Arnold Kling

Limits to Growth?

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Bjorn Lomborg and Olivier Rubin have an article that concisely challenges the thesis that environmental limits to growth are binding.


[the limits-to-growth argument's] real weakness is the underlying assumption that planet Earth has finite, essential resources (such as oil, water, and grain) for which there are no substitutes. Few resources have turned out to be essential, since the demand for and the availability of the Earth’s resources adjust over time in accordance with technological progress and economic development. In photography, for instance, silver is now dispensable due to digitalization. In telecommunications, silicon fibers have replaced copper wires. Renewable energy (such as solar and wind power) are becoming a viable alternative to fossil fuels...

In short, there is no natural law dictating an exponential mounting pressure on Earth’s ecological resources. The limit of sustainability is not a static ceiling but is formed and expanded by human innovation and technological progress. This exponential dynamic seems to have outpaced any pressure on the limit. Thus, perhaps the most problematic assumption is the omission of technological progress and human innovation from the model. Only by ignoring these strong dynamic forces can one posit a fixed limit to growth.


For Discussion. Going forward, what resources are likely to increase in price, and what resources are likely to decrease in price?


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COMMENTS (39 to date)
Charles Sestok writes:

I suspect that the price of agricultural products will fall in the future, due to advances in genetic engineering. I'm optimistic that crops can be designed to consume less water and fertilizer, grow in a wider variety of environments, and be more resistant to pests. As these technologies spread, I believe that evidence of their benefits will overwhelm the efforts of skeptics in places like

Brian writes:

Open space and wilderness will become more expensive. Wild animals, hunting and fishing licenses, remaining examples of endangered species (even with CITES), and heirloom crops will rise in price as they become scarce and demand rises.

Permission to pollute will become harder to come by and tradeable allowances will become the most valuable asset of some industrial plants.

dsquared writes:

Brian is correct. If Lomborg (or anyone else) fancies a Julian Simon-type bet, I will bet that the price of agricultural real estate will be higher in 2013 than it is now, in real terms.

dsquared writes:

And of course, anyone wanting to stake the survival of the human race on continued technological progress forever ought to at least consider humanity's track record in distinguishing between exponential and logistic processes.

David Thomson writes:

“And of course, anyone wanting to stake the survival of the human race on continued technological progress forever ought to at least consider humanity's track record in distinguishing between exponential and logistic processes.”

We should readilly be willing to bet on our never ending tecnological progress. This gamble based a historical perspective is extremely prudent! The odds are definitley on our side. Furthermore, this must be our attitude if we truly wish to eradicate poverty throughout the world. The Third World is doomed if we embrace reactionary economic models.

Ross writes:

Brian/dsquared,

what is the historical trend for agricultural real estate prices? Whatever one thinks of Julian Simon, he based his bets on the continuance of long-term price trends, I believe.

Scott writes:

I believe that the price of agricultural land has trended upward - primarily because of it's value when used for something other than agriculture.

Note that in many areas, people pay much lower property taxes by claiming that their land is used for agriculture.

As for non-renewable natural resources (minerals), the trend for the last few thousand years has been downward.

back40 writes:

The value of agricultural land, as with any business asset, is its production value. As Scott notes, land near urban areas has increased in value but not as agricultural land. This is a tiny percentage of all ag land.

The only way for ag land to increase in value is if net profit from ag operations increases. If food becomes more valuable or land becomes more productive this can happen, but there are counter trends as more food is vat grown, container grown and at some point directly synthesized.

Open land and wilderness will not become more valuable or more scarce. As more food is "manufactured" less land will be used for ag. Fallow land, if managed, can revert to something like wilderness. States already own much wilderness. Vacation land near state wilderness may increase in value but fallow ag land will compete to keep the increase low or perhaps even nonexistent. As population stabilizes and then begins to fall in the 2050s land values will go into free fall except for those rare and magnificent spots humans have always prized.

Bernard Yomtov writes:

I agree with Brian's point on pollution allowances. As population increases, the health cost of pollution will rise.

As the population grows wealthier it will have less tolerance for pollution. We might even imagine "Coasian" transactions, where some communities buy up pollution allowances just to retire them.

David Thomson writes:

"I agree with Brian's point on pollution allowances. As population increases, the health cost of pollution will rise."

We should not perceive population growth solely in a negative manner. One can also say:

"As population increases, we will have more people to assist us in finding solutions to our ongoing challenges.”

David Thomson writes:

“what is the historical trend for agricultural real estate prices? Whatever one thinks of Julian Simon, he based his bets on the continuance of long-term price trends, I believe.”

I seriously doubt that the late Julian Simon would place so much emphasis on agricultural land prices. There is only one thing that should concern us: the final price of food to the consumer. And in this regard, we have been extremely successful. In the United States, almost nobody goes hungry. We instead have an overeating problem!

Are you truly concerned about world hunger? If so, you should combat the junk science movement that condemns genetically modified food. The Old Europeans and the rest of the crazy leftist coalition are responsible for the death of millions.

Brad Hutchings writes:

Capable people will become more expensive. Jokes about the mediocre will become a commodity. Every cartoon will be Dilbert. It won't even be funny anymore :-).

Harold writes:

"Brian is correct. If Lomborg (or anyone else) fancies a Julian Simon-type bet, I will bet that the price of agricultural real estate will be higher in 2013 than it is now, in real terms."

Almost certainly incorrect. Less land is required for agriculture every year. Even less would be if so many governments would not pay thier farmers to farm marginal land.

Eirikur Hafberg writes:

It seems that Lomborg's idea NEEDS technological innovations to be fit for the future, thus the state of affairs as they are today will NOT last. Of course the Earth is limited in all aspects; space, oxygen, oil, water, etc. That's exactly why we can expect some products to gain higher prices in the near future. So, where are the environmentalists wrong in this? They simply aren't wrong at all.

dsquared writes:

>>Almost certainly incorrect. Less land is required for agriculture every year

Perhaps so, but that's not the bet I'm proposing.

Eric Krieg writes:

>>Of course the Earth is limited in all aspects; space, oxygen, oil, water, etc. That's exactly why we can expect some products to gain higher prices in the near future.

back40 writes:

"... where are the environmentalists wrong ..."

The best, most informed, smartest environmentalists using the best data and the best mental tools never have agreed with the hysterical pseudo-environmentalists that captivated the media and politics. Those wankers are politicians not environmentalists. They use the environment as a politcal wedge issue and as a weapon to harm ideological opponents whether it is beneficial for the environment or not.

"Population growth is slowing faster than anyone has predicted."

Population decline has been predicted for decades based on fertility rates which fell below replacement levels in developed countries. When the population bomb nutters were riding high it was already known that the real problem was the demographic bubble, the increasing average age in developed countries which would result in societies too old to breed, too old to produce, and who consumed too many expensive medical products.

The only useful debates are how to speed development in other parts of the world where fertility rates were still at pre-industrial levels, and how to communicate to those in the developed world that they have to breed very near replacement levels to prevent demographic catastrophe. Population biology is not a mysterious science, the concepts are old and well known.

Eric Krieg writes:

>>The only useful debates are how to speed development in other parts of the world where fertility rates were still at pre-industrial levels, and how to communicate to those in the developed world that they have to breed very near replacement levels to prevent demographic catastrophe.

Bernard Yomtov writes:

I don't view population growth as purely negative. I was just stating what seems obvious. If there is a 1% chance that a given amount of air pollution will make someone sick then a larger population means more sick people, means higher health costs should mean higher prices for pollution allowances.

Does this suggest a flaw in the idea of trading these allowances?

Eric Krieg writes:

Air quality is improving. The improvements to air quality are so large that they simply swamp other factors that are growing much more slowly, such as population growth.

http://www.rppi.org/clearingtheair.pdf

Stephen writes:

I read limits to growth and I recommend it. It says that the population is increasing exponentially, i.e. doubling about every 30 years. They asked questions like what happens if we double the productivity of arable land, and the answer is that you only gain one doubling of the population.

It is clear that on a finite planet exponential growth has to stop sometime, probably before there are more people than atoms in the universe. The only question is what is going to stop the human population continuing to grow exponentially - is it a limit in agricultural land x sunlight energy per area agricultural land? (a limit that no technology will overcome for plant growth)

What ever the technical solution it has to keep up with the population doubling every 30 years. Given the price of yellow fin tuna it seems eminantly possible to overfish the sea such that fish become rarer (and more expensive driving technolgy to catch every last one) Why should land be any different?


In the article it says this (see quote below), but on reading the book, their best guess was that problems would hit the earth about 2070, the only predictions I could find that they had made (after reading Matt Simmons review of the book) was that population would get to about 6.5 - 7 billion by the year 2000, and it is about 6.5 billion. To do this they just extrapolated the exponential growth rate.

"But 30 years later, the Club of Rome’s most dire forecasts have failed to come true." This is a weird statement, their dire forcasts were aimed at a later time than today, why does everyone hate this book so much? It really makes me think that the authors of the article didn't read the book but rather looked for things to attack.

Eric Krieg writes:

>>The only question is what is going to stop the human population continuing to grow exponentially

Stephen writes:

Our free will would be the very best answer, I hope this is the case. From an economics point of view does it make sense for poor families to have more children and rich to have less? If so we would have to solve the problem of masses of poor people in the world. If only education is needed to help people make that jump then perhaps there is hope? China's popuation policy is also interesting, but I can't see that happening everywhere.

Eric Krieg writes:

Stephen, there is no need to speculate. It is happening. Even the poor ARE having less children, and not just in China (where population is coercively suppresed by an authoritarian government, not a good thing!) and India. Keep in mind that China and India alone are 1/3 of the Earth's population, so what goes on there has great importance, to say the least.

And don't forget that the developed nations have an entirely different problem: too little population growth. With not enough young people, developed nations like Japan have a demographic crisis, with not enough young people to support the elderly.

Thankfully, there is an easy solution to this problem that also helps the poor nations: immigration. If, of course, the Japanese can overcome their inherant racism!

Jim Glass writes:

"Our free will would be the very best answer, I hope this is the case. From an economics point of view does it make sense for poor families to have more children and rich to have less? "

Throughout all history increasing wealth has decreased the birthrate and it is doing so *everywhere* in the developing world now -- as it has wherever development has occured, as long as it has. In almost all developed countries the birth rate is now below replacement level, meaning population declines are already in the pipeline.

Poor agricultural families in non-financial, subsistance economies need lots of children to do all the work, and hopefully have enough children survive long enough to take care of their parents in old age. But in developed, non-agrictultural economies children are *expensive* -- and can be *dangerous* too, except in the most modern economies a lot of women still die in childbirth.

Thus, in developed economies the birth rate *plunges*. This is not new. In ancient Rome the Emperor Augustus had to *order* Roman citizens to breed when their birth rate plunged. Adam Smith discussed in _Wealth of Nations_.

(And speaking of crankery, the "population bombers" who have turned a blind eye to 2,000 years of evidence on this to instead sell absurd scare tales of "exponential growth of population until there are more people than atoms in finite world" sure have shown themselves as cranks in that regard.)

A *big* population plunge has already started in Europe, on current birth rates one will start in about 40 years in China, and the Japanese gov't has already announced when the last Japanese will go extinct given their birth rate....

http://www.guardian.co.uk/population/Story/0,2763,202717,00.html

Jim Glass writes:

"It is clear that on a finite planet exponential growth has to stop sometime."

By this silly logic the eco-doomsters should be worried about the death of the Sun, after all its life is finite, eh?

But as to economic growth, *why* does it have to stop sometime?

After all, what goes into it? Look at what GDP is composed of: Knowledge. Information. 80% of GDP is *immaterial*. When a doctor diagnoses you and gives you a pill is that at great drain on the world's physical resources? What about when a teacher teaches a class? What is the physical constraint on the *immaterial*?

Now we've already seen that economic growth reduces the level of the population, as per my previous post -- in spite of the absurd "exponential growth" scare stories peddled by the Club of Rome.

Now let's look at what else economic growth reduces -- which the Club of Rome also didn't tell you.

Economic growth reduces the *physical content* of the economy. We consume LESS of material things with advancing economic development.

One of Alan Greenspan's favorite little statistics is that while the total US economy is now almost 20 times larger than it was 100
years ago, the physical mass it consumes is *no more* than it was 100 years ago, and may be *less*.

This means physical consumption per dollar of GDP has *declined 95%* in the last 100 years.

With the US population having grown about 3.6 fold over this period, this means we have more than 5 times per capita GDP while consuming *75% less* per capita physically.

E.g., NYC has been producing a *declining* amount of garbage per person for 60 years now -- the amount now is *less than half* of what it was in the 1940s. (And it's not because of any enlightened "conservation movement" that didn't exist when the decline started).

How can this be?? Because the increasing economic value that is measured by rising GDP comes from *knowledge*, not from material things. In fact, increasing knowlege goes into reducing the use of material inputs in an economy because they are costly. The free market drives the *reduction* of claims on the material world.

Steel cans get replaced by tin, by aluminum, by plastic. Each step reducing material input. Wooden shipping boxes with steel straps outside and braces inside get replace by cardboard, bubblewrap and styrofoam. In constructing skyscrapers brick and iron are replaced by glass and composites with only a fraction of the mass. Because it all results in less cost and higher value to producers and consumers -- it's no accident, it's the free market in action.

Look at manufacturing: Once the biggest US manufacturer was US Steel, consuming many million tons of coal and ore and iron each year, strip-mining the land. Today the biggest manufacturer is Intel, which consumes basically little bits of sand to which it provides very sophisticated structure using vast amounts of *knowledge*.

Now admittedly as we live on a finite world the Club of Rome may logically say that someday Intel must run out of the sand that is needed to manufacture computer chips, and then the economy will come to a halt -- although perhaps the Sun will expire first.

But does the Club of Rome say the human race *must* someday stop gaining new knowledge? Or is it only the Club of Rome and various eco-doomsters who are immune to new knowledge, and perhaps they are projecting?

Anyway, economic growth and development *reduce* the size of the total population and ALSO *reduce* the demands of the population on the physical world, per capita.

So if you really want to "Save the Physical World" you'd do best to become a fan of economic development and start lobbying for as much of it as we can get as fast as possible.

And as a side benefit you may help a few billion people escape lives of pretty rough hardship.

Remember: Conservation is a Luxury Good.

Eric Krieg writes:

>>E.g., NYC has been producing a *declining* amount of garbage per person for 60 years now -- ...

How can this be??

Jim Glass writes:

Half of all the garbage in NYC in 1940s was manufacturing waste?

Nope. Keep trying and by process of elimination eventually you'll come around to the explanation that drives all the eco-doomsters mad.

NYC's dumps are just measuring Greenspan's favorite little statistic in action.

Eric Krieg writes:

Jim, I'm not discounting your efficiency argument. We are using less material. But the fact is that NYC was once the manufacturing capital of the world. It is no longer even a minor center of manufacturing. The jobs in NYC replaced the manufacturing jobs are of the thinking kind, the kind that don't generate much waste.

BTW, you can, once again, thank ENGINEERS for the increase in waste efficiency, and then some. One of the things that civil engineers have solved is the pollution given off by landfills. In the old days, landfills leaked toxic liquids into the groundwater. They no longer do, thanks to systems developed by civil engineers. Civil engineers have also devised ways to cap lanfills, so the methane gas is captured. Methane is stinky stuff, so you don't want to let it escape. Also, it can be used as a fuel, so that some lanfills can also generate electricity.

And while I'm on a roll, don't forget that the plastic milk jug has lost about 1/3 of its mass over the past 20 or so years. It does the same job with less material, and thus, less waste. Again, engineers.

Just doing my part to get the engineering profession the respect it deserves.

Jim Glass writes:

"Just doing my part to get the engineering profession the respect it deserves."

Oh, that's very well appreciated. I wouldn't want to hire an economist to design a milk jug for me.

As to manufacturing, just remember that a decline in *employment* in it does not mean a decline in the *amount* of it.

Manufacturing employment has been declining in the US steadily for decades, while the amount of manufacturing as measured by the value of manufactured goods has continued to grow. It just means productivity has been rising rapidly in manufacturing so more can be made with fewer workers, the same process that has been going on in agricuture for a lot longer.

I don't know the data for my home town here, if I get the time I'll look it up.

Eric Krieg writes:

>>As to manufacturing, just remember that a decline in *employment* in it does not mean a decline in the *amount* of it

Eric Krieg writes:

>>I don't know the data for my home town here, if I get the time I'll look it up.

Jim Glass writes:

Eric, I live on the in downtown west side of Manhattan and am familiar with conditions here.

Yes, regulation on manufacturing is awful but regulation on service businesses is just as bad. The regulators don't discriminate in Moscow on the Hudson. Perhaps you saw the news item recently about how a mom-and-pop business that was fined $15,000 for having its name on its awning? That was a service business.

Manufacturing has mainly left NYC because it's just not economic to manufacture here anymore, services are the big local comparative advantage. Finance and the rest of it brings in a heck of a lot more money per square foot than manufacturing, and you need that money to cover the rent. The rent on a big old manufacturing plant in Manhattan would be impossible. In the outer boroughs the same thing is true to a lesser extent.

Where I live was all manufacturing at the beginning of the last century. The streets were full of railroad tracks running to the piers, and the buildings were all factories and warehouses. The "High Line" elevated freight railroad ran through the upper stories of the factories and warehouses, connecting one to the next.

Today the piers in the area are all sports clubs and golf ranges and the like, and the factories and warehouses have all been turned into apartments and office spaces.

But the High Line, though abandoned, still stands and still runs through them. It makes for some interesting living rooms and office reception areas. ;-)

Eric Krieg writes:

>>The rent on a big old manufacturing plant in Manhattan would be impossible

Jim Glass writes:

"NYC lost 3/4s of a million manufacturing jobs since 1954, not a half a million."

This kind of terminology always annoys me. How come jobs are "lost" but never "found"?

E.g. in the last 25 years Manhattan "lost" 150,000 jobs in manufacturing but "found" 450,000 jobs in finance and services.

So were those 150,000 "lost" jobs really "lost"? It's not like employment went down by 150,000.

Maybe rather than being lost they were "traded in" for newer, better, and more?

Eric Krieg writes:

>>Maybe rather than being lost they were "traded in" for newer, better, and more?

Matt Young writes:

I just ran into your popular site.

I looked up ag land prices from 1950-1980, and they rise 1% above inflation.

Also, scanning about 2/3 of the comments, I missed comments about urbanization, which moves underdeveloped farmers into cities where they live very efficiently in little cage like habitats.

And yes, as cultures move into cities, they die off, as we see in Europe.

back40 writes:

"Less land is required for agriculture every year. Even less would be if so many governments would not pay thier farmers to farm marginal land."

Arnold liked this statement and seems to want to discuss it some more.

Governments also pay farmers to fallow land - as in CRP programs -, pays farmers not to produce - as in quota systems, and pays farmers to overproduce - as in production and export subsidies. Agriculture is a mess.

Mark Bahner writes:

"If Lomborg (or anyone else) fancies a Julian Simon-type bet, I will bet that the price of agricultural real estate will be higher in 2013 than it is now, in real terms."

That isn't a "Julian Simon-type bet." A "Julian Simon-type bet" would be a bet on the price of a particular agricultural commodity, or basket of agricultural commodities.

The price*** of agricultural land is not relevant to human progress, the way the prices of agricultural commodities are.

As the late, great Dr. Simon would point out, you are interested in betting on the what the score of a ballgame will be in the 5th inning. He was interested in betting on the score at the end of the game.

Would you like to bet on whether the price of any agricultural commodity or basket of commodities will go up by 2013, in inflation-adjusted terms?

***P.S. Additionally, Julian Simon wouldn't agree that prices of agricultural land should be adjusted ONLY for inflation. He would say that the actual true measure of cost would be the cost per hour worked (i.e., whether it takes more hours of work to pay for an acre of agricultural land in 2013 than in 2003).

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