05/28/2007 05:54 pm ET | Updated May 25, 2011

Limits To Growth?

In 1972, the Club of Rome published the infamous Limits To Growth. The book (which I read in the early eighties) used a computer model to simulate the world and predicted that we would be running out of a lot of key resources by, well, now. It said, simply enough -- that there were limits to growth.

Needless to say, we haven't run out of the resources that Limits to Growth expected us to run out of, though with the rise of Peak Oil and such, the triumphalism of the late nineties, where practically every commodity's price was at generational lows, is not quite so sharp. Nonetheless, it's certainly the case that the Club of Rome got it wrong - at least in terms of timetable, and perhaps overall. It's worth, in this time of the resurgence of environmentalism, and the basic argument that there are limits to growth "the rest of the world can't have a Western style of life", to walk back and examine why the Club of Rome got it wrong.

They made three main mistakes with respect to production -- they didn't account for substitution; they didn't account for marginal production and they didn't deal with technological advance.

Let's deal with the second first - we're all familiar with it. At $20/barrel world oil supplies are equal to X. At $50 a barrel they are equal to X+Y. What was worth pumping at $20/barrel was a lot less. At $50/barrel it starts making a lot of sense to start ripping up the earth to get at oil sands (which amount to processing asphalt) and so on. In fact, at say $75/barrel the world isn't even close to running out of oil -- there's probably enough to go for another century.

Then there's substitution. At certain price points it starts making sense to substitute. We prefer to make gasoline out of oil -- but we can make gasified coal -- it becomes worth it at certain points. You may prefer steak, but at a certain price you may decide that a pair of chicken legs is an acceptable substitute, or even that a vegetarian meal is suddenly acceptable to you.

The third point, technological advance, plays into both. Brazil was once the heart of rubber production, but when we learned how to make tires without natural rubber, that was the end of that. Clothes are now made from a bewildering variety of synthetic fibers as well as the older natural ones like wool and cotton. Steel has been phased out in many products and replaced with various alloys or with plastics. At various points, products for which there was no acceptable substitute, have found one though technological advance.

Technology also makes it possible to both do more with less (even things made with steel use less steel than they used to, because we can make steel stronger, or harder, or more flexible, than we used to) or to extract resources we couldn't find before -- we can mine deeper than we could 30 years ago, in harsher circumstances and when we do we can extract more of what we find, and use more of the byproducts. Every ton of many resources goes further.

For all these reasons, and a number of other ones such as the structure of international trade in the late twentieth century (the encouragement of commodity cash production in 3rd world nations, for example) things didn't work out the way the Club of Growth expected. The cornucopianists won the round.

Historically the cornucopianists have been on tear. The Club of Growth is nothing more than a more sophisticated form of Malthusianism. Malthus, famously, observed that population grows geometrically, while food production grows linearly, and expected that there would be huge famines.

Unfortunately for Malthus's predictions (but fortunately for us) food production soared almost immediately after he made his prediction and while there have been plenty of famines since then, they haven't been problems of production (the world produces more food than it knows what to do with), they've been problems of distribution. In fact, in modern times, most famines don't even result from a local lack of food -- they are a product of hoarding and very logical profit-seeking behaviour.

The late science fiction author Robert Heinlein got caught in the Malthusian trap, assuming that food production would be a problem by the end of his life. He got it wrong, and admitted it, and wrote that he believed the reason he had gotten it wrong was because the controlling resource wasn't the amount of land under cultivation, but was petroleum - 1st world agriculture had become so energy intensive, and in particular petroleum intensive, that oil shortages were where the problem would arise.

Which leads us back to the modern day.

The problem we have is twofold -- the end of cheap energy in the form of oil; and a limited carbon sink.

Oil's pretty close to an ideal energy form. It's very energy dense, it's easily transportable, and at least the stuff we've been burning for the last century, is very easy to get at and refine. Saudi and Iraqi light has an energy ratio of about 30:1, and costs about $6 or $7 a barrel to pump out of the ground. Cheap. Very cheap.

But the good stuff is coming to an end, and depending on how you want to calculate the numbers there are about 3.5 to 4 billion people who never got a Western standard of living, or even close to it.

And there are, currently, no good substitutes for cheap oil. There is nothing that has as good an energy ratio; there is nothing that is as cheap to pump out of the ground. Technology will let us use a lot less to get things done, but even if we could reduce consumption per capita by half it still wouldn't make there be enough cheap oil to even cover people who are already fully in the oil economy.

And as you move up the chain in terms of substitutes, you run into a problem -- they aren't cheap, they aren't dense, and they aren't easily transportable and they have lousy energy ratios (if it takes one erg to get two ergs, you've got problems). Wind power is great, but it doesn't travel well and you can't store it well. Same with solar. Hydrogen seems like a solution -- but it is inefficient, and it doesn't travel well and it kicks the ball back -- it does allow for static generation, but you need significant overcapacity. Biofuels seem great, but people are already screaming at the price increases of corn staples; and while food carrying capacity is greater than Malthus or Heinlein thought, there are real questions about how much food we can grow, and how fast we can ramp up production -- and even larger problems with the energy ratios (even the best numbers for ethanol are pretty dismal, and while other options like switchgrass look promising, they still aren't clocking it 30/1 or even 10/1).

What the world needs, in many respects, is simply a much better battery, but we don't have it yet.

So in terms of using substitution we've got a problem -- there really isn't a good substitute yet, and we aren't working very hard on making sure that there is. There are a lot of reasons for that, but the simplest reason is this -- a lot of people are getting very rich from the current situation, and they like it that way. The current elites are well enough served by the current situation that there isn't a lot of incentive for them to really push to change it. As Diamond observed - if an elite isn't feeling the pain, the society doesn't adapt to the pain. And however expensive gasoline is, if you're rich, it's still cheap as hell and the price increases have just increased your income since you've been able to pass on the increases + extra profit, or use offshoring to keep inflation down on components.

Still, fundamentally, the world could toddle along on the petro economy for quite some time. Standards of living in the core would decrease as the energy ratio got worse; the majority of the world wouldn't be able to have a first world standard of living (at least not the old standard of the late twentieth century); there would be resource wars; income inequality would continue to increase, and so on. It wouldn't be pretty because the increased prices would continue to cascade through society with some pretty unpleasant effects, but it's certainly possible.

Or it would be, except that the world is running out of carbon sink. That's the real bottom line. We're already seeing the early effects of global warming, and it is going to get worse. We can't stop it at this point, but it will soon start effecting even our elites in ways that simply can't be ignored. It appears, in fact, to be spiraling out of control faster than expected, with the latest estimate being that the arctic ice cap, for example, will be gone in 20 years (the previous fastest prediction was 50.) The effects of that aren't going to be ignorable, even by the rich.

Let's bring this back to the idea of limits of growth. Do they exist?

Yeah, they do -- for any given economic and technological system. Societies have crashed and burned in the past when they ran up against limits to growth. The problem is that the limits are elastic -- you can exceed long term carrying capacity in the short turn. You can have a population larger than you can really support. And then when it becomes clear that you don't have enough food, or energy, or whatever the limiting factor on you growth is, you crash out.

That doesn't mean the earth's theoretical carrying capacity isn't very close to infinite. If we could capture much of the solar energy blasting through with any amount of efficiency, and if we could use that energy in a way that didn't overwhelm Earth's ability to sink them; or to mitigate them, we could support a much larger population in an even better than 20th century standard of living. We could be much, much more efficient, even now, than we are - buildings have been created in sub-freezing temperatures, for example, that actually are net producers, not consumers of energy. We could build our communities in ways that require much less travel and for such travel as we need we could turn to vehicles which don't carbon dump into the atmosphere (ie. electric cars.)

In other words -- limits to growth are based on how we organize ourselves, the technology we have, and the way in which we use that technology And we have some ability to determine what technology we have -- we could crash development on techs that don't have significant carbon signatures, like passive and active solar, wind, geothermal and so on. We could crash development of ways to store energy like hydrogen or improved batteries. We could provide subsidies which would enable such industries to get up to scale far faster, while cutting subsidies or even taxing those industries which have huge carbon costs.

We could try and find, in other words, efficiencies and substitutions The original "Limits to Growth" was wrong because it didn't take substitutions, efficiencies and technological growth into consideration - if we want the current limits to be mitigated we have to work those three things -- efficiencies, substitutions and technological advance, as hard as we can.

We have to change the basis of our society, from one which is ultimately reliant on hydrocarbons (what happens to all those cars, all that shipping and transportation, the lineaments of our society, without it) to one that doesn't dump carbon faster into the environment that the earth can clean it up. And we need to turn energy into capital -- something you can build, something whose limits to growth aren't based on how many dinosaurs died in just the right time and way into something that is much less finite.

Any new system will have its own "limits to growth", but those limits can be quite far out. We got a lot of time and a lot of prosperity out of the petroleum based system -- almost a century. Hopefully our next system will be one which will give us at least as much time, and one which allow many more human beings into the system in a way that is dignified and reasonably prosperous.

And hopefully, having found real limits to growth, especially in terms of carbon sink, we will start to think systematically about what the limits to growth are -- not in terms of pie-in-the sky cornucopianism (the market and technology will always take care of it) nor in terms of simplistic "we're going to run out of tin" linear analysis -- but in systemic terms based on "what can this technology, this organization, and the Earth's natural systems support"?