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01 / 05
Why the Human Brain Is Our Most Precious Commodity

Blog Post | Adoption of Technology

Why the Human Brain Is Our Most Precious Commodity

Humanity is yet to run out of a single "non-renewable" resource.

Between 1960 and 2015, world population increased by 142 per cent, rising from 3.035 billion to 7.35 billion. During that time, average income per capita adjusted for inflation increased by 177 per cent, rising from $3,680 to $10,194. Moreover, after 56 years of human use and exploration, the vast majority of the commodities tracked by the World Bank are cheaper than they used to be – either absolutely or relative to income. That was not supposed to have happened.

According to conventional wisdom, population growth was to be a harbinger of poverty and famine. Yet, human beings, unlike other animals, innovate their way out of scarcity by increasing the supply of natural resources or developing substitutes for overused resources. Human ingenuity, in other words, is “the ultimate resource” that makes all other resources more plentiful.

Earlier this year, the World Bank updated its Pink Sheet, which tracks the prices of 72 commodities going back (in most cases) to 1960. I have eliminated some repetitive datasets and some datasets that contained data for only very short periods of time. I was left with 42 commodity prices, which are included in the chart below.

As can be seen, out of the 42 distinct commodity prices measured by the World Bank, 19 have declined in absolute terms. In other words, adjusted for inflation, they were cheaper in 2016 than in 1960. Twenty-three commodities have increased in price over the last 56 years. However, of those 23 commodities, only three (crude oil, gold and silver) appreciated more than income. In a vast majority of cases, therefore, commodities became cheaper either absolutely or relatively.

Figure 1: Worldwide Commodity Prices, Population and Income, 1960-2016

It is often assumed that population growth must inevitably result in the exhaustion of natural resources, environmental destruction and even mass starvation. Take, for example, The Limits to Growth report, which was published by the Club of Rome in 1972.  Based on MIT computer projections, the report looked at the interplay between industrial development, population growth, malnutrition, the availability of nonrenewable resources and the quality of the environment. It concluded:

 “If present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime within the next 100 years… The most probable result will be a rather sudden and uncontrollable decline in both population and industrial capacity… Given present resource consumption rates and the projected increase in these rates, the great majority of currently nonrenewable resources will be extremely expensive 100 years from now.”

It has been 45 years since the publication of The Limits to Growth. So far, the dire predictions of the Club of Rome have not come to pass. On the contrary, we have seen an overall decline of commodity prices relative to income – in spite of a growing global population.

Can this happy trend continue for another 55 years and beyond? To get a glimpse of the future, we must first understand the concept of scarcity.

Scarcity or “the gap between limited – that is, scarce – resources and theoretically limitless wants”, is best ascertained by looking at prices. A scarce commodity goes up in price, while a plentiful commodity becomes cheaper. That was the premise of a famous bet between Stanford University Professor Paul Ehrlich and University of Maryland Professor Julian Simon. Ehrlich shared the gloomy predictions of the Club of Rome.

In his best-selling 1968 book The Population Bomb, Ehrlich reasoned that over-population would lead to exhaustion of natural resources and mega-famines. “The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate,” he wrote.

Simon, in contrast, was much more optimistic. In his 1981 book The Ultimate Resource, Simon used empirical data to show that humanity has always gotten around the problem of scarcity by increasing the supply of natural resources or developing substitutes for overused resources. Human ingenuity, he argued, was “the ultimate resource” that would make all other resources more plentiful.

In 1980, the two thinkers agreed to put their ideas to a test. As Ronald Bailey wrote in his 2015 book The End of Doom: Environmental Renewal in the 2lst Century:

 “In October 1980, Ehrlich and Simon drew up a futures contract obligating Simon to sell Ehrlich the same quantities that could be purchased for $1,000 of five metals (copper, chromium, nickel, tin, and tungsten) ten years later at inflation-adjusted 1980 prices. If the combined prices rose above $1,000, Simon would pay the difference. If they fell below $1,000, Ehrlich would pay Simon the difference. Ehrlich mailed Simon a check for $576.07 in October 1990. There was no note in the letter. The price of the basket of metals chosen by Ehrlich and his cohorts had fallen by more than 50 percent. The cornucopian Simon won.”

Simon’s critics, Ehrlich included, have since argued that Simon got lucky. Had his bet with Ehrlich taken place over a different decade, the outcome might have been different. Between 2001 and 2008, for example, the world had experienced an unprecedented economic expansion that dramatically increased the price of commodities.

True, but Simon’s thesis does not have to account for price fluctuations that are heavily influenced by the ups and downs of the global economy as well as disruptive government policies (e.g., oil crises in 1973 and 1979). Rather, Simon posited that as a particular resource becomes scarcer, its price will increase and that will incentivize people to discover more of the resource, ration it, recycle it, or develop a substitute.

Commodity prices, academic research suggests, move in so-called “super-cycles,” lasting between 30 and 40 years. During periods of high economic growth, demand for commodities increases. When that happens, commodities go up in price. It is during this period that high commodity prices encourage the discovery of new supplies and the invention of new technologies. Once economic growth slows down, prices of “now copiously supplied commodities fall”.

Accordingly, the current commodity cycle seems to have peaked in 2008. In June 2008, for example, the price of West Texas Intermediate crude oil peaked at $154 per barrel. By January 2016 it stood at $29 (both figures are in inflation adjusted 2016 US dollars). The once-high price of oil has led to hydraulic fracturing, which has revolutionized the oil industry. Today, “fracking” continues to enable us to access previously inaccessible oil reserves in record volumes. In fact, humanity is yet to run out of a single “non-renewable” resource.

Unfortunately, many people, including Paul Ehrlich, and many organizations, including the Club of Rome, believe that the answer to scarcity is to limit consumption of natural resources. In reality, consumption limits are unpopular and difficult to enforce. More often than not, their effects fall hardest on the most vulnerable. A switch from fossil fuels to “renewable” sources of energy, for example, has increased the price of gas and electricity in many European countries to such extent that a new term – energy poverty – had to be coined.

According to the German magazine Der Spiegel, “Germany’s aggressive and reckless expansion of wind and solar power has come with a hefty price tag for consumers, and the costs often fall disproportionately on the poor.”  In democracies, such policies are, in the long run, unsustainable. More important is the fact that they are unnecessary, because real solutions to future scarcity are more likely to come from innovation and technological change.

I do not mean to trivialize the challenges that humanity faces or imply that we will be able to solve all of the problems ahead. Instead, I want to suggest that human brain, the ultimate resource, is capable of solving complex challenges. We have done so with disease, hunger and extreme poverty, which have all fallen to historical lows, and we can do so with respect to the use of natural resources as well.

The Human Progress Podcast | Ep. 34

Stephen Davies: What Made the Modern World

How did the modern dynamist economy of wealth and opportunity come about? Author and Head of Education at the Institute of Economic Affairs Stephen Davies joins Chelsea Follett to discuss his book "The Wealth Explosion: The Nature and Origins of Modernity."

Blog Post | Population Demographics

Dangers of Coercive Population Control

Every 1 percent increase in population lowered commodity prices by almost 1 percent between 1980 and 2018.

Recently, when asked if he would act to “curb population growth” because “the planet cannot sustain this growth,” Vermont Senator Bernie Sanders answered in the affirmative, noting he would focus on “poor countries around the world.”

Former Vice President Joe Biden, one of Sanders’ rivals and current leading contender for the Democratic nomination, previously voiced acceptance of China’s one-child (now two-child) policy, telling a Chinese audience, “Your policy has been one which I fully understand — I’m not second-guessing — of one child per family.”

The problem with embracing a demographic goal to “curb population growth” rather than leaving each family to make their own decisions is that it often results in coercion. Also, the very idea of “overpopulation” is fundamentally misguided.

Today, China’s two-child policy still limits family sizes and requires that parents apply for birth permits. This year, one couple who could not afford a fine of $9,570 for violating family planning regulations, had their modest life savings seized. While rarer than under the one-child policy, there are even still cases of forced sterilization and abortion.

“A third baby is not allowed so we are renting a home away from our village. The local government carries out pregnancy examinations every three months. If we weren’t in hiding, they would have forced us to have an abortion,” one Chinese father of three told the BBC.

The idea of population control is old. In 1798, an English clergyman, Thomas Robert Malthus, published An Essay on the Principle of Population, warning population growth would deplete natural resources. To prevent famine, he thought it morally permissible to “court the return of the plague” by having the poor live in swamps and even to ban “specific remedies for ravaging diseases.” His nonchalant attitude toward the welfare of the poor would prove an enduring part of overpopulation alarmism.

In the 1960s and 1970s, Malthus’ view became resurgent. In 1966, U.S. President Lyndon Johnson made foreign aid dependent on countries adopting population control. In 1969, President Richard Nixon established a separate Office of Population within USAID and gave it a $50 million annual budget. In 1977, the head of the office, Dr. Reimert Ravenholt, said that he hoped to sterilize a quarter of the world’s women.

By the 1980s, the background document to the International Conference on Family Planning, co-written by the United Nations Population Fund, International Planned Parenthood Federation, and Population Council, decreed, “When provision of contraceptive information and services does not bring down the fertility level quickly enough to help speed up development, governments may decide to limit the freedom of choice of the present generation.”

Neo-Malthusianism spread among international organizations and government leaders. The neo-Malthusians offered financial support to the cause of curbing population growth, rewarding governments in poor countries that enacted population control while sounding no alarms when those measures became coercive.

India’s Prime Minister Indira Gandhi declared an Emergency (1975-77) suspending civil liberties and mandated some 11 million sterilizations. China’s one-child policy (1979-2015) saw over 300 million Chinese women fitted with IUDs modified to be irremovable without surgery, over 100 million sterilizations, and over 300 million abortions, many coerced. In 1983, the UNFPA bestowed the first Population Award prize to Indira Gandhi and to Qian Xinzhong, the man who was then in charge of China’s one-child policy.

Ironically, population growth can be beneficial. Wherever people are free to engage in innovation and exchange, economist Julian Simon noted they are the “ultimate resource,” increasing the supply of other resources, discovering alternatives, and improving efficiency.

Research has found every 1 percent increase in population lowers commodity prices by almost 1 percent, meaning each person helps decrease scarcity, on average.

Today, population is at an all-time high, yet wherever economic freedom allows humanity to realize its innovative potential, prosperity has exceeded our ancestors’ imaginations.

Human wellbeing is improving rapidly, as chronicled on websites like HumanProgress.org (of which I am managing editor) and Our World in Data. Whatever challenges, environmental or otherwise, may loom ahead, it will be human ingenuity that will have to rise to the occasion.

The more minds working on solutions, the better.

In any case, birth rates tend to fall without coercion as countries grow richer. But the potential for human rights abuses alone is sufficient reason to oppose aiming to “curb population growth.”

This first appeared in Daily News. 

Blog Post | Environment & Pollution

Danger of Enviro-Apocalypse is Probably Overstated

The U.N. says 1 million species will go extinct without a 'fundamental, system-wide reorganization.'

A new United Nations report warns that “global rate of species extinction is already at least tens to hundreds of times higher than the average rate over the past 10 million years and is accelerating.” The only solution to the possible extinction of 1 million species: “Transformative change” in human society, according to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). “By transformative change, we mean a fundamental, system-wide reorganization across technological, economic and social factors, including paradigms, goals and values,” explained IPBES Chair Robert Watson in a press release. Recommended “transformative changes” include reducing human population growth, eschewing “overconsumption,” and “addressing inequalities, especially regarding income and gender, which undermine capacity for sustainability.”

How did the IPBES researchers come up with their estimate of 1 million species at risk of extinction? Among other things, they find that more than 40 percent of amphibian species, almost a third of reef-forming corals, sharks and shark relatives and over a third of marine mammals are currently threatened. There are about 8,000 known species of amphibians440 shark speciesabout 1,000 species of reef corals, and about 120 species of marine mammals. Parsing those numbers suggest that 3,680 or so species are at risk of extinction. Certainly not good, but far from 1 million. Insect extinction estimates are where the numbers really get boosted. The researchers claim that “available evidence supports a tentative estimate of 10 percent” for insect species at risk of extinction. Since insects make up around 75 percent of 8 million species, this means that 600,000 species are at risk of extinction.

The IPBES report further bolsters its estimate of species at risk by making calculations based on the species area relationship that in general reckon if the size of an ecosystem is reduced by 90 percent, the number of different species it can sustain is cut by 50 percent. Since humans have “reduced global terrestrial habitat integrity by 30 percent relative to an unimpacted baseline” this suggests that “around 9 percent of the world’s estimated 5.9 million terrestrial species—more than 500,000 species—have insufficient habitat for long-term survival.” However, some researchers counter that species area curve calculations considerably overestimate extinction rates from habitat loss.

As noted above, another way the IPBES tries to figure out the number of future extinctions is to assert that the rate of species disappearance is accelerating. As I reported earlier, IPBES researchers estimated the background extinction rate without human influence is about 0.1 species per million species years. In other words, if you follow the fates of a million species, you would expect to observe about one species going extinct every 10 years. Given that the report estimates that the planet harbors around 8 million species, this suggests that around eight species naturally go extinct every 10 years.

It is worth noting that the International Union for Conservation of Nature recently reported that some 800 species are known to have gone extinct since 1500. Implausibly assuming that no unknown species met their demise during this period that nets out to an extinction rate that is about double (16 every 10 years) the natural background rate.

Boosting the natural background rate by a factor of 1,000 suggests that 8,000 species go extinct every 10 years, or 800 per year. At that rate, some 64,000 species—about 0.08 percent of species—could go extinct by the end of this century. The only way to get estimates of between a half million and a million extinctions using this method is to assume the extinction rate will accelerate to  10,000 times higher than the natural background rate.

A world bereft of giraffes, tigers, whooping cranes, hammerhead sharks, karner blue butterflies, and hellbender salamanders would indeed be a poorer place. However, many of the transformative changes advocated by the IPBES are already happening as a result of the economic growth the U.N. agency wants us to steer away from. Due to increasing wealth, education, and urbanization, world population will peak later this century at around 8 to 9 billion. As result of urbanization, the number of people living on the landscape will drop by half from 3.6 billion now to 1.8 billion by the end of this century. The result is more land spared for nature. With respect to concerns about “overconsumption,” human ingenuity is dematerializing the economy by constantly squeezing more and more value out of less and less stuff. And to the extent that income and gender equality undergird a sustainable future, the good news is that both global income inequality and gender inequality is falling.

The IPBES report falls in a long line of apocalyptic extinction predictions. For example, S. Dillon Ripley of the Smithsonian Institution predicted in 1970 that in 25 years, somewhere between 75 and 80 percent of all the species of living animals would be extinct. That is, between 75 and 80 percent of all species of animals alive in 1970 would be extinct by 1995.

In 1979, Oxford University biologist Norman Myers stated in his book The Sinking Ark that 40,000 species per year were going extinct and that a million species would be gone by the year 2000. Myers suggested that the world could “lose one-quarter of all species by the year 2000.” At a 1979 symposium at Brigham Young University, Thomas Lovejoy—who later served as president of the H. John Heinz III Center for Science, Economics, and the Environment—announced that he had made “an estimate of extinctions that will take place between now and the end of the century. Attempting to be conservative wherever possible, I still came up with a reduction of global diversity between one-seventh and one-fifth.” Then-Senator Al Gore, in his 1992 book, Earth in Balance illustrated his assertion that “living species of animals and plants are now vanishing around the world one thousand times faster than at any time in the past 65 million year” with a handy chart indicating that species would be going extinct at an annual rate of 100,000 by the year 2000.

Fortunately, Ripley and the others were wrong and it is likely that the IPBES is wrong now.

A version of this article first appeared in Reason.

Blog Post | Environment & Pollution

Beware the Anti-Humanism of the Extremists

A populous world is a richer world and a richer world is better for the environment.

We are entering dangerous territory. The radicalisation of the environmentalist movement, as seen on the streets of London over the past week, is accelerating and is increasingly acquiring a darker aspect.

The anti-humanist strand of environmentalism is best exemplified by the renewed push to reduce the world’s population. Unlike in the past, when some governments, such as that of India, forced men and women into sterilisation programs and others, like the Chinese government, mandated “one-child” policies, these latest initiatives are voluntary. This makes them morally preferable, even if they remain intellectually incoherent. A populous world is a rich world and a rich world is better for the environment.

It should go without saying, though it bears repeating in some parts of the world, that motherhood ought to be entered into by consenting women. Under such circumstances, the optimal global birthrate and national birthrate would be determined by women’s personal decisions. Normally, these rates are impacted by a variety of factors including women’s religious beliefs where birth-control is concerned, economic forces and opportunity costs that women incur by joining the labour market instead of staying at home to care for children. But most people, including a lot of prospective mothers, are also influenced by broader social trends – the zeitgeist, if you will.

In pre-modern Europe, for example, religion, culture and society were often synonymous, and women were typically pressured into motherhood by commonly held beliefs, including those that said that it is “a woman’s duty to bear children and in doing so, make reparations for the sins of Eve. If she could not do so, she was a failure as a woman and lacked God’s grace”.

Today, a new quasi-religion is making inroads into popular culture and making claims about the optimal extent of female fecundity. The environmentalist movement, which started as a noble effort to make people and nature more symbiotic, increasingly sees human beings as a plague upon the planet. As such, environmentalism is running the risk of transmogrifying into a fully-fledged credo of anti-humanism.

Examples of this dangerous trend abound. BirthStrikers, for example, began in the United Kingdom as a voluntary organisation for people who have decided to eschew parenthood in response to the coming “climate breakdown and civilisation collapse”. According to the group’s Tumblr page, “We, the undersigned, declare our decision not to bear children due to the severity of the ecological crisis and the current inaction of governing forces in the face of this existential threat.”

FastCompany, a monthly American business magazine that focuses on technology, business, and design, recently ran a video that made the following claims:

“In Fall 2018, the United Nations Intergovernmental Panel on Climate Change released a report pointing out that we have only 12 years before the planet begins to feel the effects of catastrophic climate change if we don’t take action now … The four actions that would have the most impact on climate change are living car free, avoiding air travel, eating a plant-based diet and having fewer kids … When you look at the action of having one fewer child, when you’re thinking about how to account for that, you should probably account for the fact that that child is likely to go on to have their own children. Having another child is multiplicative … More people on the planet is going to entail using more resources and that just makes that number [carbon footprint] go so much higher than all the other things we looked at.”

According to FastCompany, 38 per cent of Americans between the ages of 18 and 29 “agree that couples should consider the negative impact of climate change when thinking about having kids”.

So, let’s start with some inconvenient truths. The world population, which is currently 7.7 billion, will likely peak at 9.8 billion people by around 2080 and fall to 9.5 billion by 2100. That’s according to Wolfgang Lutz and his colleagues at the International Institute of Applied Systems Analysis in Austria. Assuming rapid economic, technological and educational advancements, all of which tend to lower birth rates, Lutz estimates that humanity could peak at 8.9 billion in 2060 and decline to 7.8 billion by 2100. Put differently, in 80 years the world’s population could end up being the same as it is today.

Lutz should be listened to because the United Nations, which projects the world population expanding to 11.2 billion by the end of the 21st century, has repeatedly overshot their population estimates by underestimating the effects of economic development on fertility. To that end, the most assured way of limiting population growth is not to reduce birth rates in developed countries, where they are trending below the replacement level of 2.1 babies per woman, but by promoting rapid economic development in under-developed countries, where birth rates continue to be above the global average of 2.4 babies per woman.

That said, we should beware a plateauing or, even, declining global population. A growing population produces more ideas. More ideas lead to more innovations, and more innovations improve productivity. Finally, higher productivity translates to better standards of living. As Gale L. Pooley from Brigham Young University, Hawaii and I found in a recent paper, “over the past 37 years, every additional human being born on our planet appears to have made resources proportionately more plentiful for the rest of us”. Put differently, the relationship between population growth and abundance seems to be a positive one.

Richer people, in turn, can expend more time, energy and resources on conservation. A total of 15 per cent of the earth’s land surface, or 20 million square kilometres, is now covered by protected areas. That’s an area more than three times the size of the entire United States. Marine protected areas now account for almost 7 per cent of the global ocean or some 25 million square kilometres. That’s an area more than twice the size of South America. Furthermore, countless scientists are working around the clock to identify endangered species in need of protection and even bringing extinct species back to life.

Back in February, the U.S. congresswoman Alexandria Ocasio-Cortez (D-NY) asked, “Is it still OK to have children?” The answer is still “Yes, it is.”

This first appeared in CapX.