Reasons to be Optimistic

People used to think that more population was bad
for growth. In this view, people are stomachs–they eat, leaving less for
everyone else. But once we realize the importance of ideas in the economy,
people become brains–they innovate, creating more for everyone else….

In the 20th century, two world wars diverted the energy of two
generations from production to destruction. When the horrors ended, the
world was left hobbled and split. Communism isolated much of the world,
reducing trade in goods and ideas–to everyone’s detriment. World
poverty meant that the U.S. and a few other countries shouldered the
burdens of advancing knowledge nearly alone.

The battles of the
20th century were not fought in vain. Trade, development and the free
flow of people and ideas are uniting all of humanity, maximizing the
incentives and the means to produce new ideas. This gives us reason to
be highly optimistic about the future.

That’s me, writing at Forbes.com.  Read more about why the economics of new growth theory gives me reasons to be optimistic here.

Comments

My blurb, already used elsewhere:

I agree with Alex on many of his facts. In fact I've made similar arguments and points when talking to people I felt were too pessimistic ("doomers" actually).

That said, I'm not sure he made the case that the silver lining outweighs the cloud. Larger population and continued environmental pressure (of all kinds) mean that we will face huge problems. I think will solve some of those (and do a lot of "neat things" off on a tangent, like thinner notebook conmpters) ... but that doesn't make me a true optimist.

I mean look at 2007. All told we got better tech and a more degraded environment. Does Alex see that turning around, or does he actually claim the tech is compensation for the degradation?

Are you sure you want to look relative to 1500? We had a lot more whales, tuna, sea turtles, codfish ... and not to mention on the non-renewable side, light sweet crude oil.

The "depletionists" worry that those things are so far gone that we face ruin. I, a moderate see trouble and yes some opportunity.

Are you truly taking the other extreme, that GDP growth beats cod fisheries hands down?

If you follow ocean fishery news there has been a lot of the bad recently. With news of subsidized European fleets depleting African zones (even as Europeans "aid" Africans), and one headline that half of all European seafood was taken illegally.

This is a "cookie jar" problem. It is our nature to take one more fish and another, regardless of the market or command and control mechanisms put in place. That makes it hard, and the politics of it almost a distraction.

FWIW, I support ocean reserves and no-take zones for the pragmatic reason that they are easiest to police.

"If one of these advances goes seriously awry..."

Boy, neo-Malthusians everywhere. What about the more likely possibility--the one that has dominated human experience since the dawn of the industrial revolution--if any of these goes seriously well? What if a microwave satellite system develops to make fossil fuels obsolete?

My only pessimistic note is that the public safety fuss-buckets and worry-warts will regulate our technology markets into submission so as to delay the life-enhancing, life extending technologies so that extra generations of our progeny will be doomed to needlessly suffer disease and want, until the most alarmist skeptic is finally satisfied that we can take the next step.

I enjoy this conversation, I suppose because as a moderate I feel so superior to the fringes: "neo-Malthusians" as well as "neo-Cornucopians."

The case for moderate fear is based on science. We are arguably in an "extinction event." I take articles like this one at the Washington Post with a grain of salt ... but I think there is something there, between the Cassandras and the Polly-Annas.

Well, let's see....

Alex says if we assume a [rather high] rate of economic growth for a current human lifespan then compounding ensures that gdp will be mind numbingly high....as an aside he mentions that adding more people is not necessarily bad.

I flatly don't believe that Alex believes that there is no population level where adding +1 is a good thing. He may believe that the current level is too low but that is different from arguing (as he seems to) that all population growth is good.

Personally I am in favor of human freedom. I am pretty certain that there is more room for human freedom in a world of one billion than there would be in a world of 100 billion. I am also aware that most efforts to control population growth in a serious way (in india and china) have resulted in severe violations of human rights.

That is the policy conundrum.

There is wide spread agreement amongst scientists that the enormous scale of human activity is altering the climate and destroying ecosytems (e.g. coral reefs, tropical rain forests) around the world, resulting in mass extinctions of species on a scale that has been observed only a handful of times in the history of the earth.

Given that we depend on well functioning natural ecosystems for numerous services (clean water, flood control, repository of genes for future drug discoveries, etc.), and given that natural ecosystems have a value in themselves, I don't see how one can be unreservedly sanguine about the future.

Put another way, more people means more brains to solve problems, but it also means there are more problems that need to be solved. The trade-off going forward is far from clear, at least to me.

Whatever happened to the idea that as industries, nations, and people acquire more capital our methods of exchange become "cleaner?" For instance, the world's worst polluters are often found in emerging third world markets. If the promise of future technology is highly promising and that over a billion people will ascend into the global marketplace then surely there is hope for cleaner technologies. Most importantly, we should reasonably expect the advent of much cleaner forms of energy within fifty years as a result of surging demand.

"If the promise of future technology is highly promising and that over a billion people will ascend into the global marketplace then surely there is hope for cleaner technologies."

The Morton Arboretum outside of Chicago just built this really beautiful new guest center.
They have a number of displays showing how much more energy efficient the new building is than the old one. What they neglect to mention is that the new center is much bigger than the one it replaced. The net result is that, even though the new building is much more energy efficient, it still uses a lot more energy than the old one.

I think of this as a metaphor for how technological progress tends to work in practice - things become become more efficient and cleaner through time, but somehow, in the absence of a well functioning carbon/pollution/ecosystem service market, we always end up using more - the net result is that human impact on the environment is ever increasing.

These doom-mongerers (like odograph) are just silly. There is nothing wrong with using ever more energy. The air and water in China are more polluted than our own, but yet the Chinese aren't dying in the streets. Their average lifespan is, last time I checked, in the high 70s. As they get richer they will undoubtedly also clean up their industry as well.

Anyone who can't see that we humans are immeasurably better off than we were in, say, 1500 has gone off the deep end.

The health effects of pollution are actually fairly minor. For poorer countries, you gain dramatically more health and welfare through industrialization than you lose through any resultant pollution.

In rich countries like the US concerns over pollution have long since become mainly an aesthetic issue. Making our water 10% cleaner will have approximately zero impact on your personal health. But many of our crazy, ignorant citizens are terrified of tap water.

The enviro movement seems to consist primarily of neo-luddites and hysteria victims. And the occasional humanity-hating extremist.

Chris,

odograph a "doom-mongerer?" On the contrary, I think his position much more reasonable than yours.
* The Industrial Revolution was -- and remains -- predicated on cheap energy. By many accounts, we're in the last throes of cheap energy. What then? The economics of 1973 and 1979 will seem positively benign in comparison if we don't make serious progress on new energy sources.
* Our CO2 releases are dropping the pH of the ocean. It is quite conceivable that we could exterminate whole layers of the oceanic food chain by making it too acid for shell development.
* The effects of global warming are almost uniformly projected to be negative.
While flagging problems of this ilk, odograph still says "It is definitely not all bad news."
Let's compare that to your assertion that "the health effects of pollution are actually fairly minor." Well, perhaps, as long as you're not one of the 24,000 who are estimated to die in the US each year from the pollution from coal burning: http://www.nrdc.org/news/newsDetails.asp?nID=1399
Calling optimists who point out that we have real problems "neo-luddites" seems not useful, or accurate.

According to Charles Murray in "Human Accomplishment", our generation of brilliant new ideas per capita is well below the standards of the past. Maybe that will change once China and India are modernized, but for now the West is slacking off.

Well, again, fundamental misunderstandings by the eco crowd in what drives real human welfare. And the whinging about global warming ... ugh ... humanity will easily adapt to the quite mild climate change that seems probable to occur. The proposed climate change solutions are dramatically worse for human welfare than the actual climate change. It's only intellectually dishonest tactics like the Stern Report (with their zero discount rate) that make it look otherwise.

Ah well, this eco-hysteria will eventually pass. Sadly, it will likely be replaced by some new form of madness.

Certain types of people are attracted to apocalyptic religious insanity. The enviros are just the latest in a long line of nutters.

TGGP, can I get some links and discussion? What methodology does he use to designate "brilliant new ideas"?

A couple of quotes come to mind:

"With every mouth to feed comes two hands a brain."
- Julian Simon? Mao Tse Tung? sorry, can't find the attribution

"If we keep on having lots and lots of kids, one of them is going to grow up and figure a way to stop all this overpopulation."
- Ted Baxter, The Mary Tyler Moore Show

Brilliant!! As a student of conflict, I can tell you that many nations no longer use force in the same way as the past. 1.) Development has made it inefficient to conquer. Nations (such as the US) still try to exert influence and occasionally use military force for the same reason, but a whole category of wars that were common in the past don't exist any more. 2.) Human capital is difficult to coerce. Innovation and creativity drive modern economies. Those who wish to get rich must accept that they have to entice human capital, not coerce it.

The danger is that some nations will recede as others advance. Poverty, disfunction, and rising oil revenues ensure that Russia will return to autocracy and not invest heavily in human capital. There is enough wealth for the few. Political power is necessary to keep the productive factors in this kind of economy. In addition to increasing the number of scientists (human capital), one of the best things that can be done to make the world freer and more prosperous is to work to lower commodity prices. Fixed assets like minerals invite autocracy, and war. Ironically, the very forces that make more scientists will, in the medium term, increase commodity prices.

Alex, it's not clear to me that creativity is linear with population growth. This is more or less Julian Simon's old chestnut, when he wanted to counter the argument that the bad effects of growth might begin to outrun innovations. However, if creativity were linear to population, then we'd have about 7 or 8 Shakespeares walking around, 3 or 4 Beethovens, and a couple of Einsteins. Quite to the contrary, you have people showing up in these comments asserting that global warming will only have mild effects, while on the other hand, treating it will be an economic disaster. Not only are both assertions unproven (and both likely in my view to be very wrong,) but they are promoted by people otherwise joined in the opinion that humans have the creativity to solve problems! I am a devout environmental religionist who is also a technological optimist, (maybe one of the few who combines them,) but this continuing sort of example does not bode well for us, in the brains department.

Bernard,
Oil production has been essentially flat since 2005. We're spending more and more to discover less and less oil, and the oil we're discovering is more expensive (in terms of dollars, energy, and environmental impact). You can find lots of data (and admittedly varying degrees of apocalyptic thinking) at the following:
http://en.wikipedia.org/wiki/Peak_oil
http://www.energybulletin.net/4856.html
http://www.peakoil.com/sample/
The global peak of oil discovery was 1962; it's been falling ever since, in a nice, neat bell curve. production follows about forty years after discovery. 2003 was the first year in which no new major fields (>500M barrels, which is one week's worth of global consumption) were found.
Bottom line: energy creates money, not the other way around.

Chris
Two thoughts:
1. The idea of using less energy is intended to help us bridge from fossil fuels to something sustainable. If peak oil is near (and it appears to be), it will pose a huge global economic challenge. In 1973, the OPEC embargo cut consumption by 6-7%; but doubled the price at the pump. The case isn't exactly analogous here; a slow slide down the other side of the bell curve would be reasonably soft (to start), but we get to the shoulder really quickly when you factor in China's and other asian growth.
2. Nobody is talking about "micromanagement." The general idea is that human activities have had impacts on the environment far larger than we have realized, leading to ocean acidification (30% increase in ocean acidity since the start of the Industrial Revolution), CO2 increases and concomitant warming (CO2 levels are higher than they have been in at least 650,000 years) , and so on. We don't need micromanagement; we need to assess the damage we've done and how to improve our economy so that we don't destroy the systems that support us.

To Lee Arnold:

There's nothing inherently incompatible with the idea that global warming's effects are overstated and that the proposed solutions would be seriously damaging. I realize you meant to insult my intellect, but I think you missed the mark there. Sure I could be wrong on both counts, but there's nothing contradictory about those two statements. Perhaps you need to think it through again? For starters it helps to realize that the relatively mild (compared to the really insane plans) costs of the Kyoto Protocol wouldn't actually stop the supposed source of the problem -- CO2 emissions. Good luck.

As to Peak Oil. There's tons of energy out there. Ungodly amounts of coal. Plenty of uranium to build nuke plants. We'll be fine.

The higher the oil price the more it makes marginal oil deposits worth while. We should be drilling in the arctic and Gulf more, and we should be building more refineries and power plants. And we would if not for needless restrictions.

But the economic incentives are so strong that I'm not really worried about having enough energy.

Truth is, I'm not really worried about the eco-crazies. They are evil and slow economic growth and cause needless human suffering, but they're power is limited. And, in the long run, the public will demand and get the growth they deserve.

So, yeah, Team Evil wins some, but they can't hold back human progress forever.

I enjoy reading both Prof. AT's excellent article and the comments here.

On the orginal article, I cannot fully agree with the notion that the US and a few other countries are the sole bearers of the burden of knowledge advancement. It is true that OECD countries are leading charge on fundamental R&D. But knowledge creation does and should not follow a linear relationship with fundamental R&D. Much knowledge is created in the process of diffusion. In other words, both size and time matter. So knowledge-led economic growth should not be a process of creation-and-spillover, but one of specialization, and division of labor.

Chris
It's not just the quantity of energy, it's the quality of it. Most of our transit is dependent on oil; coal and nuclear have to go to some intermediate form in order to be useful for cars, trucks, etc. That means new infrastructure, and lots of it. Also, supplies of fissionables are limited and, while we do have "gobs" of coal, we'll run through that pretty quickly if we direct more of it into the voracious transportation sector.
Economic incentives to open up marginal deposits don't matter if you lose energy in the process. The EROI of the oil industry as a whole has been steadily declining for decades. The easy oil is gone. For example, USGS's estimate is that ANWR contains enough oil to satisfy US needs for roughly six months. That's it. Heavy infrastructure, like that which supports our energy and transportation sectors, takes decades to build. Right now are are energy-rich and can afford to invest in the alternatives at relatively low economic/social/political cost. We're not making that investment now. Later, when the need is impossible to ignore, it will be much more expensive.

Also, worst pollution occurred in Soviet Union over last 90 years. Socialist countries have no public interest groups to protest activities of industry. Only democracies have this. Green movement started in democracies. Let's hope they don't push ideology over common sense.

Alex, do you believe that the human race is similar to industry? By this I mean do you think that there is a limit to our ability to innovate and it will diminish eventually to the point where marginal revenue will equal marginal cost for human kind? Separately I believe eventually humans may not be able to innovate their way out of a situation, most likely an environmental one or epidemic. Looking at Easter Island as an example they couldn’t innovate a way out of their situation and many died. Population growth continues to put a stain on the environment and resources, and increases the rate that disease spreads. I still see population growth as more stomachs that consume and slowing or stopping the growth would slow the environmental pressures leaving more per person and preserving our MR/MC difference.

jorod:
> There is plenty of oil and gas in the US but oil companies are not allowed to drill for it.
US domestic oil production peaked in 1970. The areas that have been marked off limits to drilling do not sit on the giant/supergiant fields we'd need to achieve self-sufficiency in oil.

> There is enough to supply the US for 30 years.
Simply not true. It was much more close to the truth in 1973, when we should have started serious investment in alternatives. What happened was that oil companies bought out the patents small firms developed for solar and other energy sources and then sat on them. Same logic as RJR staying in the tobacco business; they judge the cost of change to be greater than their ROI. Unfortunately, in both cases, many others besides their shareholders suffer negative impacts from the decision.

> By that time, alternative energy technologies should be realistic and economical.
You're mostly right here, in the sense that building out energy infrastructure takes a long time (see my post above).

> For example, turbine engines can run on cooking oil. Just need the right engineering technology to make it practical.
And where does the cooking oil come from? Biodiesel is an important and interesting gimmick to draw people's attention to energy issues. It is not a serious energy solution. If you included all of the cooking oil in the world in a global petroleum inventory it would be such a small fraction that it would, statistically speaking, simply not exist.

> Temperature of earth is determined by the sun. Climate is determined by the oceans. CO2 is more a result than a cause of global warming.
Essentially every climate scientist on the planet disagrees with you on this.

Hi,

I think the article does not take into account the most important aspect of human population in the next 2-4 decades. In the next 2-4 decades, the number of "human brain equivalents" represented by computers will equal and then vastly exceed the human population.

For example, by calculations I did in November 2005 (based only on hardware, not on software), the number of "human brain equivalents" (HBEs) added in 1996 was...one!(!)

And in 2007, it's only about 1000.

But by 2016, my calculation is that 1 million human brain equivalents will be added. And by 2025, it will be 1 BILLION human brain equivalents added.

http://markbahner.typepad.com/random_thoughts/2005/11/why_economic_gr.html

Note that these calculations don't include software. If we include a delay of about 7 years to account that software development is slower than hardware, 1 billion human brain equivalents won't be added until 2032.

Even before I did this calculation in November 2005--just based on a qualitative feel for the computing power involved--I had predicted world per-capita GDP growth exceeding 6.0 percent per year by the decade of 2030-2040.

http://markbahner.typepad.com/random_thoughts/2004/10/3rd_thoughts_on.html

Now I think I may have been much too conservative. I think Arnold Kling's prediction...way back in December 2003...of world per-capita GDP growth of 10 percent per year for the decade of 2030-2040 will be more correct.

P.S. And we both agree per-capita GDP growth will accelerate from there.

P.P.S. I'm explicitly excluding the possibility of global thermonuclear or biological war. Or (perhaps more likely) takeover by Terminator-style machines.

One thing to remember, As societies advance their birth rate steadily decreases.

Michael: Is the crowding you've observed mainly due to population growth, or other stuff? Most of the time, crowding seems like it's caused by more people trying to use some resource than there is resource available to be used. But almost always, that resource is produced by people. If you're standing in line at the DMV or the supermarket, or stuck in a traffic jam, this isn't because of the number of people, it's because of the relationship between number of people and number of cashiers/lanes.

Population growth is a fairly slow process. It's not hard to adapt building roads and hiring cashiers to that rate of change. I think the thing that gets us is that shifts in population are much faster (so that it's hard for infrastructure to keep up), and that it's often in the interests of the people building the infrastructure to allow some crowding. (Since roads are typically free to use, for example, the effective "price" that rations use of the Beltway at 8 AM on a weekday is the amount of delay you can accept--that convinces a lot of people to shift their commute times or telecommute or buy a house closer to work.)

I agree that more population isn't necessarily bad for growth. It seems reasonable to associate an increased market size with a company's desire to increase its profits. I would think that increased competition among the population would positively impact growth as well. In Alex's example regarding cancer drugs, more competition in a growing market may lead to the development of the drugs more quickly than without the increased market and competition.

More people definitely offer the benefit of additional brain power. When more than one person is attempting to find a solution, a wider variety of options is more likely to be discovered. We would be wise to learn from each other and to seek to continually improve the world in which we live.

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