April 30, 2006
Financial Experts Debate Implications Of Aging Population

Businessweek has a debate between a couple of finance experts on the financial implications of an aging population. University of Pennsylvania Wharton business school finance professor Jeremy Siegel sees everyone working longer.

The age wave is the most severe in Japan. By mid century, 75 to 80 will be most populous age group there, and the number of workers per retiree will fall to one-to-one. The big questions facing the developed world are, who's going produce the goods, and who's going buy the assets. If there are not enough workers earning income, then there aren't enough buyers of all the stocks and bonds that are going be sold. It's the flip side of same question.

I built a model to show how much longer Americans will have to work because of the coming shortage of workers. Life expectancy will continue to rise. But the retirement age will rise substantially more, I believe, from 62 today to 73 or 74 in the future. Of course, some say it will rise just because people live longer. But it has to rise more than that. The age Americans spend in retirement will shrink from 14.4 years today to 9.2 by mid century.

I certainly agree that retirement ages must rise. Western nations should start raising retirement ages now. We need to move toward eligibility for state-funded retirement programs based on physical and mental inability. Healthy people should work unless they save enough to retire.

Junk bond king Michael Milliken sees a rosier future where biotechnogical advances that lead to slower aging will translate into higher economic output and better lives.

In 1974, it cost $100 million to sequence a gene. Today, it cost $3, and by 2013, it will be 3 cents.

We also constantly underestimate life expectancy. In Japan today, the quality of life lasts longer than anywhere else. They have 73.6 healthy years before becoming disabled (by old age), vs. 67.6 in the U.S. But even in the U.S. there have been big gains. The share of men in poor or fair health has gone from where it was at age 60 20 years ago to age 72 today. That's 12 years of increased quality of life. In 1970, a 59-year-old man had the same probability of dying as a 65-year-old today. The same is true with women. We're living longer and more productive lives.

I think all the conventional ways to project future increases in life expectancy are greatly underestimating the effects of coming advances in biotechnology. Our knowledge is not simply increasing with the same fixed amount of knowledge added to the sum total of our knowledge every year. Rather, the rate at which we can collect knowledge is increasing. That trend looks set to continue for decades to come.

Look at Milliken's example of the dropping cost of DNA sequencing. Orders of magnitude increases in capabilities in biotechnology mirror the orders of magnitude increases that happen in electronics technology. The advances in semiconductors for manipulating things at very small scales that drive the rapid advances for electronics are also enabling the construction of devices for biotechnology such as DNA gate arrays and microfluidics devices. The electronics revolution is being repeated in biotechnology.

Just as the discovery of antibiotics made many infectious diseases suddenly curable the same will happen with diseases of aging. Got a bad heart? Grow a new one or send gene therapy in to instruct your cells in how to repair themselves. Bad liver or bad kidneys? Again, grow replacements or fix them. All the problems that must be solved to reach that point are solvable. Therefore we will solve them.

People who do not see this biotechnological revolution in rejuvenation on the horizon are akin to someone in 1965 saying that of course computers must take up whole rooms and that we'll never have desktop computers which are many orders of magnitude faster than 1965 mainframes. We are going to gain the ability to manipulate cells and genes on a level that will allow us to repair our aged bodies. There's nothing about the nature of physical reality that precludes our developing the ability to do this.

If you want to learn about how human aging will become curable and whole body rejuvenation will become possible read about Aubrey de Grey's Strategies for Engineered Negligible Senescence.

Share |      Randall Parker, 2006 April 30 10:21 AM  Aging Debate

Joe said at May 1, 2006 10:17 AM:

I agree with you about aging. We need a social model that can handle only a small % of people working. Though automation we can support a few people for every 1. Right now capitalism has to make un-needed jobs for these people. I don't know how it should be, but I know capitalism and super-longevity do not mix well.

epobirs said at May 6, 2006 2:35 AM:

The conflict is not between capitalism and longevity. It is between capitalism and automation which can render members of the workforce redundant. The problem would continue to mount if life expectancy were frozen while automation advanced. Consider, if a $1,000 robot could deal with most of a home's weekly cleaning tasks, this puts a big chunk of unskilled laborers out of work. No improvement to human life expectancy needed.

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