WSI: Malthus Returns (Parochialism of the Present)

One of the biggest challenges in appreciating the world trends we've examined in this series is "parochialism of the present." This refers to the twofold trap we fall into if we do not try to view our circumstances from beyond our narrow sliver of time. One trap is that we ignore history and fail to appreciate the trajectory of change moving through our time. The other trap is to insufficiently appreciate rates of future innovation and erroneous project present circumstances into the future. A particular variety of this mindset, known as Malthusianism, extends back to the earliest days of the Industrial Revolution. (More recent versions are frequently called neo-Malthusian.)

Thomas Malthus was an early nineteenth-century British minister who analyzed parish records spanning many years. He published his research in An Essay on the Principle of Population in 1798. The relationship between population and resources was at the core of Malthus' observations. He observed that while resources grow arithmetically (i.e., 1, 2, 3, 4, 5…), the population tends to grow geometrically (i.e., 1, 2, 4, 8, 16…). Population always outgrows the ability of resources to support the population.

Aside from the normal causes of death, like accidents and old age, factors like war, pestilence, and famine also served as a check. This would reduce the population to manageable levels. Population would increase again and repeat the cycle all over again. Being opposed to contraception and abortion, the only solution Malthus saw was late marriage and abstinence. His outlook for humanity in the century ahead was one of catastrophic economic disasters. Malthusian thinking predominated in the early years of the nineteenth century.

In the latter part of the nineteenth century, other Malthusians appeared. William Stanley Jevons (1835-1882) wrote The Coal Problem in 1865. Concerning Jevons, Angus Maddison writes:

Jevons estimated that British coal output was 83.6 million tons in 1861, and projected a need for 2,607 million tons in 1961, if 'the present' annual growth of 3.5 per cent persisted (in fact production grew from 1820 to 1860 at about 3.8 per cent a year). Such growth 'would exhaust our mines to a depth of 4,000 feet or 1,500 feet deeper than our present deepest mines' (p. 274), and bring a prohibitive rise in prices. He rejected the feasibility of substitutes -- timber, wind, water, tidal energy, hydrogen, or petroleum. ... He also rejected the feasibility of large scale imports, because of heavy transport costs. ... He recommended 'wholesale emigration' to countries like Australia of the US which had much larger coal reserves. In fact British coal production peaked a 292 tons in 1913, fell to 118 million in 1973 and 26 million in 2003. In 2003, British energy consumption was equivalent to 370 million tons of coal, about a seventh of what he projected for 1861, and British coal provided only 7 per cent of it. Thus Jevons failed to see the possibilities for reducing energy intensity, was wrong about substitution possibilities and the pace of technological advance. He also demonstrated the fragility of centennial forecasts. (Contours of the World Economy, 1-2030, AD. 353)

Those old enough to remember the 1960s and 1970s will remember the last neo-Malthusian revival with people like Paul Ehrlich, the Club of Rome, and Jimmy Carter and his Global 2000 Report. These folks predicted exhaustion of most major commodities, increased famines, and unprecedented global unrest from shortages and economic collapse by 2000. In 1980, economist Julian Simon offered a $1,000 bet that commodities chosen by his opponent would be cheaper than they were in 1980, at a date in the future chosen by his opponent. Ehrlich took him up on the bet, choosing a handful of commodities to be valued after ten years. Ehrlich paid up a decade later when every commodity fell from its 1980 price.

In the past decade or so, we've seen another neo-Malthusian resurgence married to cataclysmic climate change scenarios (which we will visit soon), suspicion about economic growth, and an anti-technology predisposition. Much of the "sustainable growth" movement is permeated with neo-Malthusian thinking. People who don't hold neo-Malthusian views are cast as sinister people who refuse to live within limits (meaning the overwhelming majority of economists.)

Like failed second-coming forecasters, each new revival has reasons why it will come true this time. The problem with the Malthusian views is the failure to appreciate the dynamism involved in the market economies. If the supply of a commodity is becoming scarcer for the commodity, then the commodity's price will climb. Commodity prices factor in anticipated growth in present and future demand, estimated quantities of natural resources, and the capacity to extract resources for productive use. What has happened to commodity prices over the years? A 2001 study examined commodity prices over the previous 140 years and charted the following trend.

Paul Cashin and John McDermott conclude:

“…while there has been a downward trend in real commodity prices of 1.3 percent per year over the last 140 years, little support is found for a break in the long-run trend decline in commodity prices. …”

Keep in mind that over this 140-year period, the earth's population grew by a factor of five, and the per capita gross domestic product grew by a conservative factor of ten. Meanwhile, resources have become more abundant! How is this possible?

When a commodity becomes scarcer, several things happen. Suppliers are motivated to search harder for more of the commodity, to find ways to renew supplies of it (i.e., the lumber industry), and to embark on recovering less accessible deposits of the commodity. Entrepreneurs enter the markets. They begin offering substitute commodities, they recycle the existing commodity, and they begin to find ways to use the commodity more efficiently. In the Ehrlich vs. Simon bet, most of the commodity prices went down because of better extraction or processing techniques (ex., better smelting for tungsten) or substitute commodities came into the market (ex., aluminum began replacing tin for some uses and sand made into fiber optic cable began replacing cooper.) Commodity users will likely decrease usage as price increases and/or look for alternatives.

Donald Hay writes in his book, Economics Today: A Christian Critique:

Assuming that an exhaustible resource is going to be put to a good use, are we justified in depleting it and so depriving future generations? Our response is in the affirmative, but with a reservation. If a substitute does not exist, then it is presumptuous to believe that our needs are greater than those of a later generation. In practice, it is hard to find an example of a resource without a biologically renewable substitute. For example, the fossil fuels could, in principle, be replaced by wood or solar energy. Metals are more of a problem, but it is not impossible to conceive of a culture that uses no metal in its artefacts (and metals can be recycled their availability over time). (298)

Jared Diamond is a biologist and geographer who has contributed significantly to our understanding of past cultures, but he, too, unfortunately, lapses into a Malthusian mindset. If you look at most of his examples of resource exhaustion, two factors are at play. First, insufficient scientific and technological knowledge allowed innovation to develop. Second, assuming sufficient knowledge, there were inadequate feedback loops about the supply and demand of waning resources. Market economies provide a dynamic feedback loop that prohibits abrupt exhaustion of resources, even as they generate the human and financial capital to address new challenges. The market will inhibit the total depletion of resources because people will abandon the commodity when the price is too high, long before its exhaustion. Human and financial resources empower aggressive searches for new solutions.

The remarkable improvements in human life over the last couple of centuries do not warrant pessimism. It is not a suicide machine. I believe Indur Goklany gets it right when he writes:

...these overall improvements in human well-being contradict the view advanced by Jared Diamond, for example, that new technology creates more problems than it solves because it replaces old problems with new, more difficult problems. A more accurate characterization of new technology is that it generally replaces imperfect existing technologies with improved, but still-less-than-perfect technologies. (The Improving State of the World, 374)

Just as Malthus could not see the impact of the Industrial Revolution on resource availability, I think many neo-Malthusians are blind to the evolution of renewable, reusable, and synthetic fabrication (from renewable resources) that is taking place in our lifetimes. Had Malthus' perspective won out in the early nineteenth century, it is hard to imagine the devastating impact it would have on generations down to this day. The same caution needs to be sounded about neo-Malthusians today.

In closing this post, I'm sure many know there has been a recent spike in oil and commodity prices. None of this has an impact on the long-term trend of commodity prices. Artificial factors intervene from time to time to cause prices to spike or drop. For instance, OPEC may decide to restrict the rate at which they pump oil. (See here.) That doesn't change the actual quantity of oil available. Economic growth in emerging nations likely has some impact in the short term on commodity prices, but it is worth noting that with both the US and emerging economies slowing, commodity prices have still gone higher. The recent rise in prices likely has much to do with the present unusual situation of negative real interest rates. (See this article by Harvard economist Jeffrey Frankel.)

The bottom line is that we are not running out of resources or depriving future generations of a better life. On the contrary, economic growth accomplished through developing cycles of prosperity (more about this phrase later) is an important gift we can give to our children. It is essential for lifting billions of others worldwide into prosperous lives. Parochialism of the present must be resisted.

[Previous] [Next] [Index]

Comments

[Gruntled]

Can neo-Malthusians fit declining population into their model? Ben Wattenberg describes the likely coming world population decline as a Copernican revolution in demography. Real demographers have, no doubt, been absorbing these new projections. The economists and "futurists" that you cite here, though, are at one remove from demography as a field, and seem to take their Malthus straight, with no reference to subsequent developments.

[Michael W. Kruse]

I think the potential (and likely) move toward depopulation is one of the innovations and adaptations that neo-Malthusians tend to ignore. Depopulation has enormous consequences for how we see issues like economic growth, CO2 production, public policy on pensions and health care, etc.

The population explosion has been a temporary consequence of the dramatic reduction in death rates achieved through the agricultural and industrial revolutions of the past four centuries or so (ala Demographic Transition Model). But People are reflective beings.

Malthus correctly saw historical patterns of economic growth leading to even faster population growth that would ultimately lead to collapse. What he was not able to envision was an economic system that could expand productivity so fast that it could out pace the initial population explosion until such time as people could reflect on their lives and their world, and then adapt accordingly. One of the near universal responses to economic growth has been reduced fertility rates, even to the point of population decline. Negative replacement rates will likely spark cultural efforts to achieve growth back toward stabilization rates.

The basic point is that people reflect and adapt. My beef with neo-Malthusians is their tendency to think statically instead of dynamically with regard to human behavior.

BTW, your series of posts on Wattenburg inspired me to finally purchase a copy. Thanks for the inspiration. :)