Background. Economics 390: Population Bomb: Tragedy of the Commons (Hardin)

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1 Economics 390: Population Bomb: Tragedy of the Commons (Hardin) Today I will discuss Hardin s 1968 paper on The Tragedy of the Commons. It is a classic and you should read it on two levels (1) substantive (content are the arguments correct) and (2) rhetorical (style, how the case is made whether true or not). Also read the paper by Charles Mann on the debate on the population bomb How many is too many? It too is an even handed discussion of the debate on the size of the world s population. Mann s paper came out in the Atlantic Monthly, it s non technical and I will leave you to read it on your own. Background A number of forests have been cut down to print the papers written on the relationship between population and the environment. The topic is different than most we have examined this semester because it spans (at least) biological and social sciences. We are lucky to be an expert in one field, not two. So no one is an expert that can fully process the literature and arguments from each perspective. Plus the problem is massive and entails, at a fundamental level, the globe. We can study the effect of population concentration on regions or localities. But regional or even national problems can be accentuated by immigration and the redistribution of population. International migration was the safety value during the 19th and 20th centuries witness the huge inflows from Europe to America, Canada and Australia. There is less debate on particular local levels (e.g., smog in Mexico City, or Tokyo) or shanty towns in mega cities in developing countries. Thus problems are real and pernicious, but with population redistribution need not impinge on the global climate or global resources. And they are not our topic this week. The truism of Malthus is that the world is finite. Population growth can not continue indefinitely. Technological change increases the population that the earth can support, but this is an ultimate resource constraint. At some point, we reach the end of our finite resources, and diminishing marginal productivity sets in and Malthus predictions become compelling. It is not a far step from Malthus to ask what is the optimal level of population? Malthus gives us an equilibrium, and it is natural for economists (and others) to ask, what equilibrium is best? For Malthus, there was no choice, because the system would return to population with a subsistence level of living. But once we accept the role of technological change as shifting out the production possibility curve and supporting an ever larger population size, the question of optimal population and optimal growth rate emerge. Early modern models of economic growth (e.g., Solow, circa 1960) assumed population growth is constant and exogenous, and solved for the optimal level of investment and capital. By the 1980s, growth economists recognized that human capital (knowledge) is as important as physical capital and extended their models to consider endogenous growth to include population. However, the models were centered more on the development of human capital than with the size of the population. 1

2 It was the biologists, such as Hardin that saw the finiteness of the earth s resources and argued for The Limits to Growth (another famous book of the period). Economic growth, implicitly over consuming natural resources, and population growth was causing irreparable harm to the environment. The center of attention was the Population Bomb rapid increase in population in developing countries. Concern over the Population Bomb appeared in the 1960s (Ehrlich s book), just as the developing countries were entering their demographic transition and population growth rates were high. Modern public health improvements were transmitted to the developing countries and mortality rates fell dramatically. Fertility rates were slow to respond and population growth rates were at their historical peak (see the PRB material). Exponential growth at such high rates (2-3 percent per year) take virtually no time to explode. And the force of population momentum implied that we needed to defuse the population bomb immediately, before the consequences of an age distribution distorted by years of high fertility take hold. This is also the period of international interest in family planning programs. (These are well summarized by Weeks in the last or penultimate chapter of the text.) As an aside, the discussion has (not so) latent race and ethnic over tones. Arguments of the eugenicists from earlier in the century appear (concern over the eclipse of the elites by the more prolific masses) in public discussions. The cold war of the 1950s had A-bomb, while the late sixties and 1970s had the Population Bomb. To be sure there are threads of the concern, especially concerning environmental degradation that remain. Now the concern shifted from the sheer size of the world s population to the consequences of economic growth and development by countries with large populations (e.g., China and India), such as on energy demand and market competition. In the 1980s the notion of carrying capacity appeared the maximum population that could be supported by the world s food resources. The first estimates I remember seeing were produced by The Food and Agricultural Organization (FA0), the United Nations Population Fund (UNFPA) and the International Institute for Applied Systems Analysis (IIASA). These organizations produced estimates of potential food production. They estimated agricultural production based on techniques in Europe in circa 1980 and incorporated detailed information on soil quality, climate, water availability, and topology. They also considered different levels of fertilizer usage. They considered 15 crops and produced estimates of food production by country. They augmented these estimates of total calories produced (in the food) with estimates of the number of calories required to sustain life (about 1500). The carrying capacity is the ratio of total calories produced divided by the minimum calories to support life. This definition may seem simple, but it is not much different than that used to calculate the official poverty line in the United States. The poverty line is proportional the market cost to provide the minimum dietary needs, adjusted by family size. (For example, if poor families spend half their budget on food, then the poverty line equals twice the calculated household food purchases.) 2

3 Ask The estimated GLOBAL carrying capacity is 30 billion. Particular countries fared poorly, Southwest Asia (Bangladesh) current population near or above the estimated CARRYING CAPAC- ITY. Egypt, Ethiopia and Nigera also at risk. Latin America, Indonesia, and especially Brazil in good shape. Ask What do you think the primary criticism of carrying capacity is? Why select carrying capacity as the minimum level of food consumption? Who supports that as the relevant measure? The general problem is what is the reference point? What basket of goods or consumption should be used as a base? Could, in principle, define a minimum level of consumption q min. Can figure the minimum cost of providing that consumption basket. Will want to include more than food consumption. Want standards more than subsistence level of consumption.(?) Yet, clear that supportably population; i.e., the carrying capacity must decline with more luxurious minimum consumption bundle. Sen, Dasgupta and other economic ethicists argue that the bundle of goods should include nonmarket goods such as personal rights and freedoms. (More on Thursday.) The argument shifts from carrying capacity to sustainable development. There is also a distinction between growth and development. Growth quantitative increase in physical dimensions. Development qualitative improvement in the structure, design, and composition of physical stocks and flows that result from greater knowledge. By these definitions an economy can develop without growing! I view notions of sustainable development as the ecological analogue of permanent income. Permanent Income is the level of consumption attainable with no change in wealth. Hence, permanent income equals the yield from wealth and assets. One can live off the interest income and never touch the principal. Implicit in this viewpoint, must be concerned with the full costs, that is must internalize social costs of growth. This is important because of 1. Pollution environmental damage, if not corrected then growth illusory; gain by drawing down current (environmental) resoures. 2. Congestion noise pollution, waiting and queueing costs are hiddend but real costs. 3. Land use soil erosion. 4. Forest/fisheries and other renewal resources are public goods and must be properly assesed. Tragedy of the Commons offers a powerful metaphor to illustrate the dangers of over use of public goods. The great rhetorical device is that the village green or commons represents the earth s resources. We cannot fathom the earth s bounty, but we can understand the commons. 3

4 What s the value to the herdsman of adding an additional animal to the herd and grazing on public land? Answer: Herdsman benefits by the full value of the extra animal. What is the cost to the herdsman? If there are n people in the population, his share of the cost of using the public good is is cost /n. That is, the herdsman receives the full benefit, and pays only his share of the cost. The obvious implication is that there will be over grazing, as everyone has the same incentive. There is a free rider problem: the individual herdsman grazing his animals on public lands does not internalize the full cost of adding an additional animal (that is the cost imposed on others). What are possible solutions? Hardin notes two: 1. Private ownership 2. Taxes and subsidies. The primary difference between biologists (neo-malthusians) and economists (cornucopias) is that biologists do not take account of behavioral responses. Price Responsiveness When property rights are well defined price system allocates resources. Scarcity cause price to increase, allocation is efficient as resources go to highest bidder. Moreover, with an increasing price there are more substitutes. Raising prices not only restrict consumption, but higher prices give greater incentive to expand production. Consider oil exploration, as the price of crude oil increases it becomes profitable to drill deeper wells. Alternative technologies also become feasible, such as oil shale refinery, at low price it is not cost effective to obtain oil from coal shale. But as price increases eventually it becomes feasible to process coal shale. Interesting that the time to exhaustion of the known reserves of oil remains essentially constant. Innovations. Population pressure gives an incentive to innovate, to adopt new agricultural techniques. Use of hybrid crops, new fertilizers. (Boserup s view of reverse causality. Why the Malthusian prediction is wrong.) Population increases increase market opportunities investment opportunities. Another source of innovation. And with a larger population scale economies and the division of labor also serve to increase production. The most optimistic looks at the success of the Green Revolution. The use of modern science (pesticides) to increase crop yields. Yields per acre grow faster than population. So development in agriculture grew faster than population implying that the carrying capacity grew faster than the population. The biologists (e.g., Ehrlich) argue that such faith in the ingenuity of man is unfounded, especially with respect to food production. 4

5 Some final thoughts In principle, with taxes and subsidies for a given population size we can set the price of a free access resource to internalize the full cost of its use. But even if level of use is regulated for the existing population, there still exists free access to the resource through reproduction, which is Hardin s point. Or to use the colorful language of Harding breeding (which connotes primitive behavior). The optimal level of use per person depends on the number of people. Hence, each birth inflicts a cost on all others by reducing the value of their environmental birth right. We have seen that some countries have a declining and aging population. For them, a birth has positive value (negative cost). The specter of population decline in at least some countries was not on Hardin s radar. Thus, the situation is a bit more complex: the free rider problem at the global level is compounded by local, country specific, incentives to increase fertility. Thus, it is not only the total number of people but their distribution that matters. When identifying population problems, important to distinguish between problems induced by a larger population and the inadequacies of the existing institutional structural. Problems of population are to a large extent problems of institutions. For example, work by Sen shows that the problems famines is not the inadequacy of the production of food, but rather the institutions available to distribute the available food. Can the externalities caused by reproduction be internalized by user fees? If so, who will set the level of fees and collect them? What sanctions are available for people who violate the laws? What are the distributional consequences (rich versus poor)? 5