Eco-nomics: Malthus and Global Warming - Will There be Enough Food?

Josh Haner/The New York Times

Over the weekend, The New York Times had an interesting and provocative article on the fate of the world food supply in the face of global warming.  And, once again, we are faced with the prospect of a planet that keeps adding more people and a food supply that might not be able to keep up.  Similar to debates in the 1960s and 1970s that went away with the Green Revolution, new debates are beginning to arise about how, and if, humanity will adjust:

Perhaps the most hopeful sign nowadays is that poor countries themselves are starting to invest in agriculture in a serious way, as many did not do in the years when food was cheap.

In Africa, largely bypassed by the Green Revolution but with enormous potential, a dozen countries are on the verge of fulfilling a promise to devote 10 percent of their budgets to farm development, up from 5 percent or less.

“In my country, every penny counts,” Agnes Kalibata, the agriculture minister of Rwanda, said in an interview. With difficulty, Rwanda has met the 10 percent pledge, and she cited a terracing project in the country’s highlands that has raised potato yields by 600 percent for some farmers.

Yet the leading agricultural experts say that poor countries cannot solve the problems by themselves. The United Nations recently projected that global population would hit 10 billion by the end of the century, 3 billion more than today. Coupled with the demand for diets richer in protein, the projections mean that food production may need to double by later in the century.

Unlike in the past, that demand must somehow be met on a planet where little new land is available for farming, where water supplies are tightening, where the temperature is rising, where the weather has become erratic and where the food system is already showing serious signs of instability.

“We’ve doubled the world’s food production several times before in history, and now we have to do it one more time,” said Jonathan A. Foley, a researcher at the University of Minnesota. “The last doubling is the hardest. It is possible, but it’s not going to be easy.”

The debate has been labeled as one between the Malthusians (i.e. those pessimistic about food supplies keeping ups with population) and economists (who generally believe that with dwindling supplies come higher prices and strong incentives to innovate). The author of that article has a follow-up in the Times' Green blog that discusses precisely this debate.  The tenor of his article and his blog post is essentially 'this time we might not be able to innovate out of the problem:'

In general, these pessimists about the human future have turned out to be wrong — so far. The missing ingredient in doomsday prognostications, about the food supply or anything else, is an appreciation of the power of innovation to solve problems.

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Economists consider Malthusianism, at least as understood in modern times, to be a discredited doctrine. From their perspective, one powerful lever explains why innovation always seems to come to the rescue when it is needed most: prices.

Most people intuitively understand that the reason prices rise in times of scarcity is to allocate the available supply. It may be less obvious that higher prices serve another, more crucial function: they call forth additional supply. Higher prices reverberate through an economy like a clarion call, saying to capitalists everywhere: Produce more!

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“Where Malthus and his modern-day followers go wrong is that they miss the power of prices to drive the technological change that has helped societies adapt to all kinds of events and will help us to adapt to climate change,” Michael Greenstone, an economist at the Massachusetts Institute of Technology, told me by e-mail. “It is certainly possible that agricultural prices may end up being higher, but the apocalyptic visions of shortages are not supported by the long history of markets directing people to innovate in the areas where it is needed most.”

Without question, the potential for agriculture to adapt to climate change, to higher demand and to the other problems that confront it is substantial. Farmers can grow different varieties; they can plant them earlier to avoid hot spells; they can invest capital in water-saving systems like drip irrigation.

Within limits, agriculture can move north as the climate warms; some projections show wheat being grown in the future as far north as the shores of Hudson Bay, and even in parts of Alaska.

Gary Toenniessen, head of agricultural programs at the Rockefeller Foundation, pointed out to me that if prices got high enough, much of the United States could grow two crops a year instead of one. That is already done in parts of the country where winter wheat is grown, and it is being done even more intensively in Asia.

Both are very interesting reads and worthy of your investment in time, but the point I was to make here is that the price of food has many effects. Yes, it does provide a strong inventive to innovate, to use land and water more carefully, etc., but is also have an effect on households: larger families become more and more expensive.  Which, of course, was really Malthus' point in the first place - that humans respond to these market signals.

So, I am aligned with the economist camp described above, but I believe that if we do struggle with food production, the resulting higher prices will have a myriad of effects: agricultural innovation, shrinking households, more kitchen gardens, etc.  It is wrong, in other words, to focus only on whether science will keep up with humanity's appetite, but rather we should think through all the implications of rising commodities prices.

Eco-nomics: Global Warming

The science is solid, the evidence is real and the culprit is human activities - so says the National Research Council:

The compelling case that climate change is occurring and is caused in large part by human activities is based on a strong, credible body of evidence, says Advancing the Science of Climate Change, one of the new reports. While noting that there is always more to learn and that the scientific process is never "closed," the report emphasizes that multiple lines of evidence support scientific understanding of climate change. The core phenomenon, scientific questions, and hypotheses have been examined thoroughly and have stood firm in the face of serious debate and careful evaluation of alternative explanations.

"Climate change is occurring, is caused largely by human activities, and poses significant risks for — and in many cases is already affecting — a broad range of human and natural systems," the report concludes. It calls for a new era of climate change science where an emphasis is placed on "fundamental, use-inspired" research, which not only improves understanding of the causes and consequences of climate change but also is useful to decision makers at the local, regional, national, and international levels acting to limit and adapt to climate change. Seven cross-cutting research themes are identified to support this more comprehensive and integrative scientific enterprise.

The report recommends that a single federal entity or program be given the authority and resources to coordinate a national, multidisciplinary research effort aimed at improving both understanding and responses to climate change. The U.S. Global Change Research Program, established in 1990, could fulfill this role, but it would need to form partnerships with action-oriented programs and address weaknesses that in the past have led to research gaps, particularly in the critical area of research that supports decisions about responding to climate change. Leaders of federal climate research should also redouble efforts to deploy a comprehensive climate observing system.

So what to do? A carbon tax is the solution most economists favor, at least in part because if the relative simplicity. Here is Ed Glaeser on the current bill:

This bill is a behemoth for three reasons. First, it tries to do far more than just charge for carbon emissions. The bill starts by providing “incentives for the growth of safe domestic nuclear and nuclear-related industries.” It supports carbon capture in coal plants, expands offshore drilling, establishes an Office of Consumer Advocacy and promotes “clean energy career development.” Standard economics suggests that many of these interventions would be unnecessary if we had the right tax on carbon emissions; if companies pay the full social costs of their actions, they have the right incentives to invest in greener technologies without any further help from Uncle Sam.

The second reason that the bill is so big is that it uses a complicated cap-and-trade system rather than a simple Pigouvian tax. In theory, a permit system can be identical to a tax. Selling permits to emit carbon at $50 a ton is equivalent to taxing carbon emissions at $50 a ton. But tradeable permits, typically and as promulgated in the American Power Act, differ from a tax for two reasons: the quantity of permits is relatively fixed, and many permits will be given away rather than sold.

Fixing the number of permits may actually be the right thing to do. As my colleague Martin Weitzman wrote almost 40 years ago, quantity controls are better than prices if we are more certain about the right quantity than we are about the right tax. In the case of global warming, we may arguably be more confident that the amount of carbon should stay relatively flat than we are about the per-ton damage from carbon emissions.

Giving away permits rather than selling them is often defended as a means of ensuring that global warming doesn’t become an excuse for higher taxes. A carbon tax could easily get out of hand if the public sector starts seeing it as a solution to America’s budgetary shortfalls. Freely distributing permits seems to be crucial in building support for the bill, but the cost in simplicity is significant.

International trade is a third reason that this bill is so complicated, because we are trying to use domestic legislation to handle a global externality. If America charges for the carbon emissions involved in making an industrial product but our trading partners do not, then American producers will be at a competitive disadvantage.