Thursday, July 19, 2012

Malthus vs. Jackson smackdown

What can perennial wheatgrass tell us about macroeconomics?

Probably not all that much in the end, but it can help frame a way of thinking about it.

L:; R:
One of the big questions in macro should be (but isn't) the extent to which a different path of technological development can allow us to do more with less.This might not seem like much of a question--Isn't that what technological progress is?
In the picture above, the guy on the left is Thomas Malthus. 200 years ago he said we would always have lots of poor people because population would always try to increase geometrically (increasing by the same percentage every year), while food production increased arithmetically (increasing by the same absolute amount every year). At some point, the upward curving line of population pressure has to hit the straight line of increasing food production, and some combination of war, famine, pestilence, and just plain starvation (i.e., poverty) would have to happen to keep the population down below what agricultural productivity could support. You should get a picture like the one below, and the parts where population drops down--that's where poverty and/or war are thinning the herd (that's us).

But a funny thing happened on the way to the 21st century. For millenia, population had bumped along sort of the way Malthus said. And then just about the time he wrote, it changed. The 19th and 20th centuries were times of unprecedented population growth, against which the World Wars were relatively small blips. When he was writing, there were about 1 billion people on Earth, and the great majority considered themselves fortunate if they had a comfortablel food supply; their material possessions were not extensive. Now we have 7 billion, a number Malthus would likely have insisted was simply impossible. A billion are in abject poverty--that's as many people as were alive in Malthus's time. Another 1.5 billion are poor. But then there are the 3.5 billion in so-called "middle-income" countries, where GDP per capita is around $5,000 to $15,000 per year. The average American visiting such a place might consider it poor, but most of the people there are actually doing pretty well. Then there are the billion people in the rich countries, who take for granted a standard of living that has far greater material possessions than the average person 200 years ago.

So we have as many "rich" people today as simply people in Malthus's time. And a majority of those alive today live with a level of wealth that Malthus thought could only be reached by a few. So in some sense Malthus was obviously wrong. The questions is the way in which he was wrong.

The standard line in economics is that Malthus didn't understand just how much technology would revolutionize agriculture, allowing yields to increase far more than he imagined possible. Each hour of farm labor produces far more food than it used to, and so does each acre of ground. Using new technology, we accomplished more with less, and so we escaped the Malthusian trap.

But there's a big, important piece missing from that story. To a large extent, the technologies that revolutionized agriculture were things that allowed us to apply far more energy. Petroleum in a tractor or a combine allowed a person to farm far more land than working with horses. As for yield per acre, a lot of attention goes to the breeding of new crop varieties. That's been real, but those varieites wouldn't produce their huge yields without abundant fertilizers, pesticides, and often irrigation. It takes energy to make the fertilizers and pesticides--sometimes fossil fuel is even the feedstock, the material out of which the thing is made. It takes energy to ship those products, and more to apply them--pesticides are sometimes sprayed from small airplanes. And it takes energy to pump the irrigation water. Our yields per acre and our output per hour of labor are way up, but so is the amount of energy that gets used to produce a pound of food.

This is the core of the techno-pessimist position: "more from less" may be real, but it's far less common than people think; more output from our labor is common, but it very often happens because our labor is combined with a lot more energy.

And this is where the wheatgrass comes in. For decades, Wes Jackson at the Land Institute in Salina, Kansas has been trying to breed perennial grains. (He's the guy on the right in the picture at the top, and what he's holding is a variety of perennial wheatgrass.) The vast majority  of human food comes from annual grain crops: each year, you clear the ground and plant new seeds, and the plant produces its roots, leaves, and seeds, you harvest the plant, eat most of the seeds, saving some of them to do it again next year. Clearing the ground accelerates erosion, growing a plant from seed each year takes more fertilizer than keeping a perennial plant healthy, and the new annual plants are more vulnerable to pests, so pesticide use is higher. In Jackson's vision, we might plough a field and replant it only once every five years. The savings in fertilizer, pesticide, erosion, and fuel are potentially huge.

If perennial crops would be so great, why haven't we developed them already? When I was first learning about Jackson's work, I heard an explanation that made sense to a non-biologist, and also fit with an economist's way of looking at the world. A plant has an energy budget, determined by the amount of sunlight it's able to capture through photosynthesis. Perennial crops survive year-round by putting a large part of that energy into building roots. Annual grain crops don't have to build up their roots, so they can put more energy into their seeds--the part we eat. So Jackson's project was about finessing this tradeoff: How far can you increase the energy going into seed production while preserving the root structure needed to support the perennial habit?

In the April, 2011 National Geographic, Edward Buckler, a geneticist at the USDA, suggests a different answer to the question of why we domesticated annuals rather than perennials: "Not because annuals were better, he says, but because Neolithic farmers rapidly made them better--enlarging their seeds, for instance, by replanting the ones from thriving plants, year after year. Perennials didn't benefit from that kind of selective breeding, because they don't need to be replanted. Their natural advantage became a handicap. They became the road not taken." (p. 30)

This ties in with an evolutionary view of technology and the development of agriculture, which suggests that there was no need for agriculture to be consciously "invented." People's selection of "good" plants would lead to "better" plants, and the people wouldn't even have to know that they were causing genetic change. Our crops simply co-evolved with us, the same way that many flowering plants co-evolved with the animals that pollinate them. We didn't select annuals for their higher productivity--we didn't consciously "select" them at all. Because they had to be replanted every year, they went through their generations faster than the perennials did, so they changed faster and so they more quickly became plants that were more productive for us.

A recent paper by Philippe Aghion and others has a similar vision. They divide the economy's inputs into "dirty" and "clean," with "dirty" being roughly synonymous with fossil fuels, and "clean" meaning more or less renewable energy sources. In their model, the reason we use more "dirty" inputs than "clean" ones is that our technology for using the dirty ones is far more advanced. Had our past innovative efforts gone in a different direction, we might now be in a situation where "clean" energy was cost-competitive with "dirty." And if we refocus our efforts going forward, we can make our "clean" technology so good that it will allow us to continue the 3% per year growth that has been normal in the industrial age relying on fossil fuels. The authors warn that if we don't heed their advice, we're in big trouble: either the stocks of fossil fuels will get too hard to extract in the quantities we've come to rely on, or they won't, and our combustion of those stocks will overheat the climate. But if we do listen to them, no worries: growth just like your grandparents had, only greener!

I'm fairly skeptical of this model. Most blatantly, there's no resources needed for the "clean" input, just labor, capital, and technology. In the real world, solar and wind power at least take up land (or water surface), and there are resources that go into making solar collectors and wind turbines. Biofuels like wood or ethanol obviously take up land, and scaling them up to replace oil alone, never mind coal, doesn't look possible. And while it's true that over the last couple centuries we've put a lot more effort into fossil-fuel innovation than renewables, fossil fuels have some built-in advantages, the biggest one being how concentrated they are.

When you open a coal mine or an oil well, there's a lot of energy in one place, so a certain amount of mining equipment produces a large flow of usable energy. A comparable flow based on wind or current sunlight is spread out over a much larger area. With fossil fuels, time and geology have done a lot of work for us in concentrating and partially processing the fuel. If we want to replace fossil fuels, we need a lot more capital to gather and process the replacement. So yes, our "clean" technology has been relatively neglected, but there are also some deeper physical reasons why "clean" technology was the path not taken.

On the other hand, if Buckler is right about why we developed annual crops rather than perennials, perhaps there's more room on the green "path not taken" than I suspect.

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