Over the Christmas and New Year’s break, I’ve been catching up on the stack of reading materials piled up on my nightstand. Included in my stack is a copy of Jared Diamond’s book Collapse, several academic papers by the winners of the 2018 (fake) Nobel Prize, Paul Romer and William Nordhaus, and a slim volume, written in 1972, entitled Limits to Growth.
Limits to Growth was a work that was originally commissioned by the mysterious sounding non-governmental organization called the Club of Rome and written by a group of scholars associated with the Massachusetts Institute of Technology led by Dr. Dennis Meadows. The book describes the conclusions of the MIT group’s work to attempt to use a computer model to forecast large scale relationships related to the impact of economic activity on the environment. The Limits to Growth model attempted to capture the interrelationships and feedback loops inherent in a few key areas including food production, population, resource usage, and pollution.
Considering that the smart phone in my left pocket is orders of magnitude more powerful than the computer on which Meadows and his team was working, the forecasts made in the paper have held up enormously well in the intervening 47 years. More on that point in a moment.
Why this report should matter to you is that Limits to Growth suggests that without a vigorous policy response, human population levels and industrial output (i.e., human society) is set to suffer catastrophic decreases sometime within the 21st Century. In case you have – ahem – lost count, that’s the century in which we are all living.
Figure 1. Source: Limits to Growth (1972), p. 124. The thick black line in the middle of the graph represents human population levels.
If you are a trained economist, you are probably laughing right now.
For years after Limits to Growth was published, one of the favorite indoor sports of trained economists was finding fault with the assumptions made in the modeling of the Limits to Growth system. One of the other items in my holiday reading list was, in fact, a critique of a 1990s update to Limits to Growth by the abovementioned laureate, Dr. Nordhaus.
Subsequent generations of economists can boost their academic economist street cred by giving another kick to Limits to Growth, but save time doing so by completely neglecting to read the work they are criticizing (you’ll find a spectacular example of this dynamic written by a Canadian economist, who might have been born when Meadows et al published Limits to Growth).
While mainstream economists may be laughing at Limits to Growth, however, the shocking fact is that actual results since the publication of the book appear to be closely matching the forecasts made by Meadows’ team in 1972.
A 2008 review of the Limits to Growth model by Australian physicist, Graham Turner, found that:
…30 years of historical data [N.B. 1970-2000] compares favorably with key features of a business-as-usual scenario called the ‘standard run’ scenario, which results in collapse of the global system midway through the 21st Century.
Looking, for example, at a graph of actual versus forecast values for food production in Turner’s study shows how close the model was to accurately forecasting observed conditions.
Figure 2. Excerpt from A Comparison of the Limits to Growth with Thirty Years of Reality, p. 45 (Turner, G.)
Graphs for population, industrial output per capita, non-renewable resource usage, and global pollution are similarly close or show, in fact, even better fits.
So, what can we do? Is civilization doomed? My answer is “Absolutely not!”
The issues pointed out in Limits to Growth and backed up by subsequent experimental results offers humanity the kind of opportunity that exceeds any economic potential ever experienced in the historical record.
As Paul Romer points out in an excellent piece entitled Conditional Optimism about Progress and Climate in which he reviews another academic paper, there are two forms of optimism, complacent optimism and conditional optimism:
Complacent optimism is the feeling of a child waiting for presents. Conditional optimism is the feeling of a child who is thinking about building a treehouse. “If I get some wood and nails and persuade some other kids to help do the work, we can end up with something really cool.
Think of the fortunes made during the Industrial Revolution – fortunes that exist even to the present day. Think of the fortunes made during the recent China boom. These fortunes will pale in comparison to the fortunes that stand to be made in assuring that our society can remain not only viable, but flourishing into the 22nd Century and beyond.
Investors interested in building and maintaining intergenerational wealth must take this opportunity seriously.
(For those of you interested in a readable, scientific explanation of the science of global warming / climate change, please see Forbes Senior Contributor, Ethan Siegel’s excellent article, The Simplest Explanation of Global Warming Ever.)