Thursday, April 3, 2014

Malthusians Again

Malthus was one of the first economists, writing between Smith and Ricardo.

Malthus is also best-known for being completely wrong (at least … for over 200 years now).

He argued, without a growth model, that the end result of diminishing marginal productivity was that we would all starve: enough food leads to more babies which eventually leads to less food on average.

As we’ll show in class when we get a descriptive growth model working in a spreadsheet, Malthus used diminishing marginal productivity, but he was ignorant of constant returns to scale. Add that, and his result goes away.

But Malthusians are still around, most predominantly in the more radical parts of the environmental movement. Eduardo Porter writes about what’s new in this area in a piece entitled “Old Forecast of Famine May Yet Come True” that appeared in the April 2 issue of The New York Times.

Now it’s the IPCC. That’s the UN group that issues reports every few years warning of anthropic global warming. Like many bureaucracies, the IPCC morphs into something different when it needs to. Now they are warning about crop prices rises they view as imminent:

Nonetheless, Malthus’s prediction was based on an eminently sensible premise: that the earth’s carrying capacity has a limit. On Monday, the United Nations Intergovernmental Panel on Climate Change provided a sharp-edged warning about how fast we are approaching this constraint.


Digression: Did you recognize the implicit time series analysis here? I expose you to that, in part, so that you can recognize it when you see it. Saying that there’s a constraint is also saying that you can’t have a trend that is permanent. That means the IPCC is assuming Case 3 from the text. Of course, that would be reasonable if the data tended to support stopping at Case 3, rather than Case 4 or 5. Generally, it doesn’t.


I’m not necessarily against the IPCC’s positions on global warming, or the possibility of food scarcity.

But, I’m offended at the data used to justify this position. They focus on recent inflation in food prices. A more likely explanation for this is that we’ve moved a lot of people out of poverty over the last few decades … and the first thing they like to do is eat better. This is an issue that economists have been talking about for decades: price rises are an unpleasant symptom of a sorely hoped for improvement in well-being. The IPCC is coming late to the table and calling this a bad thing. That bugs me.

Anyway, Porter makes another point related to growth theory:

Still, there are good reasons to take prophesies of doom with more than a pinch of salt. Ecological Cassandras have consistently underestimated humanity’s capacity to invent ways around constraints, using resources more efficiently and switching from scarcer commodities to more abundant ones.

One of the things you’re going to learn over the next month is that if growth was determined by diminishing marginal productivity (primarily of capital) and constant returns to scale, then it should be done by now. The fact that we’re still growing indicates that technology has taken over from capital accumulation as the primary cause of growth. And that’s precisely what Porter is noting has a history of solving our problems.

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