In 1980, the prescient Stanford ecology professor Paul Ehrlich (author of :"The Population Bomb") made a bet with University of Maryland economist Julian Simon related to population increase and material wealth embodied in commodity prices. The bet was for $1,000 - not a mammoth sum but not unreasonable given the implicit uncertainties. The bet was that the inflation-adjusted prices of five metals (chromium, tin, copper tungsten, and nickel would rise by 1990 (Ehrlich) or fall (Simon.) Simon ended up winning the bet, but that may only have been because of dumb luck in timing and choosing those particular commodities.
Ehrlich was right in one way: the population continued to soar from 4.5 billion in 1980 to0 5.3 billion in 1990. More importantly, a recent paper discloses Ehrlich was only off by two decades and would have trumped Simon had the bet been extended (but then there was no assurance both would be alive toil validate it - as it is Simon died in 1998).
This new paper "Front Boom to Bust: A Typology of Real Commodity Prices in the Long Run" - from the National Bureau for Economic Research and authored by David S, Jacks, found that over the long run "Real commodity prices of both energy and non-energy commodities have been on the rise from 1950 across all weighting schemes". Further:
"There is a consistent pattern, in both past and present, of commodity price super cycles which entail decades long positive deviations from these long run trends with the latest set of super cycles likely at their peak. The commodity super cycles are punctuated by booms and busts which are historically pervasive and becoming more exacerbated over time."
In other words, the Jacks' paper portrayed commodity prices as a bit like the stock market: over time the Dow Jones Industrial Average has risen. However, that doesn't mean that during any given year or even decade the prices of stocks will rise. In summary, the Jacks' paper found that:"Cumulatively, the picture emerging from this exercise is a clear patter of real, rising commodity prices from at least 1950."
In effect, the Malthusians(we who believe human population growth will lead to scarcity and destitution) ought to have won the bet. Even the Economist's "free exchange" blog pointed out that while Simon may have won the specific bet, the Cornucopians haven't yet proven their position is correct. The blog points out:
"The paper does suggest that while innovation, substitution and conservation can reduce the price impact of rising demand for fundamentally scarce resources, they can't necessarily eliminate it entirely ."
"Of course, rising demand itself might come to an eventual end given new technologies - or to validate Mr. Ehrlich - the ultimate decline and stabilization of the global population. It may still be too early to tell whether humanity faces Malthusian limits or not."
In fact, it's not too early at all. We know already that Peak Oil occurred internationally in 2005, which means we are now on a downward energy spiral with net energy in the negative bracket. Thus the oil needed to run our energy intense civilization (including for food production) will be harder and harder to extract and lead to more energy consumed for extraction than the (degraded) oil can deliver. Hence, continual net energy loss. This means economies of all scales will show continued regression (recession) as population increases. In other words, the era of unmitigated growth is over.
Readers interested in learning the details of how Peak Oil impinges our economic future and renders all market (as well as their commodities) volatile and contracting are advised to read the introductory material at :
Hanson in his brief makes a good case for more than half the existing human population being killed off - likely by starvation, disease or violence. The starvation will come because of dwindling oil supplies available for mass food production. There are currently barely 1.2 liters per person per day available for food production, storage and transport in a world of 7.3b people. This compares to 2.2 L in the 1970s when there were 2.7- 3.0b fewer mouths to feed. From 2005 this will diminish by 2-4% per year contingent on population growth - currently at 85m a year. By the time the population reaches 9-10 billion by 2050, that production level may be barely 0.5 L per person which telegraphs mass starvation.
Perhaps nearly half as may will be felled by disease, especially bacterial that we'd earlier controlled through the use of antibiotics. But by 2050 - likely much earlier - all the pathogenic bacteria will be antibiotic resistant. One simple cut - say even a paper cut - could be a death sentence.
During all this time available commodities will be plummeting, especially the metals, but also grains. Quite possibly grains to support meat production will cease being available by 2025 because the cost will be so prohibitive.
Violence is a given as populations press each other for scare resources, including critical commodities. When the old energy order finally breaks down- with power grids collapsed because of excess demand during extended global warming heat waves- it will literally be every man for himself. In such a brutish world that beckons 'survival of the fittest' it's difficult to imagine even the much ballyhooed brain neuroplasticity (proposed by Steven Pinker) saving the day- say encouraging the better angels of our nature. When water and food are scarce, and energy supplies adequate to even fill a gas tank or pump water are non-existent, there is the potential for all kinds of violence.
Is there a way out? Hanson doesn't hesitate to assert there is, but it entails replacing capitalism with democracy. Capitalism is not and never has been democratic because it asymmetrically bestows the power of resource control and ownership only on the very few. Worse, capitalism is the single worst thing for the environment because it consumes actual wealth in the form of natural resources (and energy) to convert most into useless consumer waste. In doing so it fuels a preposterous "growth" that is at the basis of making the Malthusian future a reality.
The Cornucopians get it wrong because they don't see population growth for the toxin it is, and can't put 2 plus 2 together to see how it leads to the Malthusian nightmare. All of this comes back to net energy which is that energy humans need to survive. If the oil taken from the ground, say by fracking, only has a ratio of 1:1 (for energy produced to energy consumed) then it is useless to extract it. The same amount of oil-energy you are using up to get it, is basically what it carries. There is no net gain.
It is the net gain that has allowed humans to reproduce and cover the globe. It is the retraction of net gain that will eliminate a majority of humans. In effect, for breakeven oil one finds Q(net) = 0. We are fast approaching the last 700 bbl of oil - which we are fast approaching - calculations show Q(net) = - Q so that the energy extracted - say from shale oil or tracking - will always be less that the energy that can be delivered. Worse, the difficulty of extracting this type of degraded oil-energy always comes with fearsome ecological costs - essentially destroying the future natural wealth of the planet.
Unless the human population is radically reduced to the carrying capacity limit, there is no way we can avoid the Malthusian future to which we are headed. The math simply doesn't support it and the fact that so many economists don't see that merely confirms Jay Hanson's point that economics is no longer based on reality but on fantasy. (He notes that the very notion of "Pareto Optimality" bears this out.)
Alternative sources of energy are a possibility, but their diffuse nature again means a limited human population is presumed for them to work. You are simply not going to run glass factories and tanks or jet plane plants on solar energy - or even a combination of solar, wind and geothermal. It's just not going to happen.
Last, the capitalist's favorite barometer, the GDP, needs to be replaced by the sustainability index of Herman Daly. Only in that way will be able to see how much real wealth we have left, and how much has been consumed by a reckless, wretched system designed to pillage the planet to enrich the very few.