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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.
Posted by Alex Tabarrok on January 16, 2008 at 10:04 AM in Economics | Permalink
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?
Posted by: odograph at Jan 16, 2008 10:30:55 AM
Looking at one year is too limited a time-span. Growth in per capita GDP was approximately zero from the dawn of civilization to about 1500, the rate increased to 0.08 percent a year between 1500 and 1760, the rate doubled during the next hundred years and increased even further during the nineteenth and twentieth centuries. Today, world wide per-capita GDP is growing at around 2.2 percent a year.
I am optimistic about growth in the 21st century becoming even faster. But nothing is guaranteed. We must guard against the devastations that wracked the twentieth century.
Posted by: Alex Tabarrok at Jan 16, 2008 10:43:43 AM
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?
Posted by: odograph at Jan 16, 2008 11:05:52 AM
I tend to share the optimism. However, it seems to me that the equation is fundamentally changing. Throughout history, our biggest problem has been lack of growth, leading to poverty and limited innovation. Now that growth has increased by orders of magnitude, growth itself is suddenly our biggest challenge. While the classic Malthusian trap has been proven wrong, the resource demands and externalities of growth (e.g., global warming, pollution, perhaps nuclear proliferation) are also growing in fundamentally new ways and may yet brake expected progress. My hunch is that growth-driven innovation will outpace growth-driven problems, but I don't see it as a clear-cut case.
Posted by: Greg at Jan 16, 2008 11:08:04 AM
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.
Posted by: odograph at Jan 16, 2008 11:14:00 AM
Alex is right that we have reason to be highly optimistic about economic growth and technological progress.
Ironically, the biggest threat may be that as technology advances exponentially, it creates the potential for incredible power, which can create both unprecedented benefit and catastrophic harm. As Bill Joy noted in his article "Why the Future Doesn't Need Us", we are likely to see super-human artificial intelligence, genetic manipulation and creation of microbes in basement laboratories, nanotech self-replicators, and other advances within the next several decades.
If one of these advances goes seriously awry, the effects on humans could make a nuclear explosion seem trivial by comparison.
Posted by: A student of economics at Jan 16, 2008 11:27:01 AM
"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.
Posted by: M. Hodak at Jan 16, 2008 12:09:30 PM
Of course, we all know what follows a cure for cancer... ravenous, CGI zombies!
Along with environmental degradation, I think we should be rather concerned that our productivity gains are built on a cheap source of energy, which will be depleted ever faster with more growth.
And who would even want to live without seafood? I'm investing in suicide booths.
Posted by: efp at Jan 16, 2008 12:31:05 PM
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.
Posted by: odograph at Jan 16, 2008 12:35:40 PM
Do note that the primary point of the article is the economic *reasons* for optimism. When more than a billion Chinese and Indians become rich we all benefit because the fixed costs of R&D are spread across more consumers lowering costs and increasing the incentive to invest.
Posted by: Alex Tabarrok at Jan 16, 2008 12:52:31 PM
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.
Posted by: RobbL at Jan 16, 2008 1:01:39 PM
Alex,
Thanks for an excellent article. The fact that some people will be unhappy unless you also accompany anything optimistic with bucket loads of pessimism does nothing to detract from your astute insights about the upside of widespread wealth. Not nearly enough is said about said upside in the popular press.
I have long felt that you can tell a lot about someone's understanding (or lack thereof) of scarcity by how they view something like new children. The ones who think of them as new burdens are totally missing the point that under a rational economic system (peace, easy taxes, and a tolerable administration of justice...[and education]) these new children are future assets that make us all better off.
P.S. I'm also about to check out "The Independent Institute" out a bit more, noting I did't know it existed before now.
Posted by: happyjuggler0 at Jan 16, 2008 1:05:48 PM
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.
Posted by: Jeffrey Miller at Jan 16, 2008 1:11:24 PM
As I said at the top, I recognize the benefits of Asian prosperity and education. Nonetheless, I still see their story as more cautionary tale than anything else. I would not want to breathe their air or drink from their rivers. I don't think many of us (or the informed among us) would. Modern China is "piloting" one possible future for the rest of us, one in which environmental services are pressed very, very, hard.
Chinese Water: A Picture is Worth...
Posted by: odograph at Jan 16, 2008 1:45:04 PM
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.
Posted by: John Pertz at Jan 16, 2008 1:47:05 PM
John, I like the Gapminder work on those sorts of changes. It is definitely not all bad news.
Posted by: odograph at Jan 16, 2008 1:58:42 PM
"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.
Posted by: Jeffrey Miller at Jan 16, 2008 2:19:10 PM
http://www.hydrogencarsnow.com/blog2/index.php/advocates/jay-leno-takes-honda-clarity-for-a-ride/
Leno and Marie, go on to talk about such issues as the Hindenburg misconception, how hydrogen is safer than gasoline and the merits of a home refueling system for fuel cell cars and how everyone can achieve self-sufficiency in this area.
Jay Leno then takes a test drive to refuel the Honda Clarity and finds it easier than gasoline and less messy. Sage Marie talks about the current cost for refueling with hydrogen gas, which is $5 per kilogram (a kg equal a gallon). So, filling up the Clarity, which holds 4 kg will cost $20 and the Clarity can then drive for 270 miles, which equals 68 mpg.
achieve self-sufficiency in this area.
Is This a Optimistic or Pesimist NEW?
Posted by: Alexr at Jan 16, 2008 2:37:25 PM
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.
Posted by: chris at Jan 16, 2008 2:44:37 PM
What did I say about being informed?
"SHANGHAI, July 4 — Chinese government officials pressed the World Bank into removing estimates of the number of premature deaths linked to pollution in China from a bank report, according to a person involved in drafting the report.
A formal draft of the report, “Cost of Pollution in China,” was released at a conference in Beijing in March after the deletions. The excised information included statistical models estimating that as many as 750,000 people a year die prematurely in China, because of air and water pollution."
(BTW, on hydrogen fuel, check out how much is made from reformed natural gas, and how often the emissions from that reforming are counted by proponents.)
Posted by: odograph at Jan 16, 2008 3:04:46 PM
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.
Posted by: Doug Blair at Jan 16, 2008 3:31:12 PM
Jeffrey Miller,
I have long wondered why I should care that we minimize our impact on the enviroment. Why is this all this human change necessarily bad? Extant species have been changing and yes, ruining pre-existing ecosystems long before human beings. Suppose the capitalistic destruction of Indian jungle naturally selects tigers that are averse to human settlements - is this a bad thing? I see much of the environmental movement as a religious movement motivated by iconography, and this makes it hard for me to take their most extreme claims seriously. Once I've accepted some claims, like global warming, I notice how an effective yet "immoral" solutions - like sulfur geo-engineering, nuclear power, and simple inland withdrawal are rejected because they fail this Commandment of "thou shalt not change the environment".
Posted by: Billare at Jan 16, 2008 3:36:56 PM
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.
Posted by: TGGP at Jan 16, 2008 4:13:44 PM
Billare,
There are certainly some environmentalists who are moved by ethics rather pure practicality, and this can slide right into fanaticism without too much trouble. However, the effectiveness of sulfur geoengineering hasn't been proven and may well have large unforeseen consequences, nuclear power comes in at anywhere from 2-10X the cost of wind by some estimates, and "simple inland withdrawal" would be anything but simple. No need to go to ethical or fanatical arguments against these; they're not particularly practical on first analysis.
Posted by: Doug Blair at Jan 16, 2008 4:56:12 PM
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.
Posted by: chris at Jan 16, 2008 6:00:41 PM
