Wednesday, November 12, 2008

Malthus Vs. Smith

This is my answer to someone posting on our university newsgroup. I have changed the poster's name.

Samuel said ". . . we may, through human inventiveness, find new ways of producing products from new sources. That, however, only would seem to delay our acknowledgement of the fundamental problem. We live on a finite earth with finite resources."

Thomas Malthus predicted that Britain's population would outstrip its food supply and settle into a steady state on the brink of starvation in the early 1800's. Land, surely, must be the most fixed of all resources. How could Malthus miss?

In 1968 Paul Ehrlich predicted that by 1980 U. S. life expectancy would be forty-two years due to population outstripping earth's resources. Back in 1900 U. S. life expectancy was forty-seven; in 1970 it was seventy; in 1980 it was seventy-four; in 2000 it was seventy-seven. Ehrlich missed by about a century.

The fact that Malthus and his fellow travelers have been wrong thus far does not necessarily imply that they will always be wrong. But I think the Malthusians will, indeed, always be wrong. Samuel supplied the answer with, ". . . we may, through human inventiveness, find new ways of producing products from new sources."

This was the logic that the brilliant economist, Julian Simon, used in his argument and winning bet with Paul Ehrlich that involved Ehrlich's scarcity predictions.

As oil becomes scarcer its price rises. As its price rises, someone can make a lot of money by finding substitutes for oil. A capitalistic economy rewards people who can make others' lives better in this way. (I just read in Twain's "Life on the Mississippi" about how extraction of oil from cotton seeds changed the nature of cotton commerce during Twain's lifetime.)

In my view, currently our most pressing scarcity is that of fresh water. We are draining our aquifers. But as water prices rise, the rewards for finding ways to make fresh water, perhaps from salt water, increase. Also as water prices rise, industries that currently use water will find cheaper substitutes.

In the very long run, we have to deal with the law of entropy. As we continue to consume, we transform stuff from more organized states to less organized states. However, as we go forward we are able to make more and more use of these more disorganized outputs of production, because it is profitable to do so. Perhaps we can continue this for a long time (until the last judgment, for millenialists; until universe's energy is all unorganized, for others.)

Malthus attempted to improve on Adam Smith's theory of economic growth. Smith's theory is still validated in large ways and small ways all over the world. Mathusians are still telling us, "Just wait." I cannot say the Mathusians will never be right. But their track record is not so good--so far the only we only see Malthus borne out due to a lack of economic freedom to improve (in many African countries, in Mao's China, etc).


1. If we put the *world's* population into four-person families living on subdivision-sized lots, they could all fit into the state of Texas.

2. In every society, affluence reduces fertility rates. As we become better off we have less offspring, putting less pressure on resources. Paradoxically, if we clamp down on freedom today to preserve tomorrow's resources, we might increase fertility rates, straining future resources.

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