STEWART DOMPE, ADAM C. SMITH, THE FREEMAN
There are rarely any happy prophets. To get headlines you have to claim the world is ending. Add generous helpings of doom and gloom—and a pinch of apocalypse—and you’ll widen your audience.
The most recent batch of dire predictions for humanity’s future takes the same dramatic approach. You might think these are coming from the usual suspects—believers in the Mayan calendar or radical Evangelical interpretations of the Hebrew Bible. Nope. Apparently, this global, glass-half-empty prediction is the consensus of the mainstream scientific community. Or so we’re told.
Just last week, the United Nations released its IPCC report, which states that if we don’t meet global climate change head on, then all of humanity will soon be a vulnerable, dreary mess with plenty of natural disasters, famines, and other dismal scenarios to look forward to. Despite its attempt at shock and awe, there’s nothing new being offered in the report. We don’t want to suggest there are no potential problems looming in the future, but rather remind readers that one must be precise in articulating the problem if one is to propose a solution. Even among the strongest proponents of climate change, there is still considerable debate about the strength of their models given the serious shortcomings in the precision of their forecasts.
Collapse: Houston, We Have a Problem
One exemplar of this wave of dystopia is a bit of research ostensibly conducted at the behest of NASA, presumably with your tax dollars. (See here, here, here, and here.) Study authors argue that not only will human civilization collapse, but that income inequality is intricately intertwined both in the causal process and in the timing of the collapse.
The NASA study is a good illustration of the risks in applying analytical tools to problems they are unsuited to analyze. Its Human and Nature DYnamics (HANDY) model is built on the predator-prey model—which simulates interactions among wolves and rabbits—where predator Elites do everything but literally cannibalize the Commoners. Their biological model, in this instance, is simply inappropriate. Or more charitably, it’s severely limited in dealing with problems better suited to political economy.
The study starts with an assumption about inequality that would make even Paul Krugman blush. People are placed into two categories: Elites and Commoners. “The economic activity of Elites is modeled to represent executive, management, and supervisory functions, but not engagement in the direct extraction of resources, which is done by Commoners. Thus, only Commoners produce,” the report says. Elites, as much modern thinking goes, do nothing but skim off the labor performed by Commoners. Given such assumptions, the model has nothing very encouraging to say about our future.
Models Just Aren’t That Smart
The authors might contend that theirs is a model of predator (humans) and prey (nature) but the Elites can only eat because of the existence of the Commoners. This is problematic for various reasons. For example, are Commoners also responsible for entrepreneurial discovery? Going further, the authors assume that not only do the Elites hold the Commoners at a subsistence wage but that the Elites will always pay themselves a wage k times larger than subsistence.
Over time, the gap widens as Elites populate at greater rates than Commoners, thus placing tremendous burdens on the supply of natural resources. At some point, this burden becomes so pronounced that extraction rates fall because the total population has exceeded the carrying capacity of the environment. Here’s what happens:
- The Elites always pay themselves first;
- Forced extraction exceeds the natural regeneration of the environment;
- Commoners are then driven below subsistence income; and
- Famine ensues.
Once Commoners start dying out, Elites are unable to sustain the economy without them and presto! Doomsday. (Have a nice day!)
Such a model might explain the population dynamics of North Korea, but it seems inapplicable to most of the modern world. So, the main problem with this “study” is that it doesn’t go much further than nineteenth-century economics in its assumptions about how the economy actually works. Using neo-Malthusian pseudoscience with a touch of Marxian class struggle only leaves us with an embarrassingly outdated framework that is about two hundred years past its prime. However elegant the mathematical model, the assumptions used to create it are beyond spurious.
The Ultimate Resource Redux
One of the fundamental differences between humankind and the rest of the animal kingdom is that we humans discover new resources and modes of production. When there are more wolves, there are fewer rabbits; but when there are more humans, there are more chickens. Malthus, despite some interesting insights, was catastrophically wrong in his prognostications about population and agricultural output. And neo-Malthusians have been even more wrong.
The simulation only serves to give the underlying argument a veneer of scientistic respectability. But it really is just as wrongheaded as Malthus’s original theory. Relaxing the initial assumption of extreme wealth inequality would not only be more realistic but would overturn the result, as Elites would only be able to extract surplus above wages set by the market, which would certainly be greater than subsistence for most workers. This would in turn check their ability to damage the underlying resource base.
Furthermore, the model assumes that any efficiency gains from technological progress are undermined by greater consumption (akin to Peltzman’s argument that better safety technology leads to greater consumption of risk). But then how do we explain how productivity gains in agriculture have led to exponential growth in other emergent sectors (manufacturing, services, computers, etc.)? We may consume more food but not nearly enough to balance out the productivity gains. So farm employment shrinks and resources move to other pursuits, making the world a wealthier place. These real-world phenomena are literally an impossible result in the NASA model.
Cross-disciplinary studies can offer new insights into how we should view human behavior. That said, those that offer only partisan parlor tricks and dystopian caterwauling should stick with reading Mayan calendars.
Stewart Dompe is an instructor of economics at Johnson & Wales University. He has published articles in Econ Journal Watch and is a contributor to the forthcoming Homer Economicus: Using The Simpsons to Teach Economics.
Adam C. Smith is an assistant professor of economics and director of the Center for Free Market Studies at Johnson & Wales University. He is also a visiting scholar with the Regulatory Studies Center at George Washington University and coauthor of the forthcoming Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics.
Used with the permission of the Foundation for Economic Education.