See: Steady State Economy.
Before we dive into the steady state per capita growth, meet Robert Solow: American economist, Nobel prize winner in economics, and creator of the neoclassical Solow model of economic growth (that last bit is the important part).
Long story short: the Solow model uses rates of capital accumulation, labor, and technological progress as they create economic growth over time. Just as companies scale as they grow, so does the entire economy. Companies use very different amounts of labor and capital, and very different processes, when they’re big compared to when they were tiny, and the idea is similar here, except that it views the economy as a whole.
The theory runs that the economy grows at the same rate of the population, but not in terms of productivity. Per capita income is not sustained as the economy and population grow.
Think about it this way: countries with lower GDP per capita still have a lot of room to grow. They’re bursting with growth. But eventually, as economies start to mature, per capita growth slows down.
Finally, the steady state per capita growth. It’s a type of equilibrium that pulls those under it...up, and pulls those over it...down. The steady state per capita growth is the sweet spot where savings and investment per capita equals the amount of investment needed to keep per capita capital constant, given population growth and depreciation. Outside of the steady state, per capita income is not constant: capital per capita is either growing or falling.
As the population and economy grows, they converge to this steady state. Economies with a lot of room to grow naturally have a per capita income that’s racing to the steady state...up and up and up. Growth pretty effortless for economies to jump upwards toward the steady state per capita growth (think: tiger economies).
Economies that are mature, and are trying to keep growing past a certain per capita income, are fighting to grow. They’re being pulled by gravity back down to the steady state. Since the economy grows at the rate of the population, mature economies can only grow so far past their steady state before they’ll be pulled back down to that equilibrium.
Related or Semi-related Video
Econ: What are Steady State, Steady Stat...1 Views
And finance Allah shmoop What are steady state steady state
growth and steady state per capita growth Bigger is better
True when it comes to offensive lineman and wedding cakes
and brass bands and the size of your uh you
know belt buckle Well it's also true in economies Everyone
likes economic growth The faster the growth the better More
production constant expansion But there's another option The city state
economy an economy with no growth Think of the steady
state as the economic equivalent to that feeling People say
Yeah they get from meditation that Zen state that purportedly
purges you of all earthly worries No desires no wants
just peaceful days spent in quiet fulfilling meditation Now imagine
an economy sitting cross legged on a mat humming it's
mantra That's the steady state The term steady state economy
refers to a situation where physical wealth and population remain
steady An economy with zero percent growth or at least
as close to zero percent is it Khun Get population
doesn't grow birth rates run it replacement levels that is
the birth rate matches the death rate So the population
of your country is in twenty million people in two
thousand eighteen It's twenty million In two thousand twenty eight
it's still twenty million in twenty two eighteen more than
just stable population in a steady state economy The per
capita growth is also at zero as well Per capita
growth refers to the amount of growth per capita or
person You divide economic output usually measured by GDP by
the number of people in the country You have a
country with twenty million people with annual GDP of a
trillion dollars Divide one trillion buy twenty million and that
gets you per capita GDP of fifty grand So your
country has per capita GDP of fifty thousand dollars Now
in a steady state economy a few fast forward twenty
years per capita GDP is what Yes still fifty grand
It's days fifty thousand dollars One hundred years from now
we'LL in a steady state economy Production is on Ly
used to replace stuff that gets worn out where Chevy
Nova breaks down so the factory makes another one for
you You get to drive that one until well you
know the wheels fall off There's no additional growth Everything
on ly operates to replace things that have broken down
there's another connotation to the steady state economy it has
to do with the environment Will the steady state is
considered more ecologically friendly because it doesn't grow It doesn't
burn through a CZ Many resource is compared to an
economy that chases constant growth Imagine a civilisation in tune
with nature a small village separated from modern conveniences one
surrounded by lush forests and fertile river banks the kind
of civilization that uses the last remnants of moose and
trails to make organic water filtration systems for their camp
Not exploitive of resource is on ly hunting as much
as is needed Replanting every tree your crop They used
everything done in a way that doesn't deplete the environment
That's a steady state In practice A steady state would
be difficult to maintain right It's more of a conceptual
benchmark than anything that exists in real life or nature
you know like a helpful customer service rap or an
honest politician It would be difficult to hold population steady
in any society at least without resorting to authoritarian move
like the one China did with their one child policy
Also keeping per capita growth at zero would require significant
limitations It would also make the economy susceptible to recession
It would be easy to slip from zero percent growth
into Ah you know shrinkage Small closed societies in relatively
isolated areas might be able to maintain a steady state
but it would be difficult for a large modern economy
to live that way So yeah we keep coming back
to the meditation thing It's relatively easy to meditate in
an isolated monastery on a mountaintop somewhere alone away from
distraction But try to meditate when you're surrounded by ringing
cellphones and traffic noise and the smell of someone brewing
coffee in the next room Yeah it's enough to give
someone a cynic You have been there done that going