Wednesday, October 8, 2014

Krugman v. Buchanan: Escape from the Limits to Growth?

In this corner: Paul "No Limits" Krugman

In this corner: Mark Buchanan

Paul Krugman’s recent blog entry criticizing a blog by science writer Mark Buchanan on Bloomberg View raises some  interesting questions. While I’m taken with Krugman’s arguments on most topics, I’m inclined to think that he’s coming up short on this one. The contention is over whether there are any limits to economic growth imposed by physical limitations in our environment, especially whether limitations on the use of energy place a hard ceiling on the degree of economic development the world can obtain. The arguments are straightforward. Buchanan addresses Krugman by name in making his argument. Buchanan argues that energy resources (and by-products) limit economic growth. No matter how efficiently we use energy—and we have become much more efficient—we still have increased our gross energy use and with increased use has come greater pollution, greater carbon loading, and greater heat disbursement. He argues, borrowing a phrase from Econ 101, that “there’s no such thing as a free lunch”, and these limits are another example of this fundamental principle. Krugman, other the other hand, argues that technological innovation and better practices (another form of innovation) will allow continued economic growth. Indeed, in earlier posts he’s argued that the need for alternative (low-carbon) energy sources and systems will promote economic growth. 

Let me throw out some random thoughts on this debate. 

Buchanan is correct that there exist physical constraints on the growth of human activity, including population. Population can’t grow indefinitely, and with any population growth, you will have increased energy use regardless of how efficiently we use any energy source. Nothing on the horizon suggests that we can continue the current path—even under the best possible circumstances—indefinitely. Humanity (part of it anyway) has been a path of expanding energy use and economic growth since the late 18th century, and we’ve been able to off-load the negative by-products of that growth unto others—other people and other environments. (Check out the air here in China, for instance.) We will run out of safe places to dump our “waste” at some point. Of course, Paul Ehrlich made these arguments in the late 1960’s, followed by the Club of Rome report, and there predictions failed. Julian Simon won the bet. But nothing that’s happened negates the fundamental soundness of the limitations hypothesis. It’s sound science: the laws of conservation of energy and of entropy provide an immovable foundation. 

We might underestimate human innovation, but as Thomas Homer-Dixon argues, there are limits to our ability to innovate ourselves out of our dilemmas. In fact, the roll of “fallen” or “lost” civilizations or even “former greats” (Britain, Spain, France, Ming China, etc.) is a long one. Of course, many factors come into play, but many past civilizations (and hunter-gatherer communities) have failed because of physical constraints (and social constraints). Perhaps JosephTainter has the key in his sense of declining marginal return on investments in energy in an attempt to support increasing complexity within a society facing constraints. The label of EROI (energy return on investment) is an economic concept applied to an energy problem that has some impressive arguments in its favor. Krugman doesn’t address the limits imposed by complexity on a system. He shares the economists’ bias that we can innovate our way out of any problem. Often—and often to our surprise—we can, but not always. 

An economist might say that the physical constraints that Buchanan fears are too remote to be of concern. To borrow the much used (and abused) quote of Keynes, “in the long run we’re all dead”. But Buchanan argues that we’re not talking about “the long run”, we’re talking about now. Krugman, who knows the reality of global climate change, seems to think that the physical constraints are not relevant to this problem, but given the slowness with which humanity has responded to the signals, it shows that many tacitly believe that real change is required. 

Krugman gives the example of “slow shipping”, an innovation that was simply a change in behavior without any change in technology. However, for the same output it requires an increase in labor and capital. He fails to state whether the energy for creating and operating another ship in the fleet will be greater or lesser than the energy saved by slower operation of the current fleet. In other words, will a constant output (goods delivered in a year) require more or less total energy with larger but more efficiently operated fleet? Two cars operated at 55 mph still take more gas than one car at 85 mph (I think). I’d have to have this argument fleshed out further to buy it (or I’m just dense). 

One problem is “economic growth” understood as more stuff (as it means to as a practical matter to most people). The magnitude of stuff as a measure of well-being has lost its allure to some, but to the greater part of the world it’s still a kick. Alas, economics doesn’t seem equipped to deal with issues of quality of life as measure of well-being (although some are making efforts in this direction). 

 Krugman opens his blog with  a bit of ad hominem argument, suggesting an unholy alliance of “conservative” (pro-business) groups; anti-capitalist, anti-materialist types; and scientists to promote the idea that limiting global climate change and creating a safer environment mean less (or no) economic growth. As to the first group, they’re disingenuous. On the “lefties”, there’s some truth to Krugman’s appraisal, but their perspective has merit. I’m not anti-capitalist, but I believe about market capitalism what I believe about democracy: it’s the worst system except compared to all the others that have been tried. Market capitalism works far from perfectly and needs fixing. It’s a transition phase (although not with the successor that Marx predicted and desired). It’s a phase to allow something better. Consumer capitalism isn’t a good system for human well-being in many of its aspects. How does a system that depends upon ever-increasing human wants and acquisition keep going indefinitely? And what does it do the people that feed the system? The consumer-capitalist world we live in is at once terrific and awful.

As to scientists and their “imperialism” (and that of economists), Krugman has a point. But exploring other domains doesn’t require “imperialism”. Inquiry should be performed in a spirit of discovery and humility, respecting and gaining from the new domain and giving to it. This is the way of great thinkers. Academics who pay attention to turf boundaries within the academy are small-ball thinkers. The best explore and learn from new fields. Krugman and Buchanan both do this, and Krugman shouldn’t lump all forays into new domains into the same crowd. We need more of this cross-domain fertilization, not less of it. Among my favorite examples: Thomas Homer-Dixon, Jon Elster, Garry Wills, Martha Nussbaum, Amartya Sen, Ken Wilber, Peter Turchin. These thinkers and others have done the study of the gnat’s ass required by an advanced academic degree and have then turned their attention to wider fields. If you’re not sure what label to put on a thinker (e.g., “philosopher”, “political scientist”, “classicist”, etc.) or what department they should be appointed to, then you’ve found someone likely to broaden horizons and deepen perspectives. Krugman shouldn’t knock this. He belongs in the club. 

Historian, archeologist, and classicist (another example of cross-fertilization) Ian Morris has it right: either we achieve “The Singularity” of control of energy and our future (an unprecedented development), or we hit a roof of development like all prior human civilizations have struck (at a lower height), and we collapse back into simpler social forms. Earlier examples of hitting limits and collapsing (or decaying) haven’t been the result of only physical constraints. The existence and history of Industrial Civilization has proven that the physical constraints can be altered, at least for a period. Industrial Civilization is unique in its level of attainment of social complexity and energy utilization. But although it’s gone far higher than its predecessors, we can’t conclude that a roof doesn’t exist. Where the roof lies and how we might move it is the challenge that we face.