For my new class, I was assigned the reading “The Limits to Growth: Malthus and the Classical Economists” by E. A. Wrigley. It’s a great primer into the worries classical economists had about the state of the economy, growth and population dynamics, and was interesting enough that I decided to look further into the issue. As I sometimes do, I chose to have a little discussion with myself to straighten out some of my previous misconceptions. Enjoy!
Q: So, Malthus was basically this doomsday figure that said our civilization would keep on collapsing because we would have unsustainable population growth, right?
A: Yes and no. In fact, it’s not quite that simple, but the basic worry of Malthus was indeed that there was an “ineluctable tension between man’s formidable powers of reproduction and his much more modest powers of production” (Wrigley, p. 32). His basic argument was this:
- Food is necessary to the existence of man.
- The passion between the sexes can be regarded as a constant.
- Land (the main production factor for food) is finite on Earth.
So, if you therefore realize that a constant growth rate of the population means geometric (exponential) growth, but that you could at best grow food production arithmetically (linearly) (because, when your land is fixed and all you can add is more labor, you won’t be able to more than double the production if you double the people working on your land), Malthus argues that history would go something like this:
- Because of progress, we are good at producing food and other things, making everybody better off in the short run.
- Our population grows at a constant rate.
- Soon, though, the absolute population growth overtakes the food production growth, and we can’t feed all the new people.
- There are two possible resolutions: a) the positive check: mortality rates go up and people die off quicker until our population falls back to the optimal level; or b) the preventive check, where marital rates go down and thus fertility also decreases.
- This continues until we arrive at a population size where everybody has a socially acceptable standard of living, at which point mortality falls again and marriage rates increase.
- Repeat from the top.
Q: Wow, that’s pretty sad.
A: It comes even worse. Remember that whole “we can grow food production linearly?” Once Malthus thought more about it, he realized that after a while, not even that might be true anymore. Rather, with increasingly intensive use of the same amount of land, you will get less and less increases in output/yields – which is called “the law of declining marginal returns”. This is also the law that most of the work done in agricultural economics is based on. You can now basically prove that increasing fertilizer use, for example, first leads to increasing returns (the more you use, the greater impacts you have), then quickly changes to decreasing returns, and after a certain level even turns into negative returns (putting even more fertilizer on your fields negatively affects your yields). So Malthus was actually pretty ahead of his time.
Q: But there were classical economists that disagreed with him, though, right? Like Adam Smith or David Ricardo? They thought that you could have real economic growth?
A: Actually – and this surprised me – the Wrigley article says that they were basically on the same page on most of these issues. They all agreed that you couldn’t have increasing real wages (basically, because all your additional profit in the short run would be spent on the additional workers that were born because of the better living conditions. David Ricardo actually formalized the law of declining returns and agreed with the pessimistic conclusions.
In fact, the article says that Malthus was less pessimistic than Smith in terms of his views on fertility and mortality. While Smith basically assumed that the fertility of poor people was so high that only their high childhood mortality rates kept population in check, Malthus had pretty complex views of the west European marriage system and its link to population growth. In societies with economic triggers for the decision to have kids (i.e. the couple finds it has sufficient income to support a family), according to his thesis, you would be able to have a greater standard of living than in those where having children is more linked to a biological trigger (if it is considered shameful for a sexually mature girl to remain unmarried and childless). Either way, though, these preventive or positive checks would, according to the economists, make population growth beyond a certain size impossible.
Q: Huh. Well, society clearly hasn’t collapsed, now, has it? So you are saying that basically all classical economists got their basic view of the macroeconomy wrong?
A: Well, wait a second. These insights stem from the particular time they were conceived in – the late 18th (for Smith) and early 19th century (for Malthus and Ricardo). This was a pre-industrial society in which economic production was closely linked to the land. You could say they were living in an organically based economy. Land wasn’t just necessary for food production, but was also the principal source of industrial raw materials (wool, cotton, flax, silk, leather, hair, grain, straw, fur, wood) and of mechanical energy and heat (again through food, feed – needed for human and animal muscle energy – and wood). Thus, all of society exerted a double pressure onto the land – through their food demand as well as the even greater demand for non-food products) which made such conclusions very likely.
Q: So what happened? What was the game changer?
A: One major discovery: Coal. And thereafter other mineral raw materials and fossil fuels which decoupled our production facilities from the limited factor of land. Now, the law of marginal return could be overturned, at least temporarily, for food production, since we had the energy available to switch to a massively mechanized mode of production, including the manufacturing and/or mining (which also required energy) of mineral-based fertilizer. Similarly, our other economic production was decoupled from the land, at least temporarily.
Furthermore, the development of contraception and more advanced family-planned methods actually contradicted the assumption that an increase in wealth would lead to more fertility. Rather, it is the other way round, as Hans Rosling shows so well with his data:
[skip to 6.30 for the correlation between development, improved child survival, and fertility]
Q: Can we still take away anything valuable from these thinkers?
A: Well, yes, of course! For one, some people argue that these basic limits (of a finite planet) still exist, except that we managed to ignore them for one or two centuries longer because we relied on a capital stock of mineral endowments (fossil fuels) that will come to an end sooner rather than later. In today’s carbon-based economy, that would create massive shocks, but the only alternative is to go back to a (of course technologically more sophisticated) organically based economy where the main energy is based on solar and other renewable energy sources that are then transformed one way or another with the help of land and other tools. Thus, maybe we have soon reached a period where “Limits to Growth” (in terms of per capita GDP or wealth) will once more become a reality.
What had you heard about Malthus’ ideas before?