Wednesday, February 06, 2019

Naomi Beck on Hayek (6): Population Growth--Malthusian Doom or Simonian Abundance?

Naomi Beck argues that Hayek's evolutionary defense of capitalism fails, because he fails to show how capitalism can solve the many problems it creates--particularly the depletion of natural resources and degradation of the environment caused by unlimited economic and population growth.  She thinks that Thomas Malthus saw this problem clearly in his Essay on the Principle of Population (1798): economic growth improves the conditions of life so that death rates decline, and population increases; but then inevitably the natural resources that sustain human life are depleted, and the human population must be reduced by famine, disease, infanticide, or war.  The neo-Malthusian Garrett Hardin saw the same problem: population growth in a world with limited resources must devastate the Earth, and therefore "freedom to breed will bring ruin to all" (122-23).

Beck criticizes Hayek for refusing to see the truth of Malthus's theory of population (119-21).  In Chapter 8 of The Fatal Conceit--"The Extended Order and Population Growth"--Hayek argued that Malthus's theory does not apply to a market economy with intensification of exchange and of the diversification and specialization of labor.  "The modern idea that population growth threatens worldwide pauperization is simply a mistake" (121).  "There is no danger whatever that, in any foreseeable future with which we can be concerned, the population of the world as a whole will outgrow its raw material resources, and every reason to assume that inherent forces will stop a process long before that could ever happen" (125).  After quoting passages like these, Beck objects: "It is not quite clear what Hayek thought would happen when we run out of resources.  He seemed totally impervious to mounting concerns regarding environmental issues and the risk of depletion or misuse of resources on the part of the scientists he quoted" (122).

In quoting the sentence above from page 125 of The Fatal Conceit about "no danger whatever," Beck (120) does not quote Hayek's references immediately following this sentence to the writings of Julian Simon, Esther Boserup, Douglas North, and Peter Bauer. She says nothing about Simon or about Simon's famous debate with Paul Ehrlich over population growth and resource availability. This is part of her rhetorical strategy of being silent about any possible objections to her position.

In 1968, Ehrlich (a biologist at Stanford) began his popular book The Population Bomb with this paragraph:
"The battle to feed all of humanity is over.  In the 1970's the world will undergo famines--hundreds of millions of people are going to starve to death in spite of any crash programs embarked upon now.  At this late date nothing can prevent a substantial increase in the world death rate, although many lives could be saved through dramatic programs to 'stretch' the carrying capacity of the earth by increasing food production.  But these programs will only provide a stay of execution unless they are accompanied by determined and successful efforts at population control.  Population control is the conscious regulation of the numbers of human beings to meet the needs, not just of individual families, but of society as a whole" (11).
Ehrlich's Malthusian prediction of catastrophe from unchecked population growth did not come true. Norman Borlaug's development of new high-yield varieties of food grains--the "green revolution"--allowed high-population countries like India to produce so much food in the 1970s that they actually became exporters of grain.  And while the world population in 1968 was three and one half billion, the world population today is about 7.7 billion, and yet the rate of global famine and poverty is much lower today than in 1968.

This confirms the prediction of Julian Simon--in contrast to Ehrlich--that population growth does not lead to a shortage of resources, because a growing population means not only more labor but also more ideas about how to solve our problems, and as long as there are the incentives of a free market economy, people will make resources more plentiful through more efficient uses of resources, increased supply, and the development of substitutes.  Consequently, Simon argued, a growing population creates not scarcity but abundance!  Hayek agreed with this.

In 1980, Simon challenged Ehrlich to make a bet with him.  Ehrlich could select a basket of raw materials that he expected would become less abundant and consequently more expensive over some designated time period.  At the end of that time period, the inflation adjusted price of those materials would be calculated.  If the price was higher, Ehrlich would win the wager.  If the price was lower, Simon would win.  Ehrlich chose copper, chromium, nickel, tin, and tungsten; and he chose 1980 to 1990 as the time period.  By 1990, the world population had increased by 873 million from 1980, but all five of the commodities that Ehrlich had selected had declined in price by an average of 57.6 per cent.  Ehrlich mailed Simon a check for $576.07.

Some of Ehrlich's supporters have tried to argue that Simon was just lucky, because if they had selected a different time period, Ehrlich could have won the bet.  But in 2016, some economists pointed out that in 2015 Ehrlich's five metals were 22.4 percent cheaper than they were in 1980.

Recently, Gale Pooley and Marian Tupy have developed a new way to measure the availability of resources, which confirms Simon's argument.  They have compiled the latest price data for 50 important commodities covering energy, food, materials, and metals.  They then have calculated the "time-price" of these commodities--in terms of the global average hourly income, the "time-price" is the amount of time that an average human has to work in order to earn enough money to buy a commodity.  By that standard, the real price of Ehrlich's minerals has declined in every year from 1980 to the present.  Pooley and Tupy also found that from 1980 to 2017, the real price of their basket of 50 commodities fell by 36.3 percent, and the time-price fell by 64.7 percent.

Their explanation for why Simon wins his bet with Ehrlich is based on Hayek's understanding of how the price system works to generate abundance:
"The relationship between prices and innovation is dynamic.  Relative scarcity leads to higher prices, higher prices create incentives for innovations, and innovations lead to abundance.  Scarcity gets converted to abundance through the price system.  The price system functions as long as the economy is based on property rights, rule of law, and free exchange" (11).
They conclude with this Hayekian insight:
"The world is a closed system in the way that a piano is a closed system.  The instrument has only 88 notes, but those notes can be played in a nearly infinite variety of ways.  The same applies to our planet.  The Earth's atoms may be fixed, but the possible combinations of those atoms are infinite.  What matters, then, is not the physical limits of our planet, but human freedom to experiment and reimagine the use of resources that we have" (15-16).
Oh, but what about climate change?  Hasn't capitalism caused the global warming that threatens to destroy civilization?  Doesn't slowing or reversing global warming require that we move away from unregulated capitalism towards a socialist society that restricts economic consumption and production, and thus perhaps reducing human population?  That's the argument of Naomi Klein in her book This Changes Everything: Capitalism vs. The Climate.  Although Beck does not mention Klein's book, she would seem to implicitly agree with Klein's argument.

Hayekian liberals like Matt Ridley accept the reality of global warming as caused by the modern economic growth that has depended on increased energy use from fossil fuels.  But Ridley and others have made the Hayekian argument that as long as global free market economic incentives endure, this will promote innovative ideas for solving or mitigating the problems from global warming.

We cannot predict what these new ideas will be.  But we can see some possibilities that are already at work.  For example, as Joshua Goldstein and Staffan Qvist have argued in their new book A Bright Future, one possible solution to global warming is a rapid expansion of nuclear power.  Sweden has already done this.  40 percent of Sweden's electricity comes from nuclear power, with another 40 percent coming from hydropower.  And the rest comes from wind and biofuels.

By contrast to Sweden, Germany has tried to eliminate nuclear power, while increasing renewable energy from wind and solar.  But 40 percent of Germany's energy still comes from coal, and six of Europe's 10 most polluting power plants are in Germany.

Sweden's innovative reliance on nuclear power as a cheap, clean, and reliable source of energy to fuel economic growth while reducing global warming is one illustration of Simon's insight into how capitalism generates abundance.

Beck is silent about all of this.

So what is Beck's proposal for avoiding what she sees as the disastrous consequences of population growth?  She never says.  But she does seem to agree with Hardin that "freedom to breed will bring ruin to all" (123).  And she says that the human experience with the artificial selection of animals shows that "successful breeding is not impossible" (66).  Is she implying that we need to coercively enforce eugenics?  If so, who will decide who has the "freedom to breed"?  She doesn't say.

In my six posts on Beck's book, my main criticism has been that she refuses to acknowledge, much less answer, the many possible objections to her position.  Her book is very short--a total of 184 pages--so she could easily have added a hundred pages or so explaining her replies to the objections I have raised.  This could have been a great book,  if only her editors had sent her manuscript out to some meticulously critical referees who could have forced her to take seriously some of the criticisms that I have brought up here.

Some of my points in this post are elaborated in other posts here, herehere, and here.


Ehrlich, Paul. 1968. The Population Bomb. New York: Balantine Books.

Goldstein, Joshua S., and Staffan A. Qvist. 2019. A Bright Future: How Some Countries Have Solved Climate Change and the Rest Can Follow.  New York: PublicAffairs.

Klein, Naomi. 2014. This Changes Everything: Capitalism vs. The Climate. New York: Simon and Schuster.

Pooley, Gale L., and Marian L. Tupy. 2018. "The Simon Abundance Index: A New Way to Measure Availability of Resources." Policy Analysis: Cato Institute, number 857, December 4.

Simon, Julian. 1996. The Ultimate Resource 2. Princeton, NJ: Princeton University Press.

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