Biophysical Limits to Economic Growth The Malthusian Perspective

Malthusian Model of Economic Growth Thomas Malthus ( ) developed a growth model that relates the association of resource scarcity and the prospect for long-run human economic growth.

Malthusian Model of Economic Growth 1. Resources are scarce in absolute terms. That is, humanity is endowed with a finite amount of material resources. 2. If uncontrolled, the tendency of human populations is to grow exponentially. 3. Technology should not be perceived as the ‘ultimate’ escape from the problem of resource scarcity.

Assumptions of Malthusian Model the total amount of land available for agriculture (arable land) is immutably fixed; the growth of population is limited by the amount of food available for subsistence; human population will invariably increase where the means of subsistence increase.

“The power of population is indefinitely greater than the power in the earth to produce subsistence for man.” “Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio.” “A slight acquaintance with numbers will show the immensity of the first power in comparison with the second.” Malthusian Model of Economic Growth

Law of diminishing marginal product “Iron Law of Wages” “vices” and “virtues” in the Malthusian period

Ricardian Model of Growth David Ricardo (1772–1823) by the progressive decline in the quality and quantity of extractive resources, most importantly, agricultural land Human material progress would not be hampered in the long run by explosive growth of human population as Malthus had envisioned, but by the progressive decline in the quality and quantity of extractive resources, most importantly, agricultural land.

Agricultural land varies in its natural productive capacity. Plots of land with high natural fertility (or mines containing high-grade ores) are put to use first because their real cost is low. (Real cost: the amount of factors of production needed to make a farmland available for cultivation.) Ricardian Model of Growth

Ricardian scarcity A steady increase in rent (and real cost) as quality of land (or any other extractive resources) decline. A steady increase in rent (and real cost) as quality of land (or any other extractive resources) decline. It is the steady increase in rent as land use expands that would ultimately stifle human long- term economic progress. It is the steady increase in rent as land use expands that would ultimately stifle human long- term economic progress. Population is relevant only to the extent it has an effect on what happens to demand. Population is relevant only to the extent it has an effect on what happens to demand. The major impediment to human material progress would emerge not so much from demand as rather from supply side constraints. The major impediment to human material progress would emerge not so much from demand as rather from supply side constraints.

Neo-Malthusian Models Incorporate the effects not only of population and resource scarcity but also of technology and human institutions in their consideration of environmental sustainability. Incorporate the effects not only of population and resource scarcity but also of technology and human institutions in their consideration of environmental sustainability. The emphasis has been shifted from concerns about limits to economic growth to worries about environmental sustainability. The emphasis has been shifted from concerns about limits to economic growth to worries about environmental sustainability.

increased human activities would lead to increasing stress on the functioning of the environment and in so doing ultimately lead to environmental degradation. if degradation of the environment is not restricted to the point that it is considered sustainable, biophysical limits will eventually place bounds on the growth of human activity. Neo-Malthusian Models

Neo-Malthusian Models: Ehrlich–Commoner Model I = P x F I: total environmental effect or damage, measured in some standard units. P: population size F: an index that measures the per capita impact (or damage) to the environment. (ecological footprint of the average person)

Ehrlich–Commoner Model at any given point in time, the total environmental impact of human activities is a product of the underlying population size, P, and the per capita damage to the environment. total environmental impact equals total population multiplied by the average impact that each person has on the environment.

F = f[P, c, g] c: per capita consumption or production g: composition of inputs and outputs in an economy, expressed in terms of their impact on the environment δF/δc > 0 δF/δg > 0 δF/δP > 0 (the law of diminishing marginal returns) Ehrlich–Commoner Model

Shows the fundamental positions of neo-Malthusians regarding the link between environmental sustainability and economic growth. Neo-Malthusian starts with a view that the current rate of world economic growth, (in terms of GDP), cannot be environmentally sustainable. The major issues of interest have been to identify the causes and possible remedies for the damages that have been inflicted on the natural environment from various forms of human activity over the past century. Ehrlich–Commoner Model

The Ehrlich–Commoner (E-C) model suggests that neo-Malthusians would tend to claim that;  the steady increases in population  the steady increases in per capita consumption  the proliferation of products that are harmful to the environment are the major factors contributing to continued global environmental degradation.

No consensus on the relative impacts these three key variables have on the environment. Ehrlich and his followers: Ehrlich and his followers: rising human population is a predominant factor in accelerating pollution and other resource problems in both the developed and the developing countries of the world.

Commoner and his associates: Commoner and his associates: population growth plays only a minor role in explaining the environmental and resource condition of the modern era, especially in the developed world. Instead, a major part of environmental damage results from inappropriate applications of modern technologies in the extraction, production and consumption sectors of the economy. Technological choices are often made purely on the basis of profitability considerations rather than environmental sustainability

Neo-Malthusian Policy Implications Policies are directed to achieving a combination of: (i) Control population growth; (ii) Moderate or reduce per capita resource use; and (iii) Promote the development of technologies that are environmentally benign.

use policy instruments that permit direct government intervention ending environmentally damaging subsidies by government decree, ending environmentally damaging subsidies by government decree, penalizing wasteful consumption habits by means of income redistribution, penalizing wasteful consumption habits by means of income redistribution, implementing family planning programs with considerable governmental supervision, implementing family planning programs with considerable governmental supervision, providing subsidies to promote the development of environmentally benign technology such as solar energy, providing subsidies to promote the development of environmentally benign technology such as solar energy, putting broadly based strict quotas on the amount of fish to be harvested or forest area to be cleared on an annual basis, etc… putting broadly based strict quotas on the amount of fish to be harvested or forest area to be cleared on an annual basis, etc…

Neo-Malthusians are skeptical about the notion that all resource allocation problems can be solved by market or extra-market mechanisms. Neo-Malthusians are skeptical about the notion that all resource allocation problems can be solved by market or extra-market mechanisms. The private market tends toward over- exploitation and degradation of resources that are externality-ridden (environmental resources) The private market tends toward over- exploitation and degradation of resources that are externality-ridden (environmental resources) Not all technological changes favor the environment. Thus, environmental sustainability requires specific consideration of the impacts new technologies have on the environment, not just on the production and delivery of goods and service. Not all technological changes favor the environment. Thus, environmental sustainability requires specific consideration of the impacts new technologies have on the environment, not just on the production and delivery of goods and service.

Weaknesses of the Neo-Malthusian Model No clear definition of ‘sustainability’ in the E-C model. No clear definition of ‘sustainability’ in the E-C model. Ignore the potential for resource conservation through technological means, such as factor substitution and technical progress. Ignore the potential for resource conservation through technological means, such as factor substitution and technical progress. Consider resources, consumption and population only at an aggregate level, without adequate reflection on the social, technological and political aspects of resource use. Consider resources, consumption and population only at an aggregate level, without adequate reflection on the social, technological and political aspects of resource use. Predictions of catastrophe politically not useful. Predictions of catastrophe politically not useful.

‘If the present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime within the next one hundred years. The most probable result will be a rather sudden and uncontrollable decline in both population and industrial capacity’ The Limits to Growth (Meadows et al. 1971)

‘Let us face the uncomfortable truth. The model of development we are accustomed to has been fruitful for the few, but flawed for the many. A path to prosperity that ravages the environment and leaves a majority of humankind behind in squalor will soon prove to be a dead-end road for everyone’ Kofi Annan, 2002

How should we deal with the existence of the seemingly perennial Malthusian specter? Sustainable economic growth that will necessitate the design and implementation of social and technological conditions that ensure both environmental and economic stability concurrently. Which view? Neo-classical or ecological?