Tuesday, May 20, 2008

Canary in the Coal Mine

It's always good to be on our toes and be in this economic struggle of scarcity, but let's not lose our heads. I've been saying it for a while. In Malthus' time of writing his Essay on the Principle of Population, it was that we would run out of the ability to feed our growing population. Then, it was that we would run out of coal in the late 1800s and that we would run out of oil in the 1970s. Now, we worry about Oil and Food, and this week the Economist Magazine urges us to study history more carefully and not go nuts. There is no imminent danger of running out of oil; there is no imminent danger of running out of fuels to run our economies; there is no imminent danger of running out of food. There is a greater risk from climate change than from either of these problems, and we can probably even come up with clever ways of managing through that with some innovations in technology.

Life is good.

3 comments:

  1. "it was that we would run out of the ability to feed our growing population. Then, it was that we would run out of coal in the late 1800s and that we would run out of oil in the 1970s."

    The point of such a claim is that it signifies the importance of advances in production (food, coal, etc) through technological means.

    If there had been no technological advancements, we would have run out of a lot of things. [At the same time, the world is running out of quite a number of animal, plant and human species.]

    Malthus stressed on the need to keep population and food production in such a way that everyone would be fed. I think, this still hold true everywhere as one of the main concerns of economics.

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  2. There's some validity to this point if your reading of Malthus is broad, and updated in light of the lessons we've learned since his time. In his time he did stress the need to grow the food supply in pace with population, but he predicted, essentially, that: (1) left unchecked, population would tend to grow exponentially, and; (2) the food supply could grow (at best) in a linear fashion. Thus, the only way to compensate for this was through a rise in the death rate. He later moderated his viewpoint to claim that an alternative solution was "moral restraint," i.e. less sex and lower birthrates. A similar doomsday approach came about in the mid-1800s, 1970s, and of very late with respect to food as well as other resources. My point is that one thing history teaches us is that with the proper incentives, these things can be easily overcome, as you say, with technology.

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  3. In fact there is evidence that rising populations increase the pace of innovation (Kremer??, Basuchoudhary and Reksulak, 2007) -- thus it is not surprising that we havenot fallen into the Malthusian trap. A higher population growth rate actively increases the productivity of individuals through innovation. And this innovation is not just limited to traditional technologies -- i think it is even more relevant for institutional innovation (the incentive bit that you were talking about). High population concentrations ought to increase the private benefits of institutional innovations. (Of course there are network externalities as well to institutions and it is a little unclear whether this would reduce adoption rates for new technologies). By the way I am blogging again.

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