I dreamt this afternoon about economics. I have never done so before, but that must be what I get for reading Bastiat’s Economic Harmonies before my catnap. The topic that agitated my mind was Bastiat’s comments about population density. I admit that I have not exhaustively studied Bastiat’s comments on population density; therefore, my initial response, which was negative to his claims that increasing population density is a powerful source of economic and moral improvement, may change.
Bastiat brought up his ideas about population density after he explained that exchange halts “when, in the aggregate, the sum total of satisfactions obtained by the division of labor reaches the point where it is less, by reason of the difficulties of exchange, than the satisfactions that could be procured by direct, individual action.” In other words, if an item costs you $10 to produce, but a neighboring city can produce it for $6, you would be willing to exchange for that product until it cost an additional $4 to transport it from the neighboring city to your city. At the point that the cost of exchange reaches $4, the total cost of that item becomes $10 ($6 for production + $4 for exchange), and you might as well produce the item yourself.
If you produce the item yourself, exchange has ceased. “Under these circumstances, if the machinery of exchange is improved, if the middlemen lower their costs, if a mountain is tunneled, if a bridge is thrown over a river, if a road is paved, if obstacles are reduced, exchange will increase.” Bringing people closer together reduces many of these barriers. “Hence, it follows that bringing men closer together is equivalent to improving the machinery of exchange.” He continued with his explanation that more people in close proximity could find others to exchange with more easily and find mutual satisfaction from that transaction. Multiple individuals and industries could use the same roads, keep them in better repair, and travel less distance in order to reach their customers. Essentially, these factors reduce the cost of exchange.
This is where my confusion began. I currently stay in Mukono, Uganda. The population density in Uganda is intense. There is one major highway from Entebbe, where the airport is, and Jinja, a tourist town on the banks of the Nile. Nearly the entire length of this road is populated. According to Bastiat, this should promote beneficial exchange. Increased exchange, in my mind, should promote prosperity, but Uganda is a very poor country. Many of her citizens make only enough money to eat that same day. Many others do not earn even that much. Part of my observation has been that due to the intense population density, the supply of trained workers exceeds the demand for those workers – by far. One popular option for employment is to drive a boda. Bodas are motorcycle taxis. In even the smaller towns, there are hundreds of bodas. Most of them are idle in the shade of a tree, hoping that a passenger happens along. The supply of bodas far exceeds the demand for bodas, and a major reason for this is that many men leave their villages to aggregate in the towns and cities that cluster along the highway. They have little education or vocational training; therefore, there are few options available for their employment outside of driving a boda.
I find myself questioning Bastiat’s idea, because my observations contradict his claims. I have noticed similar unemployment and underemployment in large, populous US cities. I wonder if the benefits of increased population density suffer the law of diminishing returns. Are the unemployment and underemployment I mentioned above truly resultant of too many people in one place, or are other economic and political factors responsible?
Another dispute I had with the reading is that Bastiat spent much time previously explaining that often exchange occurs due to the varying availability of resources in different locations. If we aggregate the population in location X, do we not sacrifice the available resources of location Y? Or does Bastiat desire large populations at both X and Y?
Another point of agitation for me was Bastiat’s claim that, “It is not only the physical side of the commercial mechanism that is put to use and improved by the mere fact of the density of the population, but the moral and cultural side as well.” I get the cultural side. If you have different ethnic groups living close to one another, they will be exposed to each other’s way of life; however, the moral side of his comment seems wrong. Often, crime rates are significantly higher in large cities – especially in the areas of highest population density. Would you want to walk alone down a dark street in the projects of DC, slums of Detroit, or similar neighborhoods? Does the idea of walking down a lazy country road on a dark night carry the same feeling? I do not intend to infer that country towns do not have their own problems and crime, but I think there are more illegal drug activities, prostitution, murders, and thefts per capita in large cities. (Additional research shows that the high crime rates in big cities are concentrated in areas of lower socioeconomic status. This tells me that I need to look into other factors more rather than blame population density. However, I also suspect that high population density may contribute to crime rates by juxtaposing socioeconomic classes. I also realize that I’m guilty of conjecture, and somehow arriving at the true root of the problem is probably beyond my ability and access to necessary resources.
I also imagine that many criminal activities are economic in some way-especially those like drug deals and prostitution, wherein an exchange is made in order for both parties to receive something they want. If so, maybe Bastiat was right about population density promoting easier exchange, but the morality issue remains. Bastiat’s explanation of the increased morality relates to larger numbers of individuals who can be invited and organized to donate resources, time, and labor to efforts beneficial to society, like building a church. I don’t know. That may be true, but there does seem to be more immorality in the big cities.
I recognize that I am merely starting my discovery of economic theory and principle. I love Bastiat, but during today’s reading, I have questioned much. I guess I have reached a moment in which I wish I could sit down with this and other great men and converse with them. We get to do that with books, but its such hard work at times! Especially so when you are working with an intellect as limited as mine. I’d love for Bastiat to look at me with a stern gaze and say, “Jonathan, pull your head out of that orifice and listen to me!” Later, I’d say, “Thanks Freddy! I get it now!” Maybe my mentors next semester will serve as the proxy for Bastiat by telling me how wrong I am, or maybe one of my two readers has the answer. I’d love to hear from you!