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.

Spring Break 2007

Nothing special: just work as usual!

I'll spend the week writing a paper for a conference at Duke in April. The conference is entitled "Keeping Faith: Religious Belief and Political Economy" and is sponsored by the journal History of Political Economy, which is hosted at Duke University's Economics department. My paper is on Knight's seemingly strange, active religious affliation in the 1920s and its connection to his work on economics, ethics, religion and liberal democracy later in his life.

For students: yes, I'll also be grading papers. I also plan to write an editorial on Adam Smith's views on the "cool city" concept that circulates today. I will post that here when ready.

Malthus, Money and Mating

The following was posted as a Current Comment on the Mackinac Center for Public Policy website on February 14, 2007.

Valentine’s Day is the anniversary of the birth of Thomas Robert Malthus. Some would view this as ironic: The day we celebrate "eros" is the birthday of the man who argued that the power of the passion between the sexes is "indefinitely greater" than our productive capacity to feed ourselves. The conclusion to be drawn — the dreaded "Malthusian trap" — is that the growth of human population will eventually outstrip the limited resources we have available.

But Malthus himself had a different view. For him, the population principle provided an impetus to think about the rules by which we choose to organize society. In Malthus’ account, the power of eros could be balanced by another human power — that of reason and foresight. People may, if circumstances are right, pause and ask themselves whether delaying marriage and having children later would be better than having them now. Of course, you’re going to say few of us are that restrained! And Malthus agreed. Our prudential reasoning needs assistance — incentives, if you will. And those incentives are provided by society’s institutions; the rules we choose to live by.

Malthus lived in a society whose rules he thought were imperfect in this regard. Great Britain had enshrined private property rights in the Magna Carta, but they largely protected the rights of large landowners, not the average citizen. The working class had few reasons to save because they had little prospect of acquiring property. The "parish laws," remnants of feudal times, tied people to the place they were born, preventing the free operation of labor markets. And the Church forced people to marry early in order to escape those sins associated with eros "out of wedlock." The imperfections of this English "constitution" — its set of fundamental rules — could lead to population growth without sufficient economic growth in 19th century England. The resulting poverty held the potential for starvation and disease: If our rules do not restrain us, Malthus said, nature will.

Thus, Malthus could understand how, after the French Revolution, William Godwin could call for a new English constitution that placed property in the hands of "the people," prevented market transactions and eliminated the Church of England. A society of liberty, equality and communal benevolence would surely be better than what Great Britain offered. At least, that’s what Malthus’ father, Daniel, argued to his son in 1798. Daniel thought that England could move toward such a world if it followed the path Godwin proposed in Political Justice (1793). But his son could not quite agree. After they debated the issue, the younger Malthus wrote up his argument in a short book bearing the title An Essay on the Principle of Population (1798).

This essay is often misinterpreted as a defense of the existing property regime in England and an attack on members of the working class, who lack the will to restrain eros voluntarily. But such an interpretation overlooks Malthus’ concern about institutional design. Instead, Malthus argued that the occurrence of the natural consequences predicted by the population principle were the result of poorly designed societal institutions. Private property rights that extend to everyone, free labor markets and rules that ensure that both parents bear financial responsibility for their offspring are essential, he claimed, to a constitution that would find the right balance between eros and the prudential exercise of human reason.

Of course, private property rights and free markets also are essential to innovation and entrepreneurship; two things that have ensured that the worldwide growth in productive capacity since Malthus’ time has outstripped the growth of population. Even in the poorest parts of the world, where property rights still need to be strengthened and markets are often restricted, production has grown at a rate faster than population.

So maybe Malthus was on to something. He didn’t argue that population will inevitably outrun the limits of our resources; in fact, he said that we can’t know what the limits of the productive capacity of the Earth are. Rather, Malthus suggested that good institutional design — including property rights and free markets available to all — will provide incentives that ensure that the power of eros we celebrate today will be counterbalanced by our desire to be economically secure tomorrow.