Why is the global economy constrained by the energy cost of energy?
[Editor's Note: Here Lindsey Grant endeavors to rebut "the argument that humankind should not pursue an optimum population, or that bigger is better, more or less forever.'']
This essay is taken from a paper written before Herman Kahn's untimely death. 1 He headed the Hudson Institute and generated or assembled most of the argumentation presently used against any deliberate effort to influence population growth.
Julian Simon is my other adversary in this environmentalist's critique of "cornucopians," who do not believe in limits to growth. He is Professor of Marketing in the College of Business Management, University of Maryland, and an adjunct scholar with the Heritage Foundation.
An intense if intermittent debate is under way between environmentalists and "cornucopians." The environmentalists warn of threats to the ecosystem and to renewable resources, such as cropland and forests, caused by population growth and exploitative economic activities. The cornucopians say that population growth is good, not bad (Julian Simon), or that it will solve itself (Herman Kahn), that shortages are mythical or can be made good by technology and substitution, and generally that we can expect a glorious future.
The debate has strong political overtones. If things are going well, we don't need to do anything about thema useful argument for laissez faire. If something is going wrong, the environmentalists usually want the government to do something about it. The debate thus gets mixed up in the current reaction against "petty government interference" and a generalized yearning to return to earlier, more permissive economic and political practices.
Although there are substantial differences between their views (as we shall see later in this chapter), both men are identified with a simple message of reassurance to a society that does not seem to want to be told about problems. The message is best exemplified in the title of the article in Science magazine that brought Simon to prominence: "Resources, Population, Environment: An Oversupply of False Bad News." 2
For the employer seeking assurance of cheap labor or the businessman hoping for the larger market, it is comforting to be told that more immigration and population growth are good things. The idealist, eager to help hungry fellow humans and fearful that pleas for lower fertility are a cover for racism, is just as likely to be beguiled by the message, unless he or she has come to realize that laudable purposes sometimes conflict with each other.
One could hardly object to having a couple of cornucopians urging people to be of good cheer and stout heart, were it not for the danger that may convince some citizens and policy makers not to worry about some pressing problems that urgently need attention. The cornucopians' argumentation, however, is seriously flawed as a tool for identifying the real and important present trends.
There is an asymmetry in the nature of the arguments of the environmentalists and the cornucopians. The environmentalistthe proponent of corrective actionis (or should be) simply warning of consequences if trends or problems are ignored; he or she does not need to predict. The cornucopian, on the other hand, must predict to make his or her case. He must argue that problems will be solved and good things will happen if we let nature take its course. Since nobody has yet been able to predict the future, cornucopians are asking their listeners to take a lot on faith. They say, in effect, "Believe as I do, and you will feel better." Simon says explicitly that his conversion to his present viewpoint improved his state of mind.
The cornucopians have made assumptions and chosen methodologies that simply ignore or dismiss the most critical issues that have led the environmentalists to their concerns:
* The cornucopians pay little attention to causation and they project past economic trends mechanically.
* They casually dismiss the evidence that doesn't "fit."
* They employ a static analysis that makes no provision for feedback from one sector to another. * They understate the implications of geometric growth. * They base their predictions on an extraordinary faith in uninterrupted technological progress.
We will look into some of these cornucopian fallacies, the reasoning processes and omissions that characterize Simon's and Kahn's analyses.
Estrapolating Past Growth:
The Wrong Methodology
Simon argues that the past is the best guide to the future. Perhaps, but much depends on what part of the past you look at. He devotes most of his effort to demonstrating in various ways that humankind's economic lot has improved in the past century or so, which is not an issue.
Simon bases much of his argument on an econometric study of past correlations between the number of children and economic growth. 3 This approach leaves unanswered the question: Which, if either, phenomenon caused the other one? The mathematics may simply obscure the commonsense proposition that family size grows in a period of prosperity.
That 1977 study presumably remains the basis for Simon's views, but his line of argumentation has shifted somewhat. He shows graphs of long-term trends in the prices of certain minerals and foodgrains to show price declines that suggest that things are getting better.
If one selects the right series (aluminum, for instance, but not lumber), the graphs can be made to show the desired downward curve. They reflect a long-term improvement in the efficiency of production, and to some extent they are a product of the fossil fuel era through which we have been passing, which has made energy very cheap. The graphs do not address the questions "The prices to whom? Expressed in what currency?" They are not adjusted for the buying power of different groups, or the lack thereof. Perhaps more fundamentally, this line of argumentation addresses only one small aspect of the many implications of population growth which are of concern.
Kahn is more nimble polemically. He extrapolates mid-twentieth-century growth trends with a line of reasoning that comes very close to economic vitalism. His specialty is impressive graphic presentations of the future, but examination suggests there is more of the airbrush than of intellectual discipline in those graphs. In one of his major works, The Next 200 sears, he projects per capita "gross world product" at $20,000 in A.D. 2176, but one is uncertain whether these are constant dollars, current dollars, or imaginary ones. As best one can gather from the text, this projection is based on a freehand plot of logistic or "S-curves" (slow/fast/slow) of GNP growth for different categories of countries, drawn roughly from the U.S. and European experience. 4
There are two problems with this method. First, analogy can be a dangerous process. To predict the future performance of the poor countries based upon the past performance of the rich countries may involve too loose an analogy to justify the faith put in it. The analogy assumes that the underlying factors are substantially similar. They are not. In contrast to Europe when it industrialized, poor countries today tend to have faster population growth rates, no colonies in which capital can be mobilized, lower incomes (probably), extreme foreign exchange problems, no technological lead over the rest of the world, and no empty new worlds to absorb their emigrants.
Second, and even more important, gross national productor "gross world product"is not tangible and exists only in people's minds. It has no life of its own. It is simply a way of giving a numerical abbreviation to a sum of economic activities. It is determined by underlying realities: the availability and quality of land, water, industrial raw materials, and energy; technological change; the impact of population change on production and consumption; the productivity of the supporting ecosystems; labor productivity: and so on. However, Kahn simply projects GNP, without analyzing the forces that generate it.
Proof of past success is no assurance of future well-being, and the mechanical projection of economic curves is hardly a reliable guide to the future.
In general the human condition has been improving for a sustained periodat least it was doing so until the 1970s. Indeed, the scale of the growth is a new thing on Earth, and the very magnitude of the growth of population and of economic activity is the source of the issue. For the first time, population and economic activities have grown so sharply as to bring them into a new relationship with the scale of the Earth itself.
The hallmark of recent history has been this explosive growth, supported by and supporting an extraordinary burst of technological change and humankind's first intensive exploitation of fossil fuels. The central question for the future is not "Did it happen?" but rather: "Can such growth be sustained, or does it generate dynamics that will bring the era to an end? If the latter, what will the changes be, and what if anything should we be doing forestall them or shape them in beneficial directions?"
Ignoring Climate Change
As a single example, let us take the question of carbon dioxide in the atmosphere. It takes little imagination to recognize that CO2-induced rainfall and temperature changes, rising sea levels, and perhaps the necessity to curtail fossil fuel use could influence future economic activities. The fact that human activity is changing the very chemical composition of the air we live in would seem adequate justification to bring the issue into any consideration of current trends affecting the well-being of our species.
A particular target of the cornucopians in the early 1980s was the Global 2000 Report to the President, 5 which was the most serious effort to date within the U.S. Government to relate resource, environmental, population and economic issues to each other. "Global 2000" devoted fourteen pages to man-induced effects on the climate, focusing primarily on CO2 but dealing with other issues as well. It concluded that agreed-upon climate projections are not currently possible to make, but it called attention to the problem: "The energy, food, water and forestry projections [in the report] all assume implicitly a continuation of the nearly ideal climate of the 1950s and 1960s. The scenarios are reported here to indicate the range of climatic change that should be analyzed in a study of this sort." 6
Simon seems to have ignored the carbon dioxide issue.
Kahn discusses the problem along with other possible causes of a warming trend. He concedes that a warming trend might raise the level of the oceans, but argues that "this would hardly mean the end of human society. Major shifts might be forced in agricultural areas and in coastal cities." He concludes: "It seems unlikely now that the carbon dioxide content will ever double unless mankind wants it to happen." 7 Thus, he cheerfully dismisses this problem and thereby illustrates the curious inversion of his logic.
Why does he dismiss substance for "prediction"? He dismisses the real issues for fear they would lead his readers to lose faith in the future he has promised them. Would he not better join the environmentalists and concentrate on telling his audience that, if they want that future, they may need to take the carbon dioxide problem seriously?
Which intellectual approach is the more valid way of attempting to understand current trends affecting human welfare? If you seek a sense of what will shape the future, examine the issues generated by population and economic growth; do not simply extrapolate the growth. Economic changes cannot be studied in a vacuum.
Doctoring the News
One cannot escape the feeling that some of the Simon/Kahn rebuttals of "bad news" are directed more by polemical ends than by an effort to get at the truth. Such casual hip-shots are more likely to generate doubts about the writer's credentials than to convince readers that bad news is false.
For example, Simon makes points by using gross totals rather than per capita figures. He sometimes shifts sources to manufacture trends. On world population, for example, to show that "U.N. and other standard estimates" have been steadily lowering their projections of anticipated population in 2000, he starts with a 1969 U.N. worstcase scenario, higher than their "high" series, then moves down to a later U.N. "low" series projection, and winds up with a 1977 Worldwatch Institute figure, justifying his inclusion of the Worldwatch figure by saying that Worldwatch is U.N. supported. Through these devices, he manages to show the projection declining from 7.5 billion to 5.4 billion. In fact, the U.N. projection for 2000 has remained remarkably constant, the median projection having fluctuated between 6.1 and 6.5 billion since 1957. And Lester Brown points out that his Worldwatch figure was not a projection but a proposed target.
Also, to prove that world air quality is improving, Simon, in The Ultimate Resource, cites statistics on U.S. air quality in the early 1970s. His figures are dated and limited, but they are nevertheless gratifying. He pays the environmentalists whom he excoriates the ultimate compliment of appropriating their work. If U.S. air quality has stabilized or improved in some ways since then, it is at least in some measure the product of environmental efforts like the Clean Air Act.
Kahn generally takes a subtler line. He, too, points to improvements in air quality, but he is quite willing to accept the need for some expenditures on air quality and other environmental measures and he includes "possible damage to earth because of complicated, complex and subtle ecological and environmental effects" among eight "real issues of the future." In effect, his technique is to admit the possibility of environmental problems but to avoid focusing on them or attempting to measure their importance; he quickly moves on to extolling the brightness of the future and attacking those he deems pessimistic.
In short, the cornucopians slight the resource and environmental issues that the environmentalists consider the most important questions to be examined.
The Lack of Feedback
The cornucopians stand breathless on the edge of wonderful new expectations. Simon writes: "Energy...is the 'master resource'; energy is the key constraint on the availability of all other resources. Even so, our energy supply is non-finite..." 8
He makes this remarkable claim just as the nation is discovering that the fossil fuel era is a passing phase and that petroleum, on which we principally rely, will go first. The U.S. Geological Survey estimates that exploitable U.S. resources are equal to about sixteen years' consumption, even at current rates of use (which, with a growing population, means diminishing use per capita). 9 There are serious environmental penalties to the use of fossil fuels, in any case. Coal is the most abundant remaining fossil fuel, but the most polluting.
Simon asserts that we will "dig deeper and pump faster" and find more oil. One wonders why the oil geologists hadn't thought of that, as U.S. production goes down and reserves decline. He expects oil to be derived from "coal, shale, tar sands, and the like," without a word about the costs or the environmental implications. He expects oil substitutes from biomass; he does not consider the trade-offs with forestry or with an agriculture that is already pressing hard on its soil and water resources. He expects fission energy to become cheaper. (He thinks it "already costs less than coal or oil"; this will come as a surprise to the power industry.) Despite the sobering things we have learned about nuclear power since 1945, he entertains no doubts that this is a good thing. He looks forward to nuclear fusion. 10
These expressions of faith (for they are only that) reflect a belief in infinite substitutability that Simon probably acquired from the academic economists. The assumption is not based on any systematic rationale, nor is it buttressed by any evidence other than the fact that the industrial world has been doing pretty well, so far. It is simply an assumption required by the economists to run their models. Biologists and ecologists have been trying, without success, to persuade the economists that the assumption is terribly dangerous in a finite world on which human economic activity is pressing ever more heavily. There are no practicable human substitutes for clean air and water or a functioning ecological system. Energy itself can be dangerous, and the evidence (as distinct from one's hopes) suggests that it will become more expensive, rather than less, as Paul Werbos discusses [in this volume].
Any projection for continued expansion in the use of energy must ask the questions: What are the implications of developing the energy for the environment and for resources, and what are the likely consequences of its use? The same question should be asked about projections calling for continuing expansion in the use of chemicals, or indeed of any physical resource. Global 2000 undertook to carry out as much this kind of interactive analysis as possible. Although it found that the state of current knowledge did not permit analysis to be carried very far, it undertook the examination of hundreds of such interactions.
The agricultural projections, for instance (themselves central to other major projections such as population and GNP) require certain assumptions about intensification of agriculture: a doubling or trebling of chemical fertilizer inputs (to a point where artificial introduction of nitrogen compounds into the biosphere will exceed the natural production), parallel increases in herbicides and pesticides, and reliance upon monocultures. These assumptions, in turn, generate questions concerning desertification, the conversion of forest and loss of forest cover, the effect of intensive agriculture on soil productivity, the impact of increased fertilizer application on watercourses and fisheries and perhaps on climate, and the risks associated with pesticides and monoculturesall of which relate back to the initial assumptions about agricultural productivity and GNP and population. The degree of confidence concerning different interrelationships is made clear, and reference is made to the technologies that can help forestall or mitigate the harmful interactions foreseen. 11'
There is nothing remotely approaching this sort of interactive analysis in the works of the cornucopians. Kahn simply projects economic growth assuming that the necessary inputs will be available and that environmental problems will be surmounted. Simon does not address these questions in any integrated fashion. I would argue that they are not even addressing the real issues.
The speed with which technology is changing, the demands for economic growth posed by population growth, and the effort to raise living standards in developing countries are combining to force change at an unprecedented rate, which makes the study of the future more important than ever. The principal purpose of future studies should be to look as far ahead as possible, to study the implications of current and projected activity, to see how different sectors and issues interrelate. This process is anything by static. It should be a continuing process of probing and testing the potential consequences of different activities and directions of growth, of identifying the issues that need attention and the potential directions for beneficial change.
It was the lack of and the need for this capability that Global 2000 high-lighted. A follow-up study made specific recommendations for improving the capability within the U.S. Government. Simon and Kahn, standing aside and reassuring everybody that the future looks good, seem strangely irrelevant to this entire process.
The Infinite-Earth Fallacy
Neither Kahn nor Simon successfully deals with the simple facts that the Earth is finite and that no physical growth can be indefinitely sustained. Three mathematical examples of the power of geometric growth should be illuminating (bear in mind, however, that they are not predictions):
* Even if the entire mass of the earth were petroleum, it would be exhausted in 342 years if pre-1973 rates of increase in consumption were maintained. 12
* Assume that we have one million years' supply of somethinganything with a fixed supplyat current rates of consumption. Then increase the rate by just 2 percent per year (very roughly the current world population growth rate). How long would the supply last? Answer: 501 years.
* At current rates, how long would it take for the world's human population to reach the absurdity of one person on each square meter of ice-free land? Answer: about 600 years.
These things will not happen. Resource use won't rise in a geometric curve until a resource is exhausted, then plunge suddenly to zero. There will be changes in real prices, adjustments, and substitutionsthe whole pattern of constantly shifting realities that makes prediction impossible. The population will never remotely approach such a level. Long before then, birthrates will fall sharply, death rates will rise, or both will happen.
However, the examples dramatize that the outer limits to current growth patterns are not so very far away. Populations have exceeded the carrying capacity of local environments many times and have sometimes paid the price of a population collapse, but human geometry for the first time requires that we think in terms of the relationship of population and economic activities to the entire Earth. World population has risen from about one billion to about over five billion in about six generations. The demand for resources and the environmental impacts have been more than proportional, because per capital consumption has also risen. This is not a mathematical fantasy or a projection for the future. It is a description of current reality. Kahn and Simon offer several responses to this point, none of them satisfactory.
* They fudge the problem by shifting the calculations. They project the potential longevity of the supply of raw materials based on current demand rather than on increasing demand. 13 Since they are also assuming rising populations and rising per capita consumption, this is not an argumentit is a moonbeam. The calculations above should have disposed of it permanently. A more sophisticated variant is to say that GNP will rise, but not resource consumption, because we will be more efficient and we will be consuming more intangibles, such as culture. This is very likely, within limits. However, nobody has yet drawn a model of sustained growth relying upon the consumption of operas to feed the multitudes.
* They suggest that the problem is so far away as to be irrelevant to those living now. Simon, in a bit of sophistry that he has probably come to regret by now, says: "The length of a one-inch line is finite in the sense that it is bounded at both ends. But the line within the end points contains an infinite number of points. . . [T]herefore the number of points in that one-inch segment is not finite." He then extends the analogy to copper and oil. He argues that we cannot know the size of the resource "or its economic equivalent," and concludes, "Hence, resources are not finite, in any meaningful sense." 14 The Earth is finite, even though we may differ endlessly about how much of a given resource may be available.
* Kahn says that population and consumption levels will stabilize in two centuries. He projects population stabilization at 15 billion, but allows himself a margin of error of two - i.e., the population may be somewhere between 7.5 and 30 billion. Most of us suspect that population will stop growing somewhere within that range. He does not attempt to explore whether the resource base would support the 15 billion population he posits, or what the ecological and environmental effects of such population and consumption levels would be; he simply announces that we can handle them. He thinks that prosperity will lead to lower fertility, but he does not ask whether the population growth itself will in some countries preclude the prosperity he expects. He offers no capital/output analysis to suggest how world consumption levels will progress from where they are to where he hopes they will be. In short, he states a dream without attempting to explore how it will be realized or what effects of its achievement will be.
* Simon says different things at different times. Sometimes he advocates population growth without limits of time or circumstance, and he speaks of resource availability and population growth "forever," without recognizing the crudest of barriers: lack of space. Elsewhere, he advocates "moderate" population growth. Still elsewhere he urges that we not worry about the effects of geometric population growth, since it has never been sustained in the past, and he documents his remark by showing how population growth has been periodically reversed by pestilence, invasion, and famine. Is this the man who professes such warm feelings toward his fellow humans?
Most environmentalists agree that population growth will eventually stop, if only through the operation of the Four Horsemen. The hope is that it will be stabilized by limiting fertility rather than through hunger and rising mortality. It is this goal that leads many environmentalist[s] to advocate conscious efforts to limit fertility. Kahn thinks that fertility will be limited automatically, but he does not show how. Simon, apparently, is not dismayed by the alternative.
Technology as a Faith
Technology is knowledge. It is very difficult to predict knowledge; technological trends are among the least predictable of the forces that will shape our future. The cornucopians are justified in reminding us forcefully of the effects of technology. A lot of people from Malthus on have underestimated it, and some environmentalists still ignore it.
Let us agree on one point: The world has been experiencing a burst of remarkable technological growth.
Although Kahn and Simon seem to have missed this point, Global 2000 assumes that this rate will continue for the next 20 years. This approach may be faulted as too sanguine, but it is perhaps the safest projection, given the relatively short time frame. From this modest projection, however, we move to an article of faith among the cornucopians that the more pragmatic among us do not sharethat the recent high rate of technological growth will continue indefinitely. Simon's advice to use the past as a guide argues against too much faith: Human history has been characterized by spurts of technological growth alternating with periods of slow growth, dormancy, or retrogression. Technology may continue its recent phenomenal growth, but it is act of faith to assume that it will.
In addition, technology is not necessarily benign. It shapes us as we shape it. Right now, while it may be making communications cheaper, it makes unemployment worse. It helped to generate the spurt in population growth that now concerns the environmentalists. New industrial and agricultural technologies have created many of our present environmental problems. Other technology will almost certainly help us to correct our mistakes, but a sensible observer with a feeling for history would be justified in assuming that those solutions will in turn generate new problems to be addressed.
If one chooses not to stake human welfare on unsupported faith in technology, a certain caution is in order. Humankind will not have suffered if population growth is less than the advance of technology makes possible, but it may suffer very seriously if hopes for technology prove too high and if populations outrun the ability of science to support them.
NO LIMITS TO DEBATING
If this article reflects a jaundiced view of the cornucopians' methods, it is not meant to discourage the debate. We can learn from each other.
We are allcornucopians and environmentalists aliketrying to understand and describe a world in vast change. The technological growth on which the cornucopians pin their hopes is itself part of that change, as are the population growth and the environmental by-products of technological growth that concern the environmentalists.
We are allexcept perhaps for a few nuts who enjoy human miseryinterested in seeing the modern improvement in human welfare continue.
Cornucopians by their nature tend to emphasize solutions where environmentalists emphasize problems. An interchange can be useful. Do the environmentalists overstate difficulties and fail to recognize new directions that can be helpful? Have we explored the opportunities presented by the oceans, by recent breakthroughs in biology, and by electronics and data processing as thoroughly as we have explored the dangers from desertification, deforestation, and acid rain? Have we pressed for the elimination of legal and administrative impediments to beneficial change as eagerly as we have pressed for restrictive legislation?
If we urge the cornucopians to recognize the problems, we should share their interest in promoting technological change that will help to address the problems.
Those of both persuasions should remember that this is no single battle at Armageddon. Solutions will create their own problems, and problems their solutions. Everyone should recognize that only change is constant. And change right now is very fast.
We would ask of the cornucopians that they accept as much. Growth such as we have witnessed cannot be indefinitely extended. We must all seek a sustainable relationship between people and the Earth. Most particularly, we must work out the implications of population growth. The issue cannot be: "should it stop?" The questions are, when should it stop, and how?
1. See The Cornucopian Fallicies (The Environmental Fund, Washington, D.C., 1982). Excerpts printed by permission of Population Environment Balance, Inc., 1325 G St. NW, Washington D.C.20009, successor to The Environmental Fund.
2. Science,208, (June27,1980),pp.1431-37.
3. Julian Simon, The Economics of Population Growth (Princeton University Press, Princeton, 1977).
4. Herman Kahn, William Brown, and Leon Martel, The Next 200 Years (William Morrow, New York,1976). See especially Figure 5 on p. 56 and the accompanying text.
5. Gerald O. Barney, The Global 2000 Report to the President: Entering the Twenty First Century (GPO, Washington, D.C., 1980). Three-volume report prepared by the Council on Environmental Quality and the Department of State, with the cooperation of other U.S. government agencies. The data in the report are dated. See Note 2 of Chapter 1 for more current data. The interactive analysis, developed through cooperation among specialists in different fields, has not subsequently been matched in the United States.
6. Ibid., vol. 12, p. 64.
7. Kahn et al., The Next 200 Years, pp.75- 176.
8. Julian Simon, The Ultimate Resource (Princeton University Press, Princeton, 1981), p. 49.
9. U.S. Geological Survey, Estimates of Undiscovered Conventional Oil and Gas Resources in the United StatesA Part of the Nation's Energy Endowment (GPO, Washington, D.C., 1989). This study was based on current prices and recovery efficiency, but the analysis (see p.22 of the report) did not suggest dramatic differences between "recoverable" and "economically recoverable" quantities. The study was reviewed by a panel of oil experts including representatives from the industry.
10. Julian Simon, "Energy Supply Scaremongers," Washington Times, February 5, 1991, p. G4.
11. See Barney, The Global 2000 Report, vol. 2, Chap. 13.
12. Albert A. Bartlett, "Forgotten Fundamentals of the Energy Crisis," American Journal of Physics, 46 (September 1978).
13. See, for example, Kahn et al., The Next 200 Years, p .93, or Simon, The Ultimate Resource, pp. 32-33.
14. Simon, The Ultimate Resource, p. 47.
FOCUS/Vol.3, No. 2 1993 Carrying Capacity Network
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