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Throw Malthus Off the Bus!

Posted by: Michael Mandel on April 21

This is the opener in my week of optimistic posts. And it’s a good time to do it, given the multifaceted surge of pessimism. One branch of pessimism is environmental/natural resources. This morning we had Paul Krugman writing a column entitled “Running Out of Planet to Exploit”
where he talked about the soaring price of food, oil, and commodities, and the limits to growth. He ended the column by saying “Don’t look now, but the good times may have just stopped rolling.”

The second branch of pessimism, of course, comes from the financial crisis, which in my view is a reflection of the slow growth of real incomes for most households. Americans took on tons of debt to support a lifestyle which their incomes did not justify—an extra $3 trillion, by my calculations. Now Wall Street and the banking system is choking on all that debt.

The third branch of pessimism is demographic and budgetary. It comes from the aging of the industrial countries, and their continued inability to get medical costs under control. If current trends continue—which they can’t—then medical costs will eat up a larger and larger share of government budgets and indeed the whole economy. The latest long-term forecasts from the Congressional Budget Office call for Medicare and Medicaid to go from 4.1% of GDP today to 18.6% in 2082. These are all imaginary numbers, of course, but they are very worrisome to a lot of people.

As I go through the week, I will deal with each of these in turn, plus whatever else might come up. But just as I showed the “scariest” chart ever a few weeks ago, today I’m going to show the “most important chart ever today”.


This chart shows the sources of private nonfarm business productivity growth since 1987, as calculated by the Bureau of Labor Statistics here. What the BLS calls "multifactor productivity," I have given its correct name--increase in knowledge, broadly construed, including both business know-how and technology.

Why is this chart so important? It says that increases in knowledge--technology and new ways of doing things--represent roughly half of productivity gains since 1987. In fact, this pattern reaches back far longer...when I get some time later, I will splice together the numbers since World War II. This is one of the great regularities of economics...the fact that roughly half of productivity growth is driven by intangible improvements in knowledge, rather than tangible investments in physical and human capital.

The flip side: Reverend Malthus and the forces of dismalness always win, in the absence of technological change and improvements in knowledge. Without technological advances, the walls always close in, the disasters never stop. We get a meek and meager existence which we cannot outrun.

So what we will be looking for, in the rest of the week, are technological or knowledge advances that will help get us out of the box we are in. Tomorrow: Healthcare.

Note: Take a look at an essay written by a good buddy of mine, Chris Farrell, entitled "The Age of Scarcity?

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Reader Comments

Nathan K

April 21, 2008 01:17 PM

Knowledge may be an "unlimited resource" but I'd like the cornucopian cheerleaders at BusinessWeek to explain to me how I can eat knowledge, heat my home with knowledge, and travel on knowledge power.

Oh right, they will explain with insulting condescension, that "knowledge-driven increases in efficiency" will enable us to better utilize available resources to provide more food, energy, and so on from the same resources.


But "efficiency" is most certainly not an unlimited resource. Supposing we can increase our utilization efficiency from, say, 30% to 97% for a given resource. That's a big improvement. We gobble up this efficiency in no time with exponential growth. Now our unlimited reserve of "knowledge" can give us another boost, from 97% to 98 or even 99.9% efficiency. In other words, it can give us nothing at all. It has only delayed the inevitable "end of the growth line." Exponential growth comes to a crash.

On another point I would argue that knowledge is not actually an unlimited resource, but that is not necessary.

Brandon W

April 21, 2008 02:37 PM

I agree with Nathan K, and would add:
Much more limited than knowledge itself is human intellect and capacity to comprehend it.

Joe Cushing

April 21, 2008 03:06 PM

Fertility decreases with increased wealth. That kind of throws a chink in Malthus's chain.

Joe Cushing

April 21, 2008 03:09 PM

I think there is going to be a commodities crash in the next decade. Probably in the first half.

Mike Mandel

April 21, 2008 03:10 PM

A quote from Malthus that I like:

“I think I may fairly make two postulata.
First, That food is necessary to the existence of man.
Secondly, That the passion between the sexes is necessary and will remain nearly in its present state.“

Probably the first economist to make sexual forecasts!


April 21, 2008 11:49 PM

I suspect that other people have been reading Malthus. The rise in the price of rice suggests to me that people have come to the conclusion that no matter what happens in the US economy, people in Asia will still have to eat!

I still think our current problems are more about too many dollars than too few commodities. On the positive side, the global economy is providing a solution by devaluing the dollar at a good clip.

Abe B

April 22, 2008 12:37 AM

One thing we know is that humans can be both the most pessimistic and the most durable of creatures. We're constantly fear-mongering (doom and gloom), yet our resilience as a species is remarkable.

That said, another commenter correctly pointed out that the age of scarcity will take a long time to arrive because at some point developing countries will be developed and their fertility rates will begin to plunge like most wealthy/developed countries have before them. Indeed, the horizon portends a grim picture of underpopulation: where the previous generations are always larger and older than the next generations who're burdened with caring for their elders. Perhaps in 50 years (or sooner) we'll see initiatives to have more babies ("Please, help us save the world. Get your test-tube pregnant today!").

Nathan K is incorrect, I think, in that he seems to understate drastically the value of knowledge. Farmers plant and harvest by virtue of knowledge; fishermen fish, hunters hunt, factories operate, homes are heated...all because of knowledge. Indeed, knowledge DOES feed you, warm you, and facilitate travel. Without someone (or many someones) having knowledge no planes or trains would exist, homes would consist of caves (though, in truth, in the extreme it requires knowledge to recognize a cave can provide shelter--but I digress), we would still be hunting and gathering and picking ticks out of each other's hair. Knowledge is truly power. Knowledge has gotten us this far, how can you suggest that it has so little value? By itself knowledge is not something we can eat, but it facilitates eating. The point of this article is that knowledge, especially as populations decline, will carry more and more of the burden of providing for humanity.

While it is true that eventually we will have utilized effectively 100% of a given thing, whether or not that will matter is worth considering. If we use every last bit of oil on the planet, but have no need of it any longer, is that such a bad thing? Knowledge gives us solutions, makes us more efficient, unearths the unexpected.


April 22, 2008 01:50 AM

Crop yields worldwide have been in steady decline for 25 years. Food available per capita is on a downward trend. Population continues to increase. And in case you haven't been following, most of the world's grain and fertilizer exporters have been severely curtailing their exports, even as there have been food riots and protests in 33 nations, and even Japan has exhausted its allocated annual grain budget months early, requiring emergency measures. Don't count out Malthus yet.

richard carter

April 22, 2008 02:10 AM

The article does not mention the fact that productivity is a code word for squeezing the jobs and salaries of the average american. Productivity should also mean producing a better life for our citizens.


April 22, 2008 06:49 AM

Malthus was a genius of the 18-19th century, but a simpleton for the 21st. I agree with Abe. The biggest mistake people make using the Malthusian argument is that they do not recognize that science and technology HAS been growing exponentially.

EVERYONE has said that sequencing the human genome would take a decade at least. We did it in a couple of years. People were saying ten years ago that conservatively speaking, it would take 50 years to develop a viable commercial fusion reactor. The EU, US, Japan, and S. Korea have put money together and are building a test fusion reactor in the South of France. I predict that we will get it in a decade. Haven't you also noticed that people the world over are experiencing an obesity epidemic, even CHINA? Places like Ethiopia that experienced horrible starvation in the 80's, the problem was government maladministration. There were lush green fields everywhere but the government took the food away to feed their cronies, make money, and to punish the opposing populace. Also, NOBODY starves in India anymore.

This recent threat of starvation in the third world countries is also mostly man-made. All this push into bogus biofuels from corn ethanol, which takes more energy to grow and make than the resulting ethanol, took acreage away from other grains meant for livestock feed and human consumption, driving food prices sky high world over.

China, due to it's (highly unfortunate) one child policy, has been experiencing a negative population growth. The U.S. also, minus immigration, has a negative population rate. The second largest nation in the world, India, is rapidly industrializing like China and it will also reach zero to negative population growth. People do not know that Singapore, with 9 TIMES the population density as China, has the highest standard of living in Asia, even higher than Japan, the second richest nation on earth.

Sumanta Mandal

April 22, 2008 08:29 AM

Even if we assume that fertility rates will decrease in developing nations as they become developed but consumption increases as nations become developed.
USA consumes 25% of global oil with only 5% of global population.

Population is not the only issue here.
Higher levels of consumptions is also an issue. Oil is equivalent to 300 slaves.
Food is oil as industrial agriculture is very energy intensive.

Brandon W

April 22, 2008 09:09 AM

Quality of life has declined for 25 years, perhaps longer, because we no longer measure it by the ability to have needs met so we can have the freedom to enjoy our time and relationships. Instead, we measure it by our ability to consume - more than we need, even more than we truly want.

We are seduced by the prostitutes of capitalism into desiring things we do not need, did not want until our lust for consumption was cultivated. Advertising and marketing no longer exist to inform the market of products, but to engage in psychological deception to create an overwhelming desire to consume. Our economy now stands on the back of overconsumption and the fulfillment of excessive desires. To return to a state of rational consumption would likely cause our economy to collapse.

Our relationships are deteriorating, we are working more hours for less money, and people are slaves to their debt - slaves to the banks, who now own more of our homes than we do. People no longer save or have savings, leaving them teetering on the edge of disaster at every moment, with only further enslavement to the banks as an option. No, our quality of life has not been improved by great productivity increases or dramatic overconsumption. It has been destroyed by the greed of bankers and corporate capitalists; destroyed by our own gluttony. And we now find ourselves slaves to the banks who demand we rescue them from their clandestine games, slaves to corporations who seduce us into consuming beyond our needs, wants, or means and leave us desperate to work harder, longer hours, to consume more.

Can we recover our quality of life? Yes, at a price. We will spend years forced to consume only to our basic needs to repay our debts and ever more ominous interest. We will have to learn to save and control our desires; refuse to fall prey to the marketing lure of gluttony. We will have to reestablish crumbling personal relationships and learn to enjoy life for the fresh air and the grass under our feet. And the economy as we know it will have to collapse and rebuild anew on a rational basis.

Copyright (C) 2008 Brandon Watkins


April 22, 2008 10:44 AM

The magic chart that shows us we're having more knowledge power should have provided comfort to us, but it does not. The reality is that, this country is losing out in the knowledge game to other developing countries like India and China. Increasingly, more knowledge jobs (not only IT/programming, but stocks analysis, insurance processing etc) are being offshored to those countries because they churn out more college grads than us, at much lower cost/salary than us. If we do not improve education, America will wane in the global game. (And no, I don't mean well-intentioned but ill-thought-out thing like the No Child Left Behind Act from Bush, but real plans that are properly funded for.)

Wayne Dusek

April 22, 2008 11:09 AM

This current "crisis" is caused by the decline in the value of food. In 1960 the price of wheat was $3.00. In 2005 the price of wheat was $3.00. Everything else was approximately 10 times the 1960 price. The price of wheat adjusted for inflation should have been approximately $30.00. (and it just might be soon) There is no mystery why subsistance farmers in developing countries don't want to raise and sell wheat if they can buy it from the US or Australia for $3.00. It takes a hell of lot of work to raise 100 bushels of wheat without 300 hp tractors and 36 foot cut 600 hp combines. You also need at a minimum of 2 acres of very good farmland.

For your effort you got an income of $300. No wonder they want to grow poppies and coca.

The price of wheat is going up when a US farmer can turn that bushel of wheat into 3 gallons of fuel at $3.50 per gallon and have 15 lbs of high protein feed left.

Wayne Dusek

April 22, 2008 11:11 AM

This current "crisis" is caused by the decline in the value of food. In 1960 the price of wheat was $3.00. In 2005 the price of wheat was $3.00. Everything else was approximately 10 times the 1960 price. The price of wheat adjusted for inflation should have been approximately $30.00. (and it just might be soon) There is no mystery why subsistance farmers in developing countries don't want to raise and sell wheat if they can buy it from the US or Australia for $3.00. It takes a hell of lot of work to raise 100 bushels of wheat without 300 hp tractors and 36 foot cut 600 hp combines. You also need at a minimum of 2 acres of very good farmland.

For your effort you got an income of $300. No wonder they want to grow poppies and coca.

The price of wheat is going up when a US farmer can turn that bushel of wheat into 3 gallons of fuel at $3.50 per gallon and have 15 lbs of high protein feed left.


April 22, 2008 01:03 PM

Work Harder


April 22, 2008 01:42 PM

i have noticed that the business community is not one to show how to lead to a future, they are to focused on the next quarter, at the outside (if not today). There have been very few in that community that have had much of a foresight. and innovation as they use it, is how well they can eliminate the jobs here. they are as focused on what they can sell today,and not what can make it better next year. the best example of this is the auto industry. they had a wake up call, 30 years ago, but they didn't keep their focus on it, and probably would have slid back except that they were forced to do so by the government. and a lot of todays technology is based on things that were required by the government (the military or NASA) not what the business community thought up on their own.


April 22, 2008 01:47 PM

Here is a detailed rebuttal to Peak-Oil/Malthusian doom and gloom nonsense :

There are people who actually believe that the world of 2040 will be so poor that car ownership will be a rare thing....


April 22, 2008 01:50 PM

"USA consumes 25% of global oil with only 5% of global population. "

So what? The US is 28% of the world economy. The US produces 4.3 times the GDP output per barrel of oil as China produces.

Canada, Australia, and Norway consume more oil PER CAPITA than the US.

China emits more greenhouse gases than the US.

This is why global warming/enviromentalism is just the latest scam designed to insert anti-US socialism into the world.


April 22, 2008 01:56 PM

It is ironic that I got to this article by clicking on Mike Mandel's blog re. current slowdown caused by americans living on borrowed money for a long time.This will necessitate a period where we live below our means,but I agree in the long run knowledge can return us to prosperity,mainly by getting us away from fossile fuel and into renewables.Should we fail at this,Mother Earth will do the job for us by widespread famines and other disasters,which will decrease the worlds population,thus reliving the strain on recources.Here is a novel idea!!Why don't we start taxing consumption instead of labor and savings and investments!!That would go along way towards getting us back on the right track for the long term future,but then again that would require some short term pain and sadly I see no indication that we as a country are ready for that.


April 22, 2008 04:52 PM

"Why don't we start taxing consumption instead of labor and savings and investments!!"

YES!!!! Give people some degree of control over how much tax they actually pay.

But it will never happen at the Federal level. It does exist at the state level in some states, which do tend to have better economic stats that states with high income taxes.

Keith G

April 22, 2008 10:59 PM

It is too late for the pessimists to be right. They have already been proven wrong – many, many times over.

Wealth is created. The world started with dirt and man (figuratively speaking) and the dirt did not get-up and do anything on its own. Everything we have is because of applied knowledge (even capital and improved human effort are because of knowledge). As knowledge increases productivity increases and wealth increases. This is already proven - it's built into the definitions.

As far as natural resources, nothing has left the earth since it was formed. Man has not needed (due to the abundance of natural resources) to recycle. It just takes more energy to transform used resources into something useful and there's a virtual infinite supply of energy from the sun, let alone if fusion is realized. The were-running-out-of-natural-resources argument does not work in the long run because as resources become scarce prices rise, then knowledge is applied, alternatives are found, and renewable resources are renewed as necessary. The non-renewables (like oil and coal) we do not want to be using anyway.

Here’s the real solution: Optimists and Pessimist, please bend all your energies into helping your neighbor improve, develop, and get educated. Point them to their schools, universities, and businesses and the productive contribution these provide to society. In fact, get more of this for yourself as well. The more each and every human is developed into an intelligent net contributor to society wealth will be on the rise (wealth has been on the rise for the developed world for the past 130 years). We should all celebrate China, Mexico, Brazil, and India! What lifts them up lifts us up. If we can only get Africa on this trajectory we could see the day when abject poverty is something our grandchildren will read about in history books as a lesson in isolation, corruption, and ignorance.

The saying is true: bad news is half-way around the world before good news can get its boots on. We should all stop listening to the depressing groanings of populists columnists (Mr. Mandel not being one of these) who preach what the masses want to hear instead of what the columnists know to be true – the highs keep getting higher and lows aren’t as low as they used to be. People are getting smarter, recessions are shorter and softer, periods of growth are more durable, and this is great news for the future!

Joe Cushing

April 23, 2008 12:00 AM

DW, you have it wrong about the Auto Industry. Americans and Germans invent technology. Japanese just implement it after we get the bugs out. What has the government invented that they use in cars without great inovation?


April 23, 2008 10:54 AM

Richard Carter above is wrong. It is productivity gains that improve our standard of living and raise wages. The US has greater maufacturing output today with fewer people compared with 10-15 years ago. That contributes to higher wages for workers and frees up labor resources to pursue other value creating activities in new industries. Automated mining equipment of today means fewer miners per ton of coal compared to the 1800s, but more coal overall. Bad for miners, but good for society as more people can heat homes and have electricity than if we relied on picks and shovels. The existing coal miner saw higer incomes as a result of productivity gains too. While there was some suffering of laid off coal miners, they could move and create better lives and futures for their families, albeit in another location.

Higher productivity is great for society and that will untimately create a better standard of living for everyone on the planet.

Joe Cushing

April 23, 2008 11:55 AM

Brandon W.

Have you ever read the history of the diamond engagement/wedding ring? Look it up. It fits right in with what you are saying. People didn't even have diamond rings until De-beers had their "A diamond is forever" campaign. It's been less than a hundred years and now we don't even know we were duped into it by the company that sells us the diamonds.

De-beers won't stop until every man on the planet gives them two months pay. Yesterday, I even saw a man with diamonds on his finger. So maybe they want two months from every woman too. I would rather take two months of low cost vacation (picnics at the beach time, kayaking etc.) spread over a couple years than spend that time slaving away to buy some girl a useless shiny rock for her finger.


April 23, 2008 12:07 PM

Virtually all the comments here are written from the perspective that things are basically fine now. This is easy for prosperous westerners to say. Most of the world IS, in fact, just plain poor, pretty much for the reasons Malthus said. The median income is around $2 per person. The median net worth of adults, adjusted purchase value, is around $2,200. Eighty percent of the toddlers in India are anemic. The IMF just lowered its GDP estimates for India and China by around 40% because they actually got in new information about how poor the countrysides (which are still most of their populations) actually are. When people talk about 'getting people in the
developing world out of poverty,' they mean extreme poverty, which is conveniently set at around $1 a day per person (which makes it easier to get people out of it). The U.N. estimates by 2015 around 1/3 of the world's population will live in third world slums, because they are leaving the countryside which can no longer support them. These discussions are, basically, done from a view that things are 'o.k.' now which is based on people's perceptions of the prosperous world around them, and a criterion that as long as third world people aren't actively starving to death on the streets, they're basically all right. I'm sorry, but Malthus is doing very well, except in the historical miracle that consists of the westernized parts of the world, still a minor fraction of the whole world's population.

Keith G

April 23, 2008 03:15 PM


The point is not that everything is OK. The point is that things are getting better due to the more general dispersion of knowledge. So, it's not OK to have people living on $2 per day, on this we agree. We should work to improve this. What's the solution? What has worked for the West to cause this 'miracle'? I would argue to educate and inform and to engage societies in trade and in dialog is what works.

These fundamentals are what has improved conditions in developing nations. Granted there are still too many poor but, to continually improve should be the goal.


April 23, 2008 10:33 PM

Michael! You are making a very basic mistake common to Julian Simon proteges. Human ingenuity and physical resources are not economic SUBSTITUTES, they are economic COMPLEMENTS. You know the rest.

Mike Mandel

April 24, 2008 09:23 AM


I would argue that Malthus is *not* doing well in either China or India, at least for now. And our goal should be that this failure of Malthus should continue.

David Coutts

December 15, 2009 08:58 PM

Technological change only buys us time, but doesn't allow our global population to sustain positive rates of growth.

For example, if we were to sustain a 1% annual growth then our global population would double (as per the Rule of 70) roughly every 70 years. At 2% we'd double roughly every 35 years. If the rate varies, as it did between 1960 (population 3 billion) and 1999 (population 6 billion) then it doubles somewhere between 35 years and 70 years depending upon whether it is closer to 1 or 2 % on average (historically, our population doubled in 39 years). Hence, the population doubles in comparable timeframes regardless of whether or not the rate varies. At such rates there would be a surface layer of humanity in centuries, and we'd consume the entire Earth in just a few thousand years...this is human global ecophagy.

Bottom line, humanity cannot sustain such positive rates of population growth on Earth. Limits to growth will apply. Malthus was right - do the maths. Hence, get used to a future with an annual population growth rate close to zero.

Note that even if we colonise space the global population on Earth will still face limits to population on Earth itself.

Matt T

December 29, 2009 07:13 AM

I don't think many people understand the time bomb we are sitting on, as they are so desperate to cling on to their current way of living. I am not just referring to economics, it includes conflict, migration, ecological issues and not to mention plain old greed. If you can't make that intellectual leap and would rather make excuses to carry on with your current lifestyle I have no time for you. It only requires basic mathematics and bit of insight, something nearly everyone should be capable of. Considering the age of the earth, the entity of money and economics in its current shape and form is created by human beings and is just a short term blip in the lifetime of the earth, if we do not abandon our current ways and make advances based simply on the goal of making money then we are doomed as a civilization. The 'rich' population is sustained by oil, mindless consumerism, which is artificial and will end unless sustainable advances are made, the 'poor' are sustained by corruption, reliance on the local climate, and aid from other countries, we may grieve over the aids crisis but it will be beneficial to us as a species in the long run. It is not a case of survival of the fittest anymore, and if we are not careful our species may end up devolving. Have a go at the pessimists and ignore the problems breathing down on us if you really want to but you must live with the consequences and hardships you may condemn yourselves or your children to. The term no pain no gain can describe the brutality of life itself, humans are capable of gain without pain because we are supposed to be intelligent. The way things are going there are three potential paths we are destined to go down 1) Everyone changes their way of living, and that includes both the rich AND the poor 2)Totalitarian control of people's lives 3) Mother nature does the job herself in a more brutal fashion than any dictatorship. Simple concepts maybe, but the fact is the future will resemble one of them. The fact is we cannot carry on the way we are and expect a rosy future. Deny it at your peril. All past species wax and wane in population depending on the food and resources available, that is a fact of nature, and it would be of sheer arrogance to assume we would be any different. Our civilization seems to have no real goal anymore, could this be the start of devolution? The answer is not in a cynical response to my post but in what are you prepared to do about it? Throw Malthus off the bus by all means, but what if only he knew which road to take in order to reach the destination? You may not need him but what if you did? If we're smart, we learn from mistakes and take note so that we don't repeat them, if we are REALLY smart we can foresee a the consequences before they really start. I I await the witty and cyincal moving.


December 29, 2009 11:02 PM

I am with you Jake ,great comments!
hope for a better future ,think positive!
people have less kids and productivity grows ,besides technologies and science keep on giving us new blessings


December 29, 2009 11:02 PM

I am with you Jake ,great comments!
hope for a better future ,think positive!
people have less kids and productivity grows ,besides technologies and science keep on giving us new blessings


December 29, 2009 11:02 PM

I am with you Jake ,great comments!
hope for a better future ,think positive!
people have less kids and productivity grows ,besides technologies and science keep on giving us new blessings


December 29, 2009 11:02 PM

I am with you Jake ,great comments!
hope for a better future ,think positive!
people have less kids and productivity grows ,besides technologies and science keep on giving us new blessings

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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