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.
Why is 70 used for doubling time? ›
The reason why the rule of 70 is popular in finance is because it offers a simple way to manage complicated exponential growth. It breaks down growth formulas into a simple equation using the number 70 alongside the rate of return.
What is the rule of 70 in regards to population growth? ›
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.
What is the rule of 70 and why is it important? ›
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 in economics quizlet? ›
What is the rule of 70? 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.
What is the rule of 70 so useful? ›
In demographics, the Rule of 70 is useful for estimating the doubling time of a country's population under the assumption of a constant rate of growth. For instance, if India's forecasted growth rate is set at a steady 1.4%, the population is expected to double in approximately 50 years (70/1.4).
What is the rule of 70 and how can this be used to determine the rate at which a given population will double? ›
To calculate this, you would use the rule of 70. This rule calculates the doubling time by dividing 70 by the growth rate. You might notice this is quite similar to the rule of 72, which has you divide the number 72 by the annual rate of return.
What is the rule of 70 to calculate the growth rate that leads to a doubling of real GDP per person in 20 years? ›
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.
Why is the number 70 used in the rule of 70? ›
The rule of 70 gives you an estimate of the number of years it will take some quantity to double given the annual percentage growth rate. Someone sat down and did the math and it turned out that the number of years to double is about 70 / the annual growth rate in percent.
Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home. The ARV of a property is the amount a home could sell for after flippers renovate it.
What is the rule of 70 proof? ›
Using 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.
What is the rule of 70 economic growth? ›
The rule of 70 is an easy method of estimating how quickly a variable will double if you know its annual growth rate. If a variable is growing at a rate of x% per period, you simply take 70 and divide it by x. The rule of 70 is useful for all sorts of applications.
When using the rule of 70 a population growth rate of 2% annually will result in doubling a population in 35 years? ›
To do this, we divide 70 by the growth rate (r). Note: growth rate (r) must be entered as a percentage and not a decimal fraction. For example 5% must be entered as 5 instead of 0.05. For example, a population with a 2% annual growth would have a doubling time of 35 years.
What is the rule of 70 formula? ›
The Rule of 70 Formula
Hence, the doubling time is simply 70 divided by the constant annual growth rate. For instance, consider a quantity that grows consistently at 5% annually. According to the Rule of 70, it will take 14 years (70/5) for the quantity to double.
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.
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.
What is 70 divided by growth rate? ›
The Rule of 70 states that the time it takes for a quantity to double is equal to 70 divided by the annual growth rate. For instance, if an investment has a 7% annual growth rate, it will take approximately 10 years (70/7) to double its value. This rule works for any growth rate, whether it is positive or negative.
