Goodhart and Pradhan have offered us an ambitious and provocative book about the economic impact of demographic change in countries around the world. Two important demographic changes are at hand in high-income and many upper-middle-income countries – an increase in the share of the population at older ages and a decline of the rate of growth in the working-age population. In many countries in East Asia and in Eastern and Southern Europe, the changes will be particularly sharp with very old populations and declining working-age populations. Japan and Germany are at the forefront of these demographic changes but other countries will follow down similar paths – China being a notable case. Prior to these new changes in population, many countries had populations concentrated at the working-ages and they were experiencing historically high rates of growth in their working-age population.

An important part of the book is its emphasis on the complementarity between growth in the working-age population and globalization. The authors emphasize that both Eastern Europe and China integrated into the global economy, but most of their story is about China. Not only did China become part of the global economy, dramatic reforms within China led to rapid growth in the manufacturing labor force that competed around the world. That successful economic transition in China has largely been completed and in combination with the shift to a new demographic regime, major economic changes are coming.

The ambitious nature of the book is apparent when we consider the many economic outcomes that they address: economic growth, inflation, interest rates, inequality, and the tradeoff between unemployment and inflation. Not to limit themselves, they also assess likely trends in populism, the public sector, dementia, employment among women and seniors, and saving rates. In some cases, the authors conclusions are mainstream but, in some instances, not at all. In particular, predictions by the authors of a sharp increase in real interest rates and inflation and a decline in inequality are likely to be challenged.

The ambition of this book is a strength but it is also a weakness. Inevitably, important topics could have been examined with greater depth and with greater attention to the literature. For example, their discussion of the impact of fertility on saving emphasizes the timing of fertility, about which little is known, and ignores the level of fertility, about which a great deal has been written. The role of human capital is a neglected issue and very important to understanding economic developments in East Asia. As Becker and Murphy among others have noted, there is a strong tradeoff between fertility and human capital investment. In low fertility, aging societies, seniors must rely on fewer workers (taxpayers) but those taxpayers will be more educated, more productive, and better able to provide old-age support.

The challenges of investigating such complex issues as addressed by Goodhart and Pradhan cannot be over-estimated. They are to be congratulated for undertaking this effort and for providing an important contribution sure to stimulate interest.