Tuesday, April 17, 2012

Malthusian Scarcity Economics And The Fear Of Innovation


Econbrowser had an interesting short post last weekend regarding scarcity.  Part of that post:

Professor Tom Murphy, my colleague in the Physics Department here at UCSD, relays an interesting conversation between a physicist and an economist on the limits to growth. Here's an excerpt: 
Physicist: At that 2.3% growth rate, we would be using energy at a rate corresponding to the total solar input striking Earth in a little over 400 years. We would consume something comparable to the entire sun in 1400 years from now. By 2500 years, we would use energy at the rate of the entire Milky Way galaxy-- 100 billion stars! I think you can see the absurdity of continued energy growth. 2500 years is not that long, from a historical perspective. We know what we were doing 2500 years ago. I think I know what we're not going to be doing 2500 years hence.
I commented:

Wow! Thanks for that softball! 
[Thomas] Malthus lives!!! 
Zero-sum thinking survives!!!!! 
What will happen when all of the buggy whip manufacturers are put out of business? There is no future for flat screen TVs because how many can afford $8,000 for a 42" display? 
What stands in our way of solving seemingly intractable problems are people who have a fear of innovation. Fear that it will destroy our world in one way or another. Fear that someone will reap large profits even if it benefits others. Fear that their fantasy of Eden might be wrong. 
For example... example... the U.S. alone buries a quarter billion TONS of garbage each year while it spends billions of dollars in fuel generating electricity. Innovation says use plasma arc technology to virtually eliminate landfills while generating a surplus of electricity in virtually any location... perfect recycling of everything. That's politically incorrect because of the fear of process pollution... which is significantly less than the pollution of 250 million tons of trash plus the mining of coal or the drilling of natural gas and the burning of those fuels for that same end product... electricity. 
Fear... all the way back to Malthus and beyond.
Some other took umbridge with my comments:
Energy available thru the combustion of solid waste would replace only 1% or so of our energy use. All of that sort of scavaging energy (methane from manure and sewage, cooking oil, etc) is ultimately just an increase in efficiency and can never produce more enrgy than put into the trash in the first place (probably less than about 5% of total energy consumption). Greater recycling has slightly greater efficiency potential than combustion, but unless we posit perpetual motion, it will neveer be an energy source.
I responded:

... with regard to generating electrical energy from plasma arc incineration of waste, it is obvious you interpreted my statements to be toilet waste ["methane from manure and sewage, cooking oil, etc"]. I suggest that you actually read about plasma arc incineration technology. 
Here is an example:
I will re-iterate: fear of innovation is the main impediment to energy freedom. That fear takes form in fear of competition, fear of unknown or presumed side-effects, fear of being wrong about your own world view. 
For those of you who can't get beyond the notion that the term "solid waste" does not refer to "poop," I will offer another example of fear of innovation... the fears of special interests.

Another wrote:
Bruce has, of course, disproven his own case. If Malthus feared innovation (I'm not aware of any evidence that he did), that fear did not prevent innovation. If, as Bruce seems to contend, there is a history if such fear and that fear prevents innovation, then there must still be a buggy whip maker in every town. There is not? Well, then, we have little to fear from the fear of innovation. We may well have reason to think that energy consumption growth will have to slow, though, based on the math here presented.
But will it?  That is more fear.  More Malthusian thinking.  Basically, since we cannot imagine now how we can produce such amounts of needed energy, therefore, we will not be able to produce the needed energy.

Most 18th century physicists would have pronounced the amount of electricity produced from nuclear energy "impossible."  Malthusian thinking.  Our present administration is filled with Malthusians.  They cannot see innovation that can solve problems because they cannot understand the scope of innovation.  Hence, they fear innovation.  They put up regulations against innovation.  We must return to organic living off the land, but crammed into tiny apartments in cities.

Their world view of scarcity would be challenged if they embraced innovation... like fracking that increases energy, like plasma arc incineration that reuses energy, like more efficient use of resources other than corn to make our fuels... like computers in your cellphones more powerful than the giant room computers using 10,000 vacuum tubes that used enormous amounts of energy.

They are much more comfortable spreading fear about scarcity.  They are much more comfortable being experts about scarcity.  They are much more comfortable being in charge of the scarcity they want to implement.

They simply cannot imagine a world 400 years from now where energy is abundant and efficiency is so great that our energy needs are much less to meet our needs than it is now.  Better to fear.  Better to be impediments to innovation.

Oh, who was Thomas Malthus?
The classical economists who followed in the footsteps of Adam Smith did not enjoy his widespread popularity. Dubbed the "prophets of gloom and doom," they became associated with turning economic thought into a dismal science. Thomas Robert Malthus, in particular, became renown for his pessimistic predictions regarding the future of humanity. His major contribution to economic thought came in the essay "The Principles of Population." Originally, Malthus wrote the piece in response to utopian utilitarians who suggested that population growth constituted an unmitigated blessing. Essentially, Malthus predicted that the demand for food inevitably becomes much greater than the supply of it. This prediction is rooted in the idea that population increases geometrically while foodstuffs grow at an arithmetic rate. Curiously, Malthus offers no explanation as to how he determined these figures. (Encyclopedia of Economic Thought) [source]
Just substitute "energy" for "food".  Just substitute "Thomas Robert Malthus" for any of the fear-mongers.



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... and one could add "not all human problems really are."
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SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)