On October 12, 1999, according to the United Nations, the 6 billionth person (approximately) in the world was born. At the time, the UN projected the arrival of number 7 billion during 2013. Now though, the due date has been changed to this Monday.
With 8 and 9 billion soon to come, in 2025 and 2043, a NY Times Op Ed asks whether we will need “a bigger pie (more productive technologies) or fewer forks (slower population growth through voluntary contraception).”
As we noted in this econlife post on the 5 ways to double our food supply by 2050, don’t we first have to figure out the right incentives?
The Economic Lesson
Perhaps one of the first environmentalists, Reverend Thomas Malthus (1766-1834) told us that population grows geometrically while resource production expands arithmetically. Consequently, resource prices will rise and supply will become increasingly inadequate. Less concerned, Malthus’s friend, David Ricardo (1772-1823), said that free trade would diminish the problem.
An Economic Question: Whenever a transaction between two parties affects a third, uninvolved individual or group, economists see an “externality.” Which good (positive) and bad (negative) externalities might population growth create?
A global phenomenon will open up new areas for oil exploration, enable ships to take shortcuts, and provide easier access to world markets for iron ore and other minerals.
The phenomenon? Global warming.
Because of global warming, the polar ice sheet is shrinking. With this summer having been one of the warmest on record, ships are traveling from Murmansk, near Finland, across the top of the world to Asia in record time. Scientists predict that by 2050, this Northeast Passage will be ice-free during the summer.
A navigable Northeast Passage means shorter travel time from Europe to Asia and competition for the Suez Canal. It means previously inaccessible resources can now be drilled and mined and transported.
That takes us to the Arctic Ocean doughnut hole. A huge fishing area that is beyond any nation’s jurisdiction, as it melts, the doughnut hole will attract fishing vessels from around the world.
Our bottom line? Global warming could have environmental positives that would include huge energy and mineral discoveries, and emissions reduction and cheaper transport from shorter routes.
The Economic Lesson
Perhaps one of the first environmentalists, Reverend Thomas Malthus told us in 1798 that population grows geometrically while resource production expands arithmetically. Consequently, resource prices will rise and supply will become increasingly inadequate.
You can see though, that environmental predictions are tough to make. This NY Times Magazine article describes the bet between the boomsters who said we would not exhaust our resource supply and the doomsters who said we would.
An Economic Question: Whenever a transaction between two parties affects a third, uninvolved individual or group, economists see an externality. How does global warming relate to positive and negative externalities?
Agree or disagree? “Both the jayhawk and the man eat chickens, but the more jayhawks, the fewer chickens, while the more men, the more chickens.”
The quote is from 19th century economist Henry George but it relates to a report from the FAO (Food and Agriculture Organization of the United Nations). Predicting that the world will have (approximately) 2.3 billion more people in 2050, the FAO said we will need 70% more food production.
Can we do it? The debate continues between the doomsters and the boomsters. Saying production cannot keep up with population, doomsters like biologist Paul Ehrlich look back to Malthus. Meanwhile boomsters, like Julian Simon say that human ingenuity and the incentives of higher prices lead to more production.
The Economic Lesson
Where are food prices? Summarized by Bloomberg, currently sugar and oilseeds (which include soybeans, sesame seed, sunflower products, canola) have been the primary reason for a 25% climb since December, 2009. The last big jump was during 2008 when a 43% spike in the FAO Index reflected higher cereals and rice prices and led to food riots in poorer nations. A handy site for seeing the current state of food production in developing nations, country by country, is here.
As economists we have so many variables! When the price of a commodity skyrockets, the result is less supply because the cost of production increases. On the other hand, as we saw with oil, when price goes up, it creates incentives on the supply side to, 1) produce more 2) innovate; create an alternative.