Monday, September 12, 2016

More Malthusian Madness: Scarcity

Last week we mentioned the Thomas Malthus in a posting or two in connection with the reverend sir’s lamentable effect on economics — he is, after all, credited with getting it labeled “the dismal science.”  Our comments last week, however, had to do with Malthus’s rejection of Say’s Law of Markets, which brought forth Jean-Baptiste Say’s best explanation of the “law” that bears his name . . . and that many people reject flat out without knowing anything about it.
For those who have never seen him: here he is.
Our topic today, however, is the Malthusian confusion (Malthusian confusian?  Malthusion confusion?) over the difference between “economic scarcity” and insufficiency.
Strictly speaking, economic scarcity says that at point x in time, y amount of everything exists.  It says nothing about how much existed before, or will exist a moment later, or whether what exists is sufficient to meet human wants and needs.
Malthusians play on the confusion between the technical meaning of scarcity, and its colloquial meaning as “insufficiency.”  They declare that because there is a fixed amount of everything, carefully omitting the qualifier “at any point in time.”
They also seem unaware of the human tendency to engage in what R. Buckminster Fuller called “ephemeralization.”  That is, people by nature tend to try to “do more with less.”  If you can’t, you find a substitute.
Now, it is a true statement to say that only so much of everything exists . . . at any point in time, we hasten to add.  Nobody disputes that, at least, nobody who knows what he is talking about.
The problem comes in when the Malthusians conclude that while human needs are limited (true) human wants are unlimited (false), and therefore (a conclusion that follows from a false premise) the human race is running out of resources and must reduce population growth, possibly even start eliminating the unfit or undesirables.
Then they contradict themselves by positing the theory of marginal utility.  The theory of marginal utility is that, all things being equal, each additional unit of something gives less satisfaction or use.  Being more or less rational, human beings will satisfy their wants only up to the point where they receive zero additional satisfaction or use, thereby limiting both needs and wants.
Schumpeter sneering at Malthus.
When we pointed this out to someone, we got the comment, “No wonder I was kicked out of my economics class for being ambivalent about Malthus.  I didn’t have the right arguments to present to the teacher.”
We told the commentator that he was handicapped by having common sense.  Fortunately, common sense is the very thing someone needs to lead him to the Just Third Way.
Of course, if someone really wants an argument from an accepted authority (how many people, after all, listen to common sense?), he can always go to Joseph A. Schumpeter’s comments on Malthus in his History of Economic Analysis.  Schumpeter was in the opposite camp, so to speak, on some issues regarding binary economics, but that doesn’t matter for out purposes here — not when you can let loose with zingers like this:
“The teaching of Malthus’ Essay became firmly entrenched in the system of the economic orthodoxy of the time in spite of the fact that it should have been, and in a sense was, recognized as fundamentally untenable or worthless by 1803 and that further reasons for so considering it were speedily forthcoming. It became the ‘right’ view on population, just as free trade had become the ‘right’ policy, which only ignorance or obliquity could possibly fail to accept — part and parcel of the set of eternal truth that had been observed once for all. Objectors might be lectured, if they were worthy of the effort, but they could not be taken seriously. No wonder that some people, utterly disgusted at this intolerable presumption which had so little to back it began to loathe this ‘science of economics’ quite independently of class or party considerations — a feeling that has been an important factor in that science’s fate ever after.” (Joseph A. Schumpeter, History of Economic Analysis. New York: Oxford University Press, 1954, 581-582.)
If binary economics and the Just Third Way have done nothing else, they have restored intellectual integrity to economics.  It has been turned from the “dismal science” to a way of delivering hope to everyone.


Jayasri Hart said...

Of course I had to see what else you had to say about Malthus. Thanks for the photo. Looks quite grandfatherly--not the bloodless theoretician I'd expected.

Michael D. Greaney said...

Not really bloodless, just despairing and depressing, not to say dismal, to round out the ds. And a bad theoretician, as Schumpeter pointed out. As a C of E clergyman, he had not solution to the problem he thought existed, and concluded doom was unavoidable. Others, less scrupulous, thought that reducing population was a necessary precondition to economic development, thereby positing an entirely wrong solution to a problem that didn't exist, at least under Malthus's assumptions. Louis Kelso, being the ultimate (or at least first) post-insufficiency economist with a feasible plan to end insufficiency (notice how cleverly I avoid the word "scarcity"), had the real solution: "OWN": Ownership for Workers (and Everybody Else . . . except that "OWAEEN" doesn't spell anything) Now.