The US population growth rate is currently around 0.7%. US GDP growth during the 4th quarter of 2015 was 1.4%. Stock market growth of over the long term is generally expected at 6-7%. What do these growth rates mean and how can you quickly makes sense of them? This article explains the Rule of 70, a tool frequently used by urban planners to help the public quickly grasp the impact of growth rates--like Jeb Bush's 4% economic growth goal released last year.
Image Source: New York Times | Explanation of the Rule of 70
The rule of 70 is a way to estimate the time it takes to double a number based on its growth rate. The formula is as follows: Take the number 70 and divide it by the growth rate. The result is the number of years required to double. For example, if your population is growing at 2%, divide 70 by 2. The result is 35; it will take 35 years for your population to double at a 2% growth rate. |
The following is an excel spreadsheet that will allow you to explore the effect of growth rates on a population. Everything is filled out except two variables, the starting population and the rate of growth. Manipulate these two variables to explore different scenarios your current town or city may experience in the future.
Note: while the Rule of 70 is often used in discussions of population growth, it can equally apply to other subjects where rates of growth are considered.
A Word on US Population Growth
The United States has one of the highest growth rates of any industrialized nation, even though it’s only around 0.7%. The map below depicts the various percentage growth rates around the world.
For the US, the current growth rate is the lowest its been since just after the Great Depression. This slow growth is mostly due to lower birth rates and decreased immigration. Is 0.7% too slow? Well, lets use the Rule of 70 to see: 70÷ 0.7 = 100. At this rate, the US population would double in 100 years. That means adding just over 3 million people a year for the next 100 years.
Having More Realistic Expectations of Growth
While in New Hampshire pursuing his presidential aspirations, Jeb Bush stated his economic goal for America:"4 percent growth as far as the eye can see.”Using the rule of 70 you can see why his 4 percent growth pledge was viewed by many economists as ambitious at best and unrealistic for any lengthy period of time. This would mean the economic output of the nation would essentially double in roughly 18 years.
While growth like this has been achieved during relatively brief periods in the past, these were times when population growth was rapid and/or technology or demographic changes were significantly increasing per capita economic output. For example, after the recession of 1981-82, real GDP growth averaged 4% over the next six years. Several factors were at play during this period, not the least of which was the beginning of the personal computer revolution as well as the addition of millions of women to the workforce.Now, with a more advanced, equitable, and mature economy, most economists agree that it will be harder and harder to duplicate periods of similar growth into the future--especiallygiven the lower rate of population growth previously discussed,
Remember the Rule of 70
Well, next time you find yourself in a conversation or presentation and growth rates come up, remember the Rule of 70, Its a quick and easy way to make sense of numbers that can sometimes be challenging to visualize.
About the author:Kirby Snideman is an AICP certified planning professional with a focus in economic development and currently serves as a senior market analyst and project manager at CDS. Originally from Houston, Mr. Snideman has lived, studied, and worked in several places including Utah, New York, California, Iowa, Illinois, Oregon, and London, England.
FAQs
The number of years it takes for a country's economy to double in size is equal to 70 divided by the growth rate, in percent. For example, if an economy grows at 1% per year, it will take 70 / 1 = 70 years for the size of that economy to double.
What is the rule of 70 allows one to equal the annual rate of economic growth? ›
The Rule of 70 can estimate how long it would take a country's gross domestic product (GDP) to double. Instead of estimating compound interest rates, the GDP growth rate is the divisor of the rule.
What is the rule of 70 in exponential growth? ›
The rule of 70 is used to determine the number of years it takes for a variable to double by dividing the number 70 by the variable's growth rate. The rule of 70 is generally used to determine how long it would take for an investment to double given the annual rate of return.
What is the rule of 70 AP environmental science? ›
A way to predict the doubling time of a population size is by the rule of 70. This rule states that dividing the number of 70 by the percentage population growth rate approximates the population doubling time.
What is the rule of 70 and why is it important? ›
The rule of 70 helps estimate how long it will take for a currency's purchasing power to halve, assuming a constant annual inflation rate. For instance, with a steady 3.5% annual inflation rate in the United States, the rule suggests that the US Dollar's value will halve in about 20 years (70/3.5).
Why do we use the rule of 70? ›
The rule of 70 offers a way to figure out the doubling time of an investment. In other words, it shows you how many years it will take for your initial deposit to double in size. You'll need to know the specific rate of return in order to use the rule of 70 or doubling time formula.
What is the rule of 70 in economics quizlet? ›
The rule of 70. is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double. If real GDP per capita grows at a rate of 8.3 percent per year, it will take ___ years to double. ( rounded to one decimal place) 8.4 (70/8.3)
What is the Rule of 72 and how is it used in explaining economic growth? ›
The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. Dividing 72 by the annual rate of return gives investors a rough estimate of how many years it will take for the initial investment to duplicate itself.
What is the rule of 70 quizlet? ›
If a variable is growing by x% per period, the doubling time would equal approximately: 70 ÷ x periods. In order for a certain variable to double in N years, the growth rate of that variable must be approximately: 70 ÷ N% per year.
How to prove the rule of 70? ›
For example, if an economy grows at 1 percent per year, it will take 70/1=70 years for the size of that economy to double. If an economy grows at 2 percent per year, it will take 70/2=35 years for the size of that economy to double.
According to rule 70, the no. of years that a variable can take to become double is determined by taking a ratio of 70 and the annual percentage growth rate of the given variable. In this case, the annual growth rate of real GDP is 70/20 years which is 3.5% per year.
How do you calculate 70 rule? ›
When buying a home to flip, investors need to estimate how much they believe the property could sell for after it's been renovated. They can then multiply that amount by 70% and subtract it from the estimated cost of renovating the property.
Why is AP Environmental Science so hard to pass? ›
While it's not as difficult as say, AP Physics or AP Chemistry, it's important to understand that APES is still a college-level course that will cover a variety of topics related to environmental science. You'll need to engage with scientific principles and concepts, data analysis, and real-world applications.
What led to the exponential growth of humans? ›
In addition, the Industrial Revolution, which brought about an unprecedented demographic explosion. In the 19th century, the population doubled and in the 20th century, it even tripled, reaching 6 billion in the year 2000. Medical, scientific and economic advances led to this exponential growth.
Is AP Environmental Science really hard? ›
Because environmental science is considered one of the more challenging AP subjects, it may not be a great fit for every student. Nearly 150,000 learners took the exam in 2021, but 51% failed to earn a score of 3 or higher.
What is the Rule of 72 in economic growth? ›
The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.
