Do You Believe That Demography Is Destiny?

By James Kostohryz  FEB 12, 2010 9:00 AM

Your disposition toward certain phrases or ideas can reveal a great deal about your psychology.

 


“Demography is destiny” is an aphorism that's repeated in the political and financial media with considerable frequency these days. Does it ring true to you?

In this article, I won't address the relative merits of this statement or its application to such issues as economic growth, social security, and health care.

It is my contention that as an investor, it's far less important that you come to understand whether this statement is true than you gain self-knowledge as to why this aphorism rings true to you.

Profiling Demographic Determinists

I invite readers to reflect on the ideological and psychological profile of commentators that are fond of quoting the phrase, “demography is destiny.”

On its face, “demography is destiny” is a notion that could have positive or negative implications for the fate of a given society depending on its particular demographic profile. Every society has different demographics. Thus, one would expect this phrase to be utilized in the context of describing the relatively “favorable” demographics and destinies of some societies as often as it is used in the context of portraying the relatively “unfavorable” demographics and destinies of others.

However, the funny thing is that this aphorism is almost exclusively employed by commentators in a pessimistic light. This phrase has been employed in support of forecasts of doom and gloom for just about every society on earth.

Thus, we were warned by Thomas Malthus in the 19th century, by Paul Erlich in the 1960s, and by their modern-day environmentalist intellectual heirs that the impending “population explosion” will produce any number and manner of global calamities. Predictions include mass famine, global warming, “peak oil,” and world wars sparked by competition by expanding populations in search of finite resources.

Simultaneously, many commentators that are fond of reminding us that “demography is destiny” have been warning of the disastrous consequences of the “baby deficit,” “the graying of the population,” and other such monikers that describe stagnant-to-declining population levels. We are constantly warned by these prophets of doom that because of declining birth rates, soon there won't be enough young working-age people to support the financial burden of taking care of all the old non-working-age people, thereby leading to economic, financial, and social meltdown.

When analyzing the prospects for societies in Africa and Latin America we're frequently told by “experts” how rising populations there will lead to an increase in hunger and misery. At the same time, “expert” commentators don't seem to tire of repeating the prediction that stagnant-to-declining populations in Europe and East Asia will lead to the decline and eventual collapse of those economies and societies.

In sum, the aphorism that “demography is destiny” is employed to support the view that rapid population growth will cause disaster, and simultaneously to support the view that that stagnant-to-declining population growth will cause disaster.

We are damned either way!

The Psychology of Pessimism


Have you ever heard an optimist say that “demography is destiny?” I haven’t.

I believe there's a good reason for that, and it has little to do with the truth or falsity of various arguments that are based on demographic data. It has to do with psychology.

Specifically, it is my contention that an emotional predisposition to the concept of “inevitability” conjured by the term “destiny” is what tends to “select” for the type of people that are attracted to this notion.

The concept of “inevitability” plays a central role in the psychology of people whose mind frame is characterized by pessimism, in my view. There are several reasons for this.  The first is rather obvious: Folks characterized by an optimistic frame of mind are marked by a belief in the possibilities of men to alter any given course of events and effect positive outcomes. The mantra of optimists is that “anything is possible.” By contrast, pessimists aren't inclined to think that human beings are capable of changing anything for the better. In their thinking, pessimists are inclined to emphasize the role of forces beyond human control that tend to determine the course of events. And to the extent that they focus on human forces at all, it is on the mankind’s capacity for mischief.

The second reason pessimists are attracted to theories of inevitability is perhaps more subtle, and has to do with the tolerance for uncertainty. Optimists tend to be relatively more comfortable with uncertainty because progress requires change, and change necessarily is associated with uncertainty. Thus, optimists have a greater tendency to reconcile positive outcomes with uncertainty.

Pessimists, on the other hand, tend to have a relatively low tolerance for uncertainty. The reason is that pessimists don't tend to believe in the possibilities for progress. As a result, since by definition pessimists tend to believe that coming changes will produce negative outcomes, they are psychologically predisposed to associate the uncertainty that is associated with change with negative outcomes.

The relative intolerance for change and uncertainty that tends to be characteristic of pessimists is associated with a state of mind that takes great comfort in certainties. Thus, pessimists tend to be strongly attracted to theories of inevitability, for they offer certainties.

Conclusion

As an investor, one way to gain self-knowledge is to monitor ourselves and ask why it is that we tend to be attracted (or not) to certain catch phrases or aphorisms. Such sayings often contain emotional triggers that appeal to certain ingrained aspects of our psychology.

For example, if you feel attracted to the aphorism “demography is destiny,” this could be an indication of the fact that you tend to be a pessimist. As an investor you need to become aware of any such biases, and their intensity thereof. For such biases will tend to influence one’s interpretation of data, and they can frequently lead one to unsound conclusions.

Investors should also monitor their emotional disposition to theories and/or ideas. Understanding the roots of your feelings toward theories such as “peak oil” or the gold standard, for example, will probably be a great deal more useful to you as an investor than any informational edge that these theories will actually provide you with.

Postscript:

As an interesting aside, the phrase “demography is destiny” is usually attributed to French philosopher Auguste Comte, considered the father of “positivism.” In the current context, Comte’s substantive views of demography are of little import. However, Comte’s positivism (evident in the aphorism itself) is of significant interest in the context of the above article as it is a philosophical theory in which the concept of inevitability plays an extremely important role. Furthermore, it is important to note that Comte’s ruthlessly consequentialist political ideas, manifested in his thoroughgoing collectivism and utter disdain for individual rights can be traced to a psychological mindset that was influenced by a strong idealist strain.

I mention Comte’s idealism because the psychology of individuals characterized by idealism (and prone to ideology) is, somewhat ironically, often framed by disillusionment. Disillusioned idealists, for obvious reasons, tend to be averse to uncertainty and risk. And in practice, with respect to most contemporary challenges facing mankind, they're almost always pessimists.

In a future article, I will discuss how the psychology of disillusioned idealism tends to affect people with an intellectual bent. I'll utilize the example of Marxists and partisans of the Austrian School of Economics. In that article I'll show how the psychological profiles and personalities of Marxists and Austrians tend to be strikingly similar (i.e. that of disillusioned idealists). I sustain that these similarities are far more interesting and important for intelligent people to understand than the presumed differences in the substance of these rival schools of thought.

For now I will merely say that if you find yourself attracted to either of these ideologies, you're probably a logical positivist and a pessimist. As such, it is unlikely that you will be successful as an investor unless you correctly identify these psychological tendencies and learn ways to deal with them. For readers who wish to read more on this general subject, please refer to my article, Perma-Bears: Pollyannas In Disguise?
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