How would a long lifespan affect the economy?

Question

My species have an average lifespan of 500 years. In the first 20 years and the last 30 years, they age normally, but for the rest, they appear barely to age at all. If we were to compare them to humans, which have an average lifespan of 80 years, a member of this species at 470 would look like a 50 year old human and at 500 they'd look like an 80-year-old human.

This would mean that they have roughly 90% productive age compare to about 50% for humans, if we assume that both species spend the first 25 years learning and the last 15 years resting.

Bonus detail: This species has a low and steady population growth rate, to avoid economic problems from overpopulation.

Here is my prediction about potential differences in their economy:

• The tax for healthcare & pension would be lower. I think even a relatively small tax over 90% productive age would offset the cost of that 10% vulnerable age.
• The tax for education however would be higher, as the population needs to be re-educated constantly. Otherwise they would be stagnant, outdated, and therefore useless for the rest of their long life.
• The government would likely invest in more massive infrastructure and scientific projects, since the benefits could potentially be reaped within individuals' lifespans.
• Business companies would be more likely to favor long term investments and business models. They'll prefer a low but steady profit instead of high and quick profit for stability of their company. As a result, a cheaper product.
• Borrowing would be easier, since it could be expected to return in a reasonable timeframe.

Are these prediction accurate enough based on the working of our own economic systems? Did I miss something? Or even get something completely wrong?

To avoid the question becoming too broad, lets focus on how the government and business would likely behave in this economic situation, in general terms of course.

Clarification

Since many people seems to be confused and even pointing out that economic policy is too subjective and broad, I think I need to show the viewers my thought about economy. So here's what I thought: In some place where you have beautiful scenery or historical landmark, USUALLY the government would make a policy to took advantage of that condition, like making it a tourism destination and build transportation infrastructure on that. The business also react accordingly by making investment on hotel, souvenir shop, or another tourist attraction. Of course the government could demolish that place to make athletic center and business could simply build a shoe factory on it, if they found it fit with their business model, but isn't this an exception not the rule?

Back to my question

If your species have a longer lifespan, shouldn't your government and business company react accordingly, like the prediction I gave you above, or maybe they would react the other way around, or maybe truly they would ignore that fact since they found no correlation between lifespan and economy?

Answer 1

There are several possible issues which would need to be addressed closely by the world builder in this scenario. I bring them up more as a guide in how to think about things, since the devil is always in the details:

1. Power law distribution of wealth. This is the infamous 80:20 rule (Pareto effect), and has been seen in every known political and economic system, from absolute monarchy to anarchistic communes. The real issue isn't that the wealth will tend to be concentrated, since that is inevitable, but rather how the society will react

2. Social mobility. A highly stratified society where people are stuck in place (for example Guild Socialism) is going to be pretty uncomfortable after a while. On the other hand, open social structures where there is a lot of opportunity to move will mean that at some point, enterprising individuals could indeed become part of the 20% of the population that controls 80% of the resources. Of course making a mistake could send you back down into the lower depths. In 500 years, you will probably have several opportunities to cycle up and down through the socio economic rollercoaster.

3. Compound interest. Even low rates of compound interest add up over long periods of time. A quick way to think about this is "the rule of 72". A 1% growth rate compounded over 72 years will lead to a doubling of the initial investment. Obviously higher rates of growth lead to faster doubling periods (10% interest doubles the investment in 7.2 years). This also works in reverse - a 1% inflation rate devalues the currency by 50% in 72 years. Over a 500 year span you could get exceedingly rich on compound interest. You could also see the currency value evaporate if there is an inflationary period over a prolonged time.

4. Time preference. The infamous "marshmallow" test was supposed to demonstrate that children with poor impulse control had worse outcomes than children who had good impulse control (i.e. "you can eat that marshmallow now, but if you wait 5 minutes you can have a cookie as well"). Five hundred years of poor impulse control isn't likely to happen, you might end up doing something that gets you killed or incarcerated. On the other hand, being able to plan with a 500 year time horizon could lead to some very spectacular outcomes.

So these are the social and economic factors which would likely impact a race with a prolonged lifespan

Answer 2

Answer because comment is not long enough.

Your question scream for more worlbuilding. Right now it's look like you have capitalists elvs (from Tolkien) who discover that you cannot grow ad infinitum and they look in the direction of Rivendell to discover you don't have to sells any nice looking piece of land for monetary gain and you don't need to try to make a quick buck.

First thing - healthcare - expenses would need to be BIGGER. Otherwise you would need to make those long living species also ill-free. Otherwise you're looking at 400 years of treating them from "pre-existing conditions". Morbidly obese people (and word morbidly is there for a reason) are not using healthcare system for long. Compared to OUR lenght of life. If you quadruple lifespan then you would also need to quadruple the time such people need to rely on that service.
If you say that they are ilness-free and cannot get fat or break bones or loose limbs then the question arise Why would they need to work at all?
I have 500 years. I can slowly build my own house seeding the trees now and cutting them 40 years later. Not spending a penny. I want a car? I can "waste" years teaching myself how to do it.
People buy things because they are brought in this mindset with very narrow windows of opportunities: beetwen you start making serious money and when you stop because you're too old and retire. With long lifespan you can dedicate 40 years to master something and create something for yourself because you will use it for the next 300 years. Look at all the DIY'ers. Now imagine they have time to make guitars, care for their veggie garden and slowly bringing dirt on their shoes to make house.

Science - we know, from history and everyday examples that 20 year old people have usually much more time till death than 70 years old people. So with that logic there should be tremendous effort to keep as much of those 20y olds in academia so they would have as much time as posible to discover things. We know that it's not true. Young people, in general are not throwing themself at science to get Nobel prize prize they hit 30.

Strangely a lot of those young people try to not do anything. "retire before 30", "entrepeneur live off profits", "make a startup, sell, not work a day after 25" and so on. Why it would change in the long living society? 400 years of not grinding 9-5 instead of "only 50".

Why borrow? Again, borrowing cames from needing things NOW. People don't want to waste time diggin their own gold, melting then learning how to make jewellery. That would take months if not years. So they borrow to be able to have that ring now. But when you live to 500? It only take years, maybe months. And while at there I can chop down some logs that I would then pul for 1000 miles because I want to build villa on the beach. It will take me just a year. Maybe two.

Bottom line - with expended lifespan you either make people sick for longer or not make them sick at all making them realize capitalist grow for grow sake is pointless. Just sit, relax, have a cup of tea. You want a tea from different part of the world? Take a walk there, learn local language, get the tea, walk back. 12 months nicely spend. 499 years more to go.

Answer 3

Sketch of an answer, touching some socio-economic aspects:

• The result will be a population density much smaller than we see today, a longer lifespan will favor the K-selection strategy. You can see the results of only a few decades increase in the average life expectancy in OECD countries versus, say, underdeveloped African countries: in OECD countries, the population growth rate would be negative in the absence of immigration.

• a 500 years life span, with 90% of it productive will lead to a wealth distribution that is extremely unbalanced (chances will favor the ones with better resources, the rich will become richer) or very egalitarian. In both cases, the pervasive use of automation within a life-time is very likely (as a note: we are less than 300 years from the start of the industrial revolution).
  My guess is leaning towards an egalitarian outlook, with a few bloody revolutions sprinkled along the way.

• in the case of an egalitarian society, it is likely that wealth-as-money will become meaningless and be replaced by a set of values that are more or less "convertible" over time/space (e.g. money is bad in capturing the cost of damaging the environment in one place on Earth just as a cost of doing business and obtain a profit. An "Earth/water coin" as a value is not transferable, an "air/energy coin" is; both of them capture the value/cost of creation better than money as we understand them)

• a 500 years long life will require life-long learning even more than today. Trying to extrapolate the today's education to a longer life is very likely prone to mistakes.
  (I'm not convinced a human brain can adjust to functioning 500 years without reaching a degree of saturation that will require discarding many thing from memory; this will become relevant when if comes to the family/friendship relations - if 7 years triggers an itch, I imagine 400+ will trigger quite a few more).