The Skeptical Liberal: 03/11/2007 - 03/18/2007

The Skeptical Liberal

How can we live together in peace, prosperity, and harmony, while retaining our liberties as autonomous individuals who can, and must, create our own values? -- J.M. Buchanan


The End of Ingenuity Is Not Nigh

The following is a response to an editorial in the New York Times by Thomas Homer-Dixon on November 28, 2006. Homer-Dixon's editorial was entitled "The End of Ingenuity."

T. Robert Malthus was onto something, but it wasn’t what Mr. Homer-Dixon thinks it was.

In his recent editorial Thomas Homer-Dixon argued that Paul Ehrlich and the limits to growth crowd are proving Malthus right: we will run out of resources in the long run, despite Julian Simon’s appeal to the human capacity to innovate. Innovation, Homer-Dixon argues, is not infinite, or at least, it is uncertain enough that we should not depend upon market-driven changes to deal with global climate change. While his editorial leaves the policy conclusions vague, the clear implication is that governments will need to both increase regulatory oversight of market outcomes and provide incentives for business and academia to innovate faster.

The problem with Mr. Homer-Dixon’s argument is that he misses a subtle aspect of the problem of innovation that Malthus actually understood. When we talk about Malthus, we usually speak only of his “population principle”: the source of the so-called Malthusian trap where the growth of population necessarily outruns the earth’s capacity to sustain the human population’s consumption. But if we go beyond the population principle in Malthus, we find he argues that the civilizing institutions that humans create—especially property rights and free markets—provide incentive structures that both restrain population growth and ensure a steady stream of innovations. In other words, the human response to natural constraints is to organize: we use our reason and foresight to create institutions that enable us to continue innovating and also contain population growth.

To be fair, Mr. Homer-Dixon is right that the prospect of innovation is uncertain. But the main reason it is uncertain emerges from Malthus’ insight: while the capacity that allows humans to restrain population growth and continually innovate is always there, the institutional framework in which we find ourselves may provide an unworthy guide to prudential action. It is not the human capacity to innovate that is somehow fundamentally inadequate or flawed. Instead, the problems lie in the nature of the incentive structures in which human innovators find themselves. When those institutions create significant uncertainties or perverse incentives, innovation tends to dry up.

Malthus followed Adam Smith in believing that the substitution of market coordination of human actions for state coercion would allow the human capacity to innovate and to restrain population growth to function best. Mr. Homer-Dixon thinks otherwise. He fears that failures in prudential action signal the failure of markets, and calls for the substitution of state coercion (perhaps in the form of a carrot rather than a stick) for the uncertainties of market organization. I believe time has shown Malthus, Smith and Simon right. Our future prosperity depends upon ensuring that global climate change does not become another means by which the coercive power of the state is expanded in ways that limit even further our capacity to respond positively to the uncertainties of life through innovation.

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