One of the biggest challenges in appreciating the word trends we've been examining in this series is what I call "parochialism of the present." This refers to the twofold trap we fall into if we do not make they effort to view our circumstances from beyond our own narrow sliver of time. One trap is that we ignore history and fail to appreciate the trajectory of change that is 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. At the core of Malthus’ observations was the relationship
between population and resources. He observed that while resources tend
to grow arithmetically (i.e., 1, 2, 3, 4, 5…), 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. These
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 disaster. 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
number of 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, at date
in the future chosen by his opponent, would be cheaper than they were
in 1980. Ehrlich took him up on the bet, choosing a handful of
commodities to be valued after ten years. A decade later, Ehrlich paid
up when every commodity had fallen from its 1980 price.
In the past decade or so we’ve seen another neo-Malthusian
resurgence that is married to cataclysmic climate change scenarios
(which we will visit soon), suspicion about economic growth, and an
anti-technology predisposition. Much of what is called 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 this time it is going to come true. 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 looked at 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.) Users of
the commodity 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 greatly to our understanding about 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, there was
insufficient scientific and technological knowledge to allow innovation
to develop. Second, assuming there was sufficient knowledge, there were
insufficient feedback loops about supply and demand of waning
resources. Market economies provide a dynamic feedback loop that prohibits an 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 no 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 had 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 are aware that 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 and it is absolutely
essential for lifting billions of others around the world into
prosperous lives. Parochialism of the present must be resisted.
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