Economics and the Rabbit of Unreasonable Hope

By David L. Brown

Readers of this web site may have noticed that I sometimes have the effrontery to raise doubts about the soundness of economic thought. In general, economics pretty much appears to be a matter of simple common sense. And yet, in some instances economists make what seem to me to be irrational judgments based on patently unsound assumptions, reaching conclusions that are completely beyond the bounds of common sense.

A key example is the practice of refusing to accept the obvious physical fact that natural resources are not in infinite supply. Economists blithely assume that any resource that becomes depleted will immediately and seamlessly be replaced with an alternative that is just as good. This is posited as a basic tenet of economics. On that ground, economists have the arrogance to discount to zero any future asset, and then to build elaborate economic models on this quicksand of muddled reasoning. If future resources have no value, then they are “free” and nothing but good times must lie ahead.

Thomas Carlyle labeled economics as “the dismal science” and yet it is not a science at all but rather an amalgam of ideas relating to monetary and financial effects of capital combined with political philosophy. In fact, the field we now call economics was originally known as “political economy,” which gives us a strong clue to its non-scientific genealogy. Early practitioners of political economy included John Locke, David Ricardo, Adam Smith and Karl Marx.

Another pioneer in the field, and the first person to be appointed as a professor of political economy in England, was none other than Thomas Malthus. It is his ideas about eventual limits to population that have kept Malthus’s name looming in the background of world events for more than two centuries. Simply stated, Malthus predicted that population would someday, inexorably, outstrip the ability of the planet to support the mass of human numbers.

Most interpretations of this Malthusian vision paint a dire picture of catastrophe. That is not entirely fair, for Malthus in actuality believed that natural forces would prevent human population from rising beyond the limits of agricultural production and that a natural balance would result. Despite that, it is an image of disaster that has been connected with his name. — and since it is in the interests of human peace of mind to deny bad news (i.e., by “killing the messenger”), it is not surprising that his theories have been ridiculed, discounted, and lampooned almost since he first published them in 1798.

It can be argued not only that Malthus had a point, but that the situation that now exists in the world is more dire by far than even Malthus himself could have foreseen. (As background to this discussion you might be interested in reading my essay “Malthus’s Classic ‘Essay on Population’ Revisited,” posted here October 29, 2006. I wrote that posting in the form of a book review after having read and dissected his work. As an aside, I have concluded that most, and perhaps nearly all of the people who refer to Malthus have not bothered to actually read his words, and that includes professional economists.)

Why should we be especially concerned about the danger of Malthusian disaster today? There are several key reasons, based on developments that Malthus could not have predicted. First is the emergence of industrial agriculture, based on the lavish use of energy to replace man- and horsepower as in Malthus’s times. The application of cheap oil, in particular, has made it possible to increase agricultural production in order to keep up with a soaring human population. Following World War II, the application of horticultural science made possible the so-called Green Revolution, even further expanding farm output and thus keeping food production ahead of the growing population.

Powered by cheap and abundant oil and improved plant and animal genetics, the world’s population has continued to climb and is now fast approaching seven billion. In numerical notation, that is 7,000,000,000, or seven thousand million — a very large number indeed, and one made possible only through the exploitation of limited natural resources to keep ramping up food production.

Another fact of which Malthus was unaware when he predicted that population and farm production would eventually come into equilibrium was the concept of overshoot-and-collapse. This phenomenon was first recognized by ecologists in various localized situations where populations of animals outgrew the sources of food available to them. The pattern was one of continued growth in numbers, culminating in a peak followed by a catastrophic decline. The same principle applies to analyses of failed human societies, such as the case of Easter Island or the vanished Mayan civilization of Central America.

Now the Earth is facing the onrushing certainty of a Malthusian disaster such as his detractors have long attributed to him, however unfairly, while at the same time denying. The reason is that despite the flawed assumptions of economists, the planet’s natural resources are straining at their limits. Food shortages are beginning to become acute, costs are rising at a rate that should be considered alarming, and agricultural production appears to have peaked and may be falling.

An underlying factor is the soaring cost of oil, the supply of which has probably reached its peak or soon will and is being sustained only through heroic efforts. It is telling that just this past week the Saudis told our visiting President that they saw no reason to increase their oil production, because “consumers are not asking for it.” Well, it is a poorly kept secret that the fabled Saudi Arabian oil fields are becoming depleted — the sheiks can no longer simply turn on the pumps to boost the world supply of oil. Neither the Saudis, nor any other member of OPEC, nor President Bush, nor anyone else in a position of leadership dares to publicly acknowledge this fact. Like the denial of Malthus’s predictions, the interests of human peace of mind requires our leaders to pretend that we can continue to go on with business as usual … that there will always be plenty of oil, plenty of food, and, oh yes, plenty of pie in the sky by and by.

And why am I spelling all of this out? Well, to prepare you for a discussion of a column that appeared in the current issue of the weekly magazine The Economist. The regular column is called “Economics focus,” and it generally concerns technical discussions of current economic theories and trends. This week’s subject is Malthus, who the headline labels “…the false prophet.” And, as you can guess from the title, it is another smear job on poor maligned Thomas and his common sense ideas.

Astonishing as it may seem, the article (which is unsigned as is the policy of The Economist) bluntly states that Malthus was wrong, that the Earth is perfectly able to support the still ballooning population, that the oil peak is a sham, that food supplies will soon recover and soar to new heights, and that flying pigs will be observed over Wall Street (well, no, I made up that last part). Here is an excerpt from this astonishing opinion (access to the magazine’s web version is restricted to subscribers):

The Malthusian heresy re-emerged in the early 1970s, the last time food prices shot up. Then, at least, there appeared to be some cause for demographic alarm. Global-population growth had picked up sharply after the second world war because it took time for high birth rates in developing countries to follow down the plunge in infant-mortality rates brought about by modern medicine. But once again the worries about overpopulation proved mistaken as the “green revolution” and further advances in agricultural efficiency boosted food supply.

If the world’s population growth was a false concern four decades ago, when it peaked at 2% a year, it is even less so now that it has slowed to 1.2%. But even though crude demography is not to blame, changing lifestyles arising from rapid economic growth especially in Asia are a new worry. As the Chinese have become more affluent, they have started to consume more meat, raising the underlying demand for basic food since cattle need more grain to feed than humans. Neo-Malthusians question whether the world can provide 6.7 billion people (rising to 9.2 billion by 2050) with a Western-style diet.

Once again the gloom is overdone. There may no longer be virgin lands to be settled and cultivated, as in the 19th century, but there is no reason to believe that agricultural productivity has hit a buffer. Indeed, one of the main barriers to another “green revolution” is unwarranted popular worries about genetically modified foods, which is holding back farm output not just in Europe, but in the developing countries that could use them to boost their exports.

Well, where do we start to analyze this attack on the “Malthusian heresy”? First, there has been no significant slowdown in the growth of the world population. As I recently noted here, in his book “The Hungry Planet” in 1965 Georg Borgstrom noted that there were approximately 3.25 billion humans alive at that time and predicted that the number would double in 40 to 50 years. It is now 43 years later and the population has indeed doubled.

Yes, birth rates have declined in some places, particularly in the advanced economies of Europe and Japan. But what does that matter when the Third World continues to produce new mouths to be fed at far above the replacement rate (births = deaths). Humanity continues to add a net of 80 million people per year, or about 220,000 each and every day.

That is equal to another Orlando, Florida every 24 hours. Another Phoenix, Arizona every week. Another Los Angeles plus another Chicago every month. (Los Angeles and Chicago are our nation’s No. 2 and No. 3 cities by population.) It takes five weeks for the world’s population to grow by the size of New York City, which incidentally has at present about as many people as the entire population of England in Malthus’s time. And do not forget that most of this growth is taking place among the poorest and most vulnerable countries and regions of the world.

So is population growth something to be concerned about? Hmm, The Economist doesn’t think so. I must beg to differ. It was not a “false concern” 40 years ago, as baldly stated, and it is a matter of extreme concern today. But the nameless writer simply brushes the problem aside; the unwelcome messengers of ill tidings are quietly murdered in some back room so that the public need not concern itself.

And neither is food a problem, thinks The Economist, because you see the “Green Revolution” has changed all that. Not to worry. But, wait! The Green Revolution was a historic event, not a permanent solution. It was a temporary fix, a jerry-rigged lashup of baling wire and twine that tided the world over for a few more decades while population numbers continued to grow and natural resources continued to be depleted. Again the magic wand of wishful thinking is waved over the problem of impending famine and out pops the rabbit of unreasonable hope.

Why, we must ask, is it unreasonable to believe that agricultural production has “hit a buffer”? It must have to do with that irrational tendency of economists to assume that natural resources are never a limiting factor, although in fact agricultural production is firmly based on a very large foundation of resources, all of which are in trouble. Plants, in order to grow, require minerals such as compounds of nitrogen, phosphorus and potassium. These were plentiful in native soils, most of which have been depleted. Now the necessary plant nutrients are provided by artificial means, and the resources from which those are drawn are fast disappearing as well.

Here are some other keys to agricultural production in its current, industrial form:

First is land, which as the writer admits is in short supply. Most of the new lands being farmed today are the result of rain forest destruction, desperate and wanton acts that promise serious repercussions in their own right. The soils being put to the plow are fragile and generally cannot produce very much on their own, so they require large inputs of fertilizer.

The next essential requirement is water, another resource that is becoming scarce. Everywhere in the world water is in serious trouble. Not only are humans demanding more, but Nature is supplying less. Winter snow melt is less abundant and the warming climate is causing rivers and streams to flood in Spring and dry up by the Summer growing season in many places. Glaciers that form the headwaters of many major rivers in Asia and Europe are fast disappearing. Ground water resources are drying up as farmers run their pumps 24/7 to draw the precious moisture from the ground. Deserts are spreading and rainfall patterns are changing in ways that do not bode well for the future.

Another key essential is energy, and in particular the flood of cheap oil that made industrial agriculture and the Green Revolution possible in the first place. There is no cheap oil today, and oil will never again be either cheap or abundant because the supply is being depleted. Oil not only powers farm machinery to replace human and animal labor but also provides a source of the fertilizer and agrochemicals that made possible the lauded production boosts during the short, temporary phase of the Green Revolution, an era that has now reached its end.

Without cheap oil there can be no cheap food, and to be blunt about it, without cheap food a large proportion of humanity is in serious trouble. Malthusian trouble. Despite the complacent words of a nameless author emanating from the no-doubt comfortable London offices of The Economist, there is no doubt whatsoever that we, the members of the human species, are approaching a massive, worldwide overshoot-and-collapse event that will shake the Third World to its core and send shocks throughout the comfortable West.

This is economics as it should be practiced. This is old-fashioned common sense such as my Scots ancestors would have understood. There can be no Green Revolution Redux because Malthus was right and the resources of the Earth are in limited and diminishing supply. And beyond everything that I have addressed, there is the uncertain background of a planet already threatened by global warming, climate change, environmental collapse and all which those entail.

And if you believe that we of the First World can sit back on the First Class deck of this ship we call Planet Earth and casually watch the steerage passengers falling overboard, you should think again. The analogy holds: This isn’t just any ship, it is the RMS Titanic and it is sailing full speed ahead in dangerous seas. All we passengers are in jeopardy, and no magical rabbits of unreasonable hope can save us from the Malthusian future that is looming like an iceberg in our path.

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