The Predictive Power of Wealth Neomalthusianism and Earth’s Carrying Capacity Thomas Martin, Devin...

The Predictive Power of WealthNeomalthusianism and Earth’s Carrying

Capacity

Thomas Martin, Devin Christensen, Aaron Konichek, Brian Beadle, Lovro Kuspilic,

Kane Wong

University of Wisconsin-Stevens Point

Malthus’ Original Argument

• Population increases exponentially• Food production increases linearly• There will reach a point at which population

overtakes food production, and that point is the carrying capacity of Earth.

Problems with Malthus

Malthus was wrong.

• The Earth still has a carrying capacity.• Some of Malthus’ concepts about the point at

which population growth will approach food production are still viable.

Assumptions:

1. Maximum net wealth is bounded by the resources of the planet, and Earth’s resources are finite.

2. Holdings near the carrying capacity can only be considered wealth if they can be traded for subsistence goods.

3. The amount of wealth actually traded for subsistence goods at any given time represents the current population level.

Assumptions: cont.

4. The difference between actual wealth and the amount spent on subsistence goods is some function of wealth inequality preferences.

5. The efficient level of wealth inequality will always be positive. _

6. Knowing something about the production of wealth, the population growth rate, and/or wealth inequality trends can help us predict the maximum sustainable population.

Wealth,Pop

Limit of Resources

Carrying Capacity (total food output)

Population (total food consumption) Wealth

Inequality

Industrial Revolution Time

Neomalthusian Prediction:

• Malthus’s predicted carrying capacity was wrong, but his theory was right. There will be a point at which population is limited by the total amount of food that can be produced.

• The question today is where are we now?

Inequality

• As the population approaches the carrying capacity, people’s shares of food will become more equal.

• Any asymptotic relationship between population and carrying capacity will represent the long-term equilibrium level of inequality.

Inequality: Ratio of Income DecilesUnited States

Denmark

Inequality: Ratio of Income Deciles

Inequality: GINI

• The GINI Index– Ratio between the current state of inequality in a

place (modeled by the Lorenz curve) and the state of perfect equality.

1= Perfect Inequality0= Perfect Equality

Inequality: Canada

Inequality: Netherlands

Inequality: Germany

Inequality: MENA

Wealth,Pop

Limit of Resources

Carrying Capacity (total food output)

Population (total food consumption) Wealth

Inequality

Industrial Revolution Time

We know there exists a relationship between the population and the total number of people the Earth can support, and we know that relationship has something to do with inequality preferences. But the data available for inequality (any measure) isn’t capable of making any strong predictions one way or another.

Population

Population

• All of the industrialized world has gone through (or is in the process of going through) the demographic transition.

• Assumption: Before we completely “fish out” technology, every country will have completed the demographic transition, so High-Income OECD population trends are predictive of future world trends.

Population: High-Income OECD

Crude Birth Rate: High-Income OECD

Technology

• Assume that the Earth is fixed capital.• There is a limited amount of food that can be

produced on Earth (law of diminishing marginal product of variable inputs).

• Recall: Wealth at the carrying limit is only that which can be traded for food (food is a perfectly liquid currency)

NOT Technology

Wealth,Pop

Limit of Resources

Carrying Capacity (total food output)

Population (total food consumption) Wealth

Inequality

Industrial Revolution Time

Moore’s Law• Gordon Moore predicted this trend in 1965• Observation that over the history of computing hardware, the

number of transistors on circuits doubles every 18 months

Moore’s Law• On April 23, 2005 Gordon Moore Stated:– “It can't continue forever. The nature of

exponentials is that you push them out and eventually disaster happens.”

Technology

Bringing it together

Limit of Resources

Carrying Capacity (total food output)

Population (total food consumption) Wealth

Inequality

Industrial Revolution

Wealth,Pop

Time

Limit of Resources

Carrying Capacity (total food output)

Population (total food consumption)

Industrial Revolution

Conclusion