There’s an op/ed in the New York Times today that essentially claims that Malthus was right and that Julian Simon just got lucky when he made his famous bet with Paul Ehrlich and his doomsinging colleagues. John Whitehead of the Environmental Economics blog has a perceptive comment:
Increases in energy prices, with the energy return on investment (EROI — a new term for me that showed up in the comments section on this blog) falling from 25 to 1 to 15 to 1 over the past 20 years in the oil industry (EROI is 4 to 1 for the Alberta oil sands) used as evidence that the current runup in oil prices is not a blip. The increase in energy prices is combined with technological pessimism about people’s ability to find alternative sources of energy. I need to do some homework on the EROI but long term trends in market prices are still a fine indicator of resource scarcity. My feel is that the EROI was developed by those who don’t trust markets to provide appropriate price signals.
I’ll bet he’s right. John also notes that the op/ed enthusiastically proclaims the Stern Review’s analysis of the cost of global warming as being up to 20 percent of global GDP and remarks:
As we know here, Stern says that the costs might range from 5% to 20% with the 20% number arising from using equity weights to somehow account for the maldistribution of climate change impacts around the world.
My neo-Malthusian rule of thumb has always been to discount any argument that doesn’t trust markets to provide appropriate price signals (except in the case of negative externalities and public goods) and says that technology can no longer keep up (the technological pessimists have always been wrong — why should we expect them to be right this time). My newest rule of thumb is to discount (at a rate higher than 0.1%), like a big baby, any argument that solely uses the Stern Review’s 20%-of-GDP cost of climate change.
Those are two pretty good rules of thumb…