The neo-Malthusian petro-kings

By Razib Khan | February 8, 2011 10:18 pm

One of the major problems with natural scientists when they “project” into the future they often do not take into account the power of innovation to change the fundamental parameters of the game. I believe this was part of the issue at the heart of the famous Simon-Ehrlich wager. Though Julian Simon was untutored in many aspects of natural science, he did comprehend the recent economic history of the world, which has seen a break with the shackles of the iron laws of Malthus. Those laws have been operative for all of human history until the mid-19th century, when Britain started to become the first nation which was a clear exception to the pattern (some may argue that the Dutch pre-figured the English case, but this seems to be debatable).

There are two major changes which Thomas Malthus and his contemporaries (including economists such as David Ricardo) could not anticipate. First, that the rate of innovation in the 19th and 20th centuries would simply surpass anything that the world had seen before. In The Fall of Rome: And the End of Civilization Bryan Ward-Perkins reports that the pollutants which are the byproducts of industrial activity did not reach Roman levels in Britain until the 18th century! I am not naive enough to be such a partisan of the “ancients” as to suggest that Europe did not reach Roman levels of civilization in the generality until the 1700s. But, up until the Industrial Revolution occurred in Britain there were aspects of European civilization which had not yet climbed back up to the Roman scale of grandeur or virtuosity. For example, it seems that it was only in 1800 that London attained the size of the city of ancient Classical Rome (which had fallen in its nadir in the 7th century to a population of 50,000).

The second major parameter is more subtle, and perhaps even more surprising, than innovation. It’s the demographic transition. Even with higher growth rates, if population rises to “catch” up with the bigger economic “pie,” then per capita wealth remains the same. What began in the advanced nations of Western Europe in the 19th century was that the urban middle classes began to reduce their fertility, while at the same time economic productivity continued to increase. The growing pie would was not matched by concomitant population increase. Ergo, greater per capita wealth.

Believe it or not, the world is going through a demographic transition, life expectancy is increasing, as has per capita income (PPP). This is due to continued economic growth, and, a decrease in the rate of population growth. At least in the aggregate.

But different conditions hold in different locales. Below is a comparison of per capita income (PPP) for a few selected nations, as well as their population growth rates:

Saudi Arabia is a famously reactionary society. Slavery was officially banned in 1962, in part due to international pressure (this was not an issue when Saudi Arabia was an obscure backwater, but its rise to a commodity powerhouse entailed an integration into the world system, and so abolition). We don’t even need to go into its religious authoritarianism and sexual apartheid. The critical point though is that in many ways the influx of petro-dollars also means that Saudi Arabia is a very modern and affluent society which has also subsidized extremely retrograde practices. And yet look at the pattern of petroleum driven affluence: it exhibits not only the cyclical swings subject to commodity prices, but, the massive gains in wealth in the 1970s led to a huge baby explosion. Fertility crashed only after the nosedive of oil prices in the 1980s. This is was a classic pre-modern pattern, where greater wealth was swallowed up by greater population growth. In contrast to Saudi “windfall” wealth, South Korea, and to a lesser extent Turkey, have followed a more conventional path of investing of in human capital. All saw a gradual consistent decrease in fertility concomitant with gradually increasing per capita wealth.

Today at a total fertility rate of ~3.0, Saudi Arabia is converging to the world average. But the legacy of the 1970s oil-fueled population explosion remains, a huge demographic bulge which grew up hearing about the stories of the glorious affluent 1970s through their childhood in the 1980s and 1990s. Because of Chinese demand I suspect that we won’t see the shift in favor of consumers that we saw in the 1980s and 1990s. But, neither will we ever see a domination of the oil markets by a single cartel like OPEC, there are too many suppliers now. Aside from the partial-exception of Sub-Saharan Africa Paul Ehrlich’s geopolitical prognostications in The Population Bomb have turned out to be false. But in the case of petro-states like Saudi Arabia his simplistic model may actually hold over the medium-term (i.e., within the next generation). Unlike genuinely advanced nations the Saudis are not doing anything innovative to produce wealth. In other words, changing the equation which constrains their ultimate potential. Rather, they’re simply tapping into their natural resource bank more efficiently. At some point in the future this capital will be expended. The consequences for the House of Saud may then be catastrophic, though I suspect they have “back up” homes across Europe and Swiss bank accounts to tide them over in case they need to flee.

CATEGORIZED UNDER: International Affairs
  • Zach Kurtz

    Ehrlich certainly deserved to lose the bet, but Simon’s faith in commodity price as a measure of scarcity was surely mistaken… Even if abundance flattens increase demand (from China, et al) could have lost Simon the bet if it had come just a bit earlier.

  • John Emerson

    From what I remember, Ehrlich put far too much emphasis on shortages of metals and minerals. Mineral shortages can be dealt with by substitution, by more efficient use, by tech progress, or by exploration. The questions with air, water, topsoil, and energy are still with us.

    A second problem is time scale. For whatever reason Ehrlich chose a one-decade time frame. That’s an economist’s timeframe. Geophysical and ecological events occur over centuries and millenia, so that there can be long lags between cause and effect. There was a conference once where economists and ecologists tried to work together on environmental questions which dead-ended when it was found that for the economists the long run was ten to twenty years, whereas for ecologists the short run was a century.

    Simon was a magical thinker. He argued once that since there are an infinite number of points in a line, we can never run out of resources. I had an argument once with a free-marketer who was unwilling to concede that when the Atlantic cod fishery was destroyed, that meant that that much less food was available. He argued that the price system would take care of it somehow and that people would substitute other products. For him no physical world existed, only economies. (The cod fishery was a relatively minor source of food quantitatively speaking, but I was building to the point that if, for example, the Ukraine’s agricultural production diminished significantly, there would be real effects on the world’s food supply.)

  • charlie

    And in terms of magical thinking, don’t assume the Saudi population figures are anything near correct.

    The Saudis in the 1980′s had a policy of deliberating inflating their numbers to make them look larger vis-a-vis Iran. I suspect they carried those numbers forward and counted a lot of immigrants. Given how gay most Saudi men are, the fertility rates are even more skewed: a much smaller portion of men are creating children than expected.

  • Sandgroper

    “Geophysical and ecological events occur over centuries and millenia” – oh yes. And politicians work to a much shorter timescale again, so trying to talk to them about very high consequence events with a recurrence interval of hundreds of years is a total waste of time. With those kind of odds, they’re willing to gamble.

    From what I recall (and it’s a very long time since I read the book) Ehrlich put a lot of emphasis on energy, too. But he was way off on time scale.

    I had a similar argument with a free-marketer once over potable water supply. He just kept insisting that the market would provide – that if it became valuable enough, people would pay to pipe it from Tibet or whatever. He couldn’t grasp that many people die every day due to lack of clean water. After a while I realized the same thing you did. It was like the free market was a religion for him.

  • Don

    Kedrosky and Summers, economists, have analyzed the famous bet. Simon wins in 1981-84 and 1987-1992. Ehrlich wins in 1985, 86, and 1995-2007 when the data end. So, 11 wins for Simon, 16 wins for Ehrlich.—189539-taking-another-look-at-simon-vs-ehrlich-on-commodity-prices

  • AG

    Like Red Queen theory, new limit will be reached some day.

    BTW, low fertility rate would not last long since non-fertile behavior is suicidal in term of evolution.

  • Don

    The low fertility of humans evolved how?

  • John Roth

    I don’t believe that first chart. It seems to be saying that, in the 30 years between 1980 and 2010, U.S. real income (that is, inflation adjusted per international dollars) has increased by a factor of 3.

    Tell that to the average man in the street.

    The other lines look halfway reasonable, though.

  • Brian Too

    @8. John Roth,

    The chart may well be correct, and you may also be correct in terms of “the average man in the street.”

    There is a well-known disparity in U.S. income growth figures, in that wealth increases are accruing disproportionately (compared to historical norms) to the already wealthy.

    I don’t have the actual data at hand but it is widely available. The divergence has happened mainly in the last 50 years or so.

  • ziel

    John/Brian – the chart’s title says “Current D$”, meaning they’re not inflation adjusted.

  • Razib Khan

    thanks for that ziel. i thought so, which is why i didn’t say inflation adjusted. my understanding was that saudi per capita wealth peaked in 1980, and that would go with that.

  • kirk

    Because burning off the atmosphere with CO2 has no down-side. Malthus-wise. The microbes will feast on our bones merrily. Malthus-wise.

  • John Roth

    Thanks ziel. That’s what I thought I was seeing. Unfortunately, the unadjusted curves really don’t say a lot. Without the inflation adjustment it’s almost impossible to tell if per-capita GDP is going up, down or sideways. I suppose I’m going to have to find data sources and plug them into a model. (Sigh).

  • omar

    I think the saudis may survive. keep in mind that they dont just have a lot of oil, they have a LOT of oil. In fact, their proven reserves now are greater than they have ever been, i.e. they find more oil than they pump out every year. Its not infinite, but its a lot of oil. They will run out one day, but not before its selling at the same price as champagne.
    Their fertility is dropping now, their education system, while poisoned by wahabi Islam, is actually pretty good compared to third world norms. I am not saying they are home free, but I wouldnt write them off. On the other hand, the wahabi business and the archaic ruling arrangement may not be sustainable and the whole thing may crash and burn long before the oil runs out..

  • Chris Cooper


    > Kedrosky and Summers, economists, have analyzed the famous bet. Simon wins in 1981-84 and 1987-1992. Ehrlich wins in 1985, 86, and 1995-2007 when the data end. So, 11 wins for Simon, 16 wins for Ehrlich.

    You can knock off eight of those wins for Ehrlich. The third column of the table consists wholly of subperiods within the decade 1999-2008 (that’s when I judge Kedrosky’s data to end). Those entries are all saying the same thing: that Ehrlich won in that decade.

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About Razib Khan

I have degrees in biology and biochemistry, a passion for genetics, history, and philosophy, and shrimp is my favorite food. In relation to nationality I'm a American Northwesterner, in politics I'm a reactionary, and as for religion I have none (I'm an atheist). If you want to know more, see the links at


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