happened to the buggy whip industry, the telegraph industry, the canal industry, etc. And yes, maybe the real estate industry too.
EDIT to add: In my opinion a more significant future for economics is accounting for externalities that have typically stayed off the books, like clean water, clean air, a stable climate, etc. Economics has typically modeled economies as open systems, that is, there are "inputs" like raw materials and energy sources, that create economic outputs. But we've conquered the Earth now... with the exception of insolation, the global economy is a closed system. Every ounce of raw material and every joule of energy creates a complementary cost somewhere else in the system. Unless we can account for that, we will fool ourselves about the actual net value we are creating.