Yet another study has been published that claims to confirm the doomsday scenarios of The Limits to Growth, first published in 1972. In predicting calamity in a decade or so, it remains equally flawed.
In 1972, a group called the Club of Rome published what would become an international bestseller. Entitled The Limits to Growth, it tried to model the trajectories of various global trends, described by the authors as ‘accelerating industrialisation, rapid population growth, widespread malnutrition, depletion of nonrenewable resources, and a deteriorating environment’.
Its headline conclusion was one of ‘overshoot’; society was headed for a near-inevitable collapse during the 21st century, with a dramatic and sudden decline of industrial output, food production and population numbers.
‘The behavior mode of the system is that of overshoot and collapse,’ says a Purdue University synopsis of the book. ‘In this run the collapse occurs because of non-renewable resource depletion. The industrial capital stock grows to a level that requires an enormous input of resources. In the very process of that growth it depletes a large fraction of the resource reserves available. As resource prices rise and mines are depleted, more and more capital must be used for obtaining resources, leaving less to be invested for future growth. Finally investment cannot keep up with depreciation, and the industrial base collapses, taking with it the service and agricultural systems, which have become dependent on industrial inputs (such as fertilisers, pesticides, hospital laboratories, computers, and especially energy for mechanisation). For a short time the situation is especially serious because population, with the delays inherent in the age structure and the process of social adjustment, keeps rising. Population finally decreases when the death rate is driven upward by lack of food and health services.’
The book then varies a number of its input assumptions, to produce many different scenarios, the majority of which predict global collapse in what is now the very near future.
Its authors have steadfastly maintained their pessimistic stance, conveniently updating their models every five years to dodge being proven wrong by history.
By making a lot of projections, of course, the Limits to Growth authors left themselves a great deal of leeway. Any variation in any of their assumptions about future trends would be covered by one or another of their charts.
Apologias
What most of these scenarios have in common, however, is that they project a collapse that has not materialised and shows little sign of materialising in the near future.
Others, who share this doomsday pessimism and support large-scale state intervention to try to prevent it, keep writing apologias, pointing out how one or another of the Limits to Growth models is tracking close to observed reality.
One such apologist is Gaya Herrington, an analyst at KPMG, who authored a newly-released paper examining four of the 12 scenarios appearing in the 30-year update published in 2004, and found that two of them, known as ‘business as usual 2’ (BAU2) and ‘comprehensive technology’ (CT), are closest to observed trends.
Herrington says these two scenarios ‘indicate a halt in growth over the next decade or so, which puts into question the usability of continuous growth as humanity’s goal in the 21st century’.
The first of these projects a peak in food production in the early 2020s, followed by a collapse in both industrial output and population by about 2040, as pollution escalates exponentially. The other is a little less harsh, projecting a decline in industrial output by around 2040, a decline but later recovery in food production, a peak in pollution around 2050, and a plateau in population from 2040 onwards.
Of course, eliminating the scenarios (greyed over, above) that predicted an industrial output peak, or at least a major downward inflection, by 2020, makes it a lot easier to argue that ‘they were right’. Any prediction of a future apocalypse cannot be falsified by historical data alone.
The paper is available on the KPGM website, and it was also published behind a paywall in the Journal of Industrial Ecology.
Herrington summarises the original book’s message like this: ‘Effectively, humanity can either choose its own limit or at some point reach an imposed limit, at which time a decline in human welfare will have become unavoidable.’
By ‘choose its own limit’, Herrington presumably does not mean that everyone gets to choose on an individual level, informed by the price mechanism. She means a limit imposed from above, such as the arbitrary 1.5°C warming target set by the Intergovernmental Panel on Climate Change, as enforced through restrictions, taxes or other interventionist means to limit the emission of greenhouse gases.
Environmental performance
The entire basis of the Limits to Growth scenarios, however, doesn’t hold water. It posited population growth, resource depletion and pollution as the greatest drivers of future socio-economic collapse.
Herrington smoothly, and rather dishonestly, substitutes carbon dioxide emissions for pollution, which was used in the initial Limits to Growth. This disguises the fact that in prosperous societies, pollution of all kinds has dramatically decreased in the last five decades.
The richer societies get, the less they actually pollute. More generally, the Environmental Performance Index (EPI) is a joint project of the Yale Center for Environmental Policy and Law and the Center for International Earth Science Information Network at Columbia University. It covers a host of indicators of environmental health and ecosystem vitality, including CO2 emissions and other factors related to climate change.
This index undermines the entire premise that economic growth is bad for the environment. The correlation between environmental performance and GDP per capita is very strong:
I reproduced the chart from the above-linked article and eyeballed a second-order curve over it to indicate that environmental sustainability does tend to decrease initially for poor industrialising societies, but beyond a modest level of prosperity, as GDP rises, so does environmental sustainability.
So, there really is no case for claiming that excessive pollution must ultimately place a limit on economic growth.
Resurrecting Malthus
The population versus resources argument is essentially a restatement of the original Malthusian thesis, that population grows exponentially while resources grow only linearly. Alternatively, that a planet with finite resources cannot possibly sustain economic growth indefinitely, and indeed, not even for the next few decades.
This view is based on a number of misconceptions.
Population growth is not exponential. Although it will initially grow as a function of resource availability in undeveloped societies, this link breaks down as societies get richer. Global population growth is already slowing down, and the reason for this is largely the historic reduction in child mortality in prosperous countries.
In poor societies with high child mortality, people need to have many children. They grow up to be contributors to the family income, and they offer old-age insurance for people without formal pension schemes. If some children are likely to die, the more children you have, the more secure your future is likely to be.
That is even true in societies with high unemployment like South Africa, since having employed adult children in a household is more likely when you have a family with more children. Surviving as a family of seven with one or two low-income earners is easier than surviving as a family of four with no breadwinners at all.
In prosperous societies with low child mortality, none of these pressures exist, and people indeed choose to have far fewer children. In fact, in the rich world, people are now having fewer children than the replacement rate, and native populations are shrinking. Their economies are buoyed by immigrants, instead.
So there is no link between sustained economic growth and excessive population growth, as posited by the Limits to Growth.
That the global population growth slowdown happens to match some of their scenarios is not a vindication of the scenarios, since the proposed causal mechanisms are entirely absent. It predicted a collapse in population numbers as a consequence of an end to growth, which in turn would be caused by resource depletion.
In reality, the world’s slowing population has nothing to do with resource depletion. On the contrary: it is linked to resource abundance.
Resource scarcity
The Limits to Growth ideology also misunderstands the concept of economic resources. For a start, it focuses entirely on non-renewable physical raw materials, and assumes that industrial output growth must occasion an equal growth in the consumption of such resources.
However, this neglects the non-material resources that go into economic production, namely capital and human resources. Greater availability of labour, inventors and entrepreneurs all positively influence industrial output, independent of physical resource use.
In this sense, a growing population is actually a net benefit to the world’s economy: it permits a deeper division of labour, and it contributes to the pool of human ingenuity, which in turn produces better technology designed to maximise output while minimising resource use.
Even when looking at only non-renewable resources, however, the premise of Limits to Growth turns out to be flawed.
Previous exercises to validate the Limits to Growth scenarios against empirical data all found that the closest match was BAU. Herrington finds that it is BAU2 (or, more optimistically, the scenario in which technology comes to our rescue).
BAU2 differs from the base BAU case only in supposing that actual resource availability was twice what the authors originally assumed. That BAU2 aligns much more closely to reality is therefore already a major blow to the theory that resource depletion is a major driver of social and economic collapse.
People who think like the Limits to Growth authors often quote the line, ‘Anyone who believes in indefinite growth on a physically finite planet is either mad or an economist.’
They routinely misattribute it to David Attenborough, because Kenneth Boulding, environmental adviser to the late US president John F Kennedy, isn’t famous enough to be worth quoting.
It betrays a fundamental misunderstanding of economics. The entire purpose of economics is to do more with less. Economics is the study of how to allocate scarce resources in the face of unlimited human needs and wants.
It presupposes scarce resources, not abundance. If resources were not limited, economics would have no purpose, since nobody would have to make the choices that are necessary to maximise value while minimising costs.
Human action
The great Austrian economist Ludwig von Mises believed that all human action consisted essentially of economic choices. Every action is a choice between competing demands on our limited resources. These resources include time, ability, capital and natural resources. Given constraints on our resources, we choose that action that, in our own subjective judgment, provides us, now or in the future, with the greatest material, emotional or spiritual benefit. Conversely, if we do not believe an action will leave us better off than before, we will likely choose to forgo it.
Note that he does not limit the notion of value to something that can be denominated in monetary terms. Mises subscribed to the subjective theory of value, in which value is not limited to material welfare, nor future value always sacrificed for short-term gain. More importantly, there is no universal yardstick by which to measure the rationality of economic choices.
When someone chooses to forgo extra working hours in favour of spending time with our families, they are making a perfectly rational economic choice, for them. Conversely, when someone else chooses to sacrifice family time in order to work extra shifts, they are also making a perfectly rational economic choice, for them. There is no objective way for an outsider to value these individual economic choices.
Price signal
Herrington tried to determine whether resources have indeed become more scarce as populations and economies have grown by trying to estimate the percentage of resources remaining from a postulated total that was available in 1900.
This kind of calculation is fraught with all sorts of unknowns, yet whatever numbers you end up with will always signal an eventual resource ‘peak’. However, like with the infamous ‘Peak Oil’ scenario, it never really comes true.
New resources are discovered, new ways to economise are developed, and new extraction methods are invented. Between innovation, substitution and conservation, the anticipated resource crisis is always pushed further into the future.
In allocating resources to produce goods and services, a far more reliable signal of relative scarcity to both producers and consumers is price. It contains a vast amount of information, implicitly collected from multitudes of produces and consumers; this information is impossible for any single observer to gather in any other way.
If a given resource becomes more scarce, its price rises, which signals producers to either throw more capital at discovering more of that particular resource, or to develop substitutes. It also signals to consumers to economise, or switch to alternative products.
Industrial society, for example, saved the world’s forests by developing more convenient and lower-cost alternatives to wood – like plastic, concrete and steel – for all sorts of products, from furniture, to toys, to vehicles, to buildings, to ships. As scarcity rises, the price of wood goes up, with the result that expensive, rare species are no longer in general use, and are rarely used only for applications – like musical instruments or high-end furniture – where their cost can be justified. And even then, wealthy consumers are increasingly conscious of pressure on rare species and choose more abundant and sustainable alternatives. ‘Sustainable’ has become a desirable luxury brand.
Long-term price trends
It would not surprise anyone that as some commodities have become harder to find and more expensive to extract, their prices have increased over the very long term. It is hard to isolate long-term trends from prices that are subject to medium-term supercycles and short-term booms and busts, but David Jacks made an attempt to do so in this paper.
He finds that ‘real commodity prices have been on the rise – albeit modestly – from 1950. This trend is not uniform, however. Energy products, minerals, and precious metals have increased in price, grains and soft commodities have consistently decreased in price, and metals are largely flat.
Marian L. Tupy, the editor of HumanProgress.org and senior fellow at the CATO Institute’s Center for Global Liberty and Prosperity, is the coauthor of The Simon Project, which studies the scarcity or abundance of resources. In an article for the Foundation for Economic Education, he largely agrees with Jacks, noting that 23 out of 42 commodities tracked by the World Bank increased in price between 1960 and 2016.
However, he notes that of those 23 commodities, only three – crude oil, gold, and silver – appreciated more than income. In a vast majority of cases, therefore, commodities became cheaper either in real prices, as Jacks measured, or relatively to income.
The notion that commodity scarcity is a brake on industrial output or economic consumption appears to be tenuous, at best. It certainly does not appear to be a particularly significant factor. On the contrary, many resources appear to be more abundant, as measured by their price relative to incomes, than ever before.
Premise of collapse collapses
Since population growth, resource depletion and pollution turn out not to be drivers of future socio-economic collapse, the entire premise of the Limits to Growth collapses, even if one or two of its many scenarios appear to match empirical data.
This means that there is no sound basis to the prediction of an imminent global collapse in industrial output, food production or human population. The scaremongering is based on nothing but feeling, rhetoric and left-wing ideology.
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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Image by Nattanan Kanchanaprat from Pixabay