{"id":5920,"date":"2009-09-30T06:16:51","date_gmt":"2009-09-30T06:16:51","guid":{"rendered":"http:\/\/blog.beliefnet.com\/jesuscreed\/2009\/09\/economics-at-the-jesus-creed-m-2.html"},"modified":"2009-09-30T06:16:51","modified_gmt":"2009-09-30T06:16:51","slug":"economics-at-the-jesus-creed-m-2","status":"publish","type":"post","link":"https:\/\/www.beliefnet.com\/columnists\/jesuscreed\/2009\/09\/economics-at-the-jesus-creed-m-2.html","title":{"rendered":"Economics at the Jesus Creed: Michael Kruse 4"},"content":{"rendered":"

\"WallStreet.jpg\"<\/span><\/p>\n

This series is by Michael Kruse and it concerns economics — a basics in economics. Most of us, and I include myself, no next to nothing about how economics work and so this series is here for the education of all of us. (Thanks Mike.)<\/i><\/p>\n


<\/i><\/p>\n

Division of labor, mechanization, and trade has given rise to prosperous societies. Economic prosperity is spreading around the globe. Most people welcome the improving material quality of life. But is this prosperity sustainable? Commodities and natural resources are limited. We are told to reduce consumption so there will be more for others … we should “live simply that others simply may live.” It seems so intuitively obvious. But is it true? Malthusians would be inclined to think so.<\/p>\n

 <\/p>\n

Scholar and clergyman Thomas Malthus, published the first edition of his landmark work, An Essay on the Principle of Population, <\/i>in 1798. Malthus was skeptical of his contemporaries’ optimistic visions for human improvement. His historical analysis showed that agricultural resources grow arithmetically (i.e., 1, 2, 3, 4, 5 …) while populations grow geometrically (i.e., 1, 2, 4, 8, 16 …). Population outgrows the supporting resources. Societies must either expand their territory or experience a check on population size via war, disease, or famine. Greater prosperity tends to follow these checks as population comes back into balance with resources. That leads to new population growth and the cycle repeats itself. This is the Malthusian trap. It is a fairly accurate characterization of the world’s experience prior to the Nineteenth Century.<\/p>\n


\n<\/p>\n

Looking
\nforward, Malthus failed to anticipate two things. First was the nascent revolution
\nin agricultural and industrial productivity. For the first time, agricultural productivity
\noutpaced population growth. For instance, in the United States, the ratio of population
\nto acreage of cropland in production stayed fairly constant until 1910. Total
\ncropland in production then was 310 million acres. The population increased
\nthreefold over the next century. Keeping the ratio constant, 700 million more
\nacres of cropland would have been needed … a land area equivalent to the land
\narea east of the Mississippi River. How many acres are in production today?
\nApproximately 310 million acres … and we export more than we import. Productivity
\nhas increased dramatically. Globally, appropriation of land for agricultural
\nproduction is still increasing as the population grows but the rate of appropriation
\nhas slowed since the 1960s.<\/p>\n

 <\/p>\n

The second
\nissue Malthus missed was innovation and substitution. The Bronze Age did not
\nend due to a lack of bronze and the horse and buggy age did not end due to a
\nlack of horses and buggies. Neither will the fossil fuel age end due to a lack
\nof fossil fuels. As technologies become too expensive or problematic,
\ninnovations are made and substitute products are brought into the market. <\/p>\n

 <\/p>\n

Turn back
\nthe clock one hundred years in the United States. Urbanization is underway and
\naccelerating. We can project that the population will grow as much as threefold.
\nPersonal transportation is powered by horses. As the cities grow, we will need
\nmore horses with corresponding increases in feed and water. The problem of
\nmanure filled streets means increased odor and unsanitary conditions. If we project
\nthe status of life in 1900 forward into the future it is unsustainable … absent innovation!<\/i> Even before 1900,
\ninventors had been experimenting with motorized buggies. Twenty-five years
\nlater we overcame the transportation obstacles (though new challenges soon emerged.)
\n <\/span><\/p>\n

 <\/span><\/p>\n

Imagine
\ntelling most people thirty years ago that the world would soon be connected by
\nan audio\/visual\/data communication infrastructure built on sand. (Fiber optic
\ncable is made of glass, which is made of sand.) It has reduced the need for other
\ncommodities like copper while empowering communication at levels unthinkable
\nnot long ago. Should we have frozen life at 1900 living standards (or some
\nother date) and figured out how to sustain that world? Should we be locking in
\nthe world of 2009 today?<\/p>\n

 <\/p>\n

Economist
\nDonald Hay noted twenty years ago in Economics
\nToday: A Christian Critique,<\/i> that nearly everything we use today could eventually
\nbe made and powered by renewable resources. The economic pressure has not been
\nsufficient to move us in that direction but as people become more prosperous,
\nenvironmental concerns rise in priority, creating demand for more
\nenvironmentally friendly technologies and products.<\/p>\n

 <\/p>\n

Also
\nconsider that as a commodity becomes scarce its price should rise. Yet as we
\nlook at the price of commodities, their inflation adjusted prices have been on a
\ncentury long trend of decline. Prior to the price shocks of 2008, major commodities
\ncost a fraction of what they did a century ago and, despite occasional spikes,
\nthe trend for the foreseeable future is declining real costs. Commodities are
\nactually more abundant today than they were a century ago because there has
\nbeen greater incentive to locate and extract them.<\/p>\n

 <\/p>\n

Malthusian
\nvisions of societal collapse from exhausting resources have been a recurring
\ntheme over the past two centuries. Writing in 1865, noted British economist
\nStanley Jevons claimed that Britain would run out of coal by the end of the
\ncentury and oil would not be able to meet the demand. Writing in the late 1960s,
\nactivist Paul Ehrlich wrote “The Population Bomb,” predicting massive
\npopulation growth, exhaustion of fossil fuels and other commodities, and the collapse
\nof agriculture. It would all lead to massive famine, war, and chaos, by
\ncentury’s end. The Club of Rome and the Carter administration’s Global 2000 Report<\/i> echoed these
\nconcerns. <\/p>\n

 <\/p>\n

Similar
\nMalthusian predictions have resurfaced in recent years under some versions of
\nsustainable development. If by “sustainable” we mean development that protects
\nbio-diversity, reverses deforestation, doesn’t foul the atmosphere, and doesn’t
\nturn the planet into a toxic waste dump, then, yes, we need more sustainable
\ndevelopment. But if we mean exhaustion of energy sources and commodities, then
\nwe have barely scratched the surface of the earth’s energy sources and we are
\nonly beginning to understand the potential of engineered substances that have
\nwide application. Economic growth is not a threat. <\/p>\n

 <\/p>\n

I think most
\nmainstream economists would embrace the above characterizations, although they
\nmight vary considerably in how they weight the challenges we face. Personally,
\nit seems to me that we run two dangers. One is obliviousness to the
\nenvironmental impact of our economic actions and the failure to incorporate environmental
\ncosts into our economic systems (and that is a tricky thing to do.) The other
\nis a Malthusian anti-technological mindset that wants to halt economic growth,
\ninnovation, and trade. To me, both are an abandonment of our cultural mandate
\nto be stewards over creation and bring it to its fullness. Furthermore, living
\nsimply (which has profound wisdom for holistic health) will not help others
\nsimply live. Redistribution within a zero-sum game is the wrong framing. What
\nothers need to simply live is productive, sustainable, and growing economies. <\/p>\n

 <\/p>\n

That’s
\nenough from me. Are you persuaded by the
\neconomists’ observations of a dynamic system that involves continuous
\ninnovation and substitution? What else needs to be considered that I’ve
\nomitted?<\/b> <\/p>\n

 <\/p>\n

 <\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

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