The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth's Future — Paul Sabin
Average Is Over: Powering America Beyond the Age of the Great Stagnation — Tyler Cowen
The Great Degeneration: How Institutions Decay and Economies Die — Niall Ferguson
When the Money Runs out: The End of Western Affluence — Stephen D. King
The World Without Us — Alan Weisman
Malthusianism is a disease of the mind; it's not yet in the DSM 5, but we can hope. The idea that the world's resources are inherently fixed is one of the great pathologies of modern thinking—a sort of communal psychosis as a side effect of the Industrial Revolution that’s been scrambling the wiring of our collective brains for generations.
Lately (and this is a cycle that's been going on for hundreds of years now), we’ve had a renewed spate of strict Malthusian discourse. Forget that it's been proven over and over that there are plenty of resources to support the globe for a very long time to come. There seems to be a misunderstanding or flat rejection that the real source of wealth in the world is innovation, which drives productivity. Economics is—strictly—the study of how the world deals with scarcity. Which is—strictly—a human phenomenon. Yes, bunnies reproduce until they can't any longer; humans don’t. They solve problems in ways that can't be foreseen, and this principally happens in market environments with stable property rights and incentives to profit. It’s by now such a recurrent pattern in civilization one should be amazed by how often it’s rejected. (Read basically any sci-fi story—they’re all dystopic. The mind imagines ruin too easily; utopia or anything like it seems Stepford Wive-ish at best.)
To understand Malthus is wrong for basically all-time, you must believe in free markets, of which there is lessened faith lately and so maybe that's how we get this resurgence. People will behave quite rationally, by and large, when faced with incentives, but many don’t seem to ever want to believe it. It's breathtaking, for instance, during that short stretch last decade when oil was well above $100 a barrel how much sheer innovation happened in virtually no time. Technology for solar cells, fuel cells, electric cars, etc. all leapt and exploded faster in the matter of a few years than they had in decades prior tied to the gold rush many saw coming. That’s an incentive, and it gave Elon Musk his current panache.
The reason Malthusianism is a psychological ill and not an economic concept or even a social one is because it's a mode of thinking transcending resources, debates about the climate, and populations—there are all sorts of Malthusians. It's almost become a form of cognition, an a priori worldview. In the same way we have resource Malthusians, we're living in an era of staunch financial Malthusianism.
All of it in all its forms is invidious to good investing for the long term and should be roundly ignored. When you buy stocks and think long-term about your financial goals, what you're doing is buying into the innovation, dynamism and creativity of the human organism—a species, mind you, that confounds itself regularly with its ability to solve problems and make life better. That is, deal with scarcity. Even more, and starkly contrary to today's economic Malthusians, human innovation is accelerating.
Today’s financial Malthusians do the things all Malthusians do: They look at the current situation, extrapolate it far into the future, and then make statements like “this is unsustainable, eventually we’re headed for ruin.” Maybe they’re right—it certainly is true fiscal profligacy, errant central banking and dumb politics have brought nations down before. But recognize how seldom that actually happens, and conversely, how often society figures out ways to solve its problems. Not every story is analogous to Gibbon’s Rome, nor does it have to be.
Things compound. That’s not just a financial concept—it pervades most parts of life. Economies compound in growth; technology compounds (see Moore's law, Shannon-Hartley theorem, et al); civilization compounds; and so on and on. Yet we think linearly too much. We say things like "2.5% growth in the US economy is too low." Well, maybe it is and maybe it isn't, but people tend to completely miss that it's 2.5% of a $16 trillion (with a "T") economy. Which is a lot bigger than it was even at the peak in 2007. Now do some scaling: $17 trillion in US debt—the number seems eye-popping—is just a little over one year’s production for the US. You yourself take on way more debt than this—likely five to seven times your pay just to get a mortgage, buy a car, pay for your children’s education.
Same thing for productivity gains: technological productivity is compounding so fast nowadays some have actual fears humans will be automated away soon! (Which is nonsense. And anyway, we should be so lucky that one day manual labor is done away with.) Productivity compounds upon itself too—an iPhone is the confluence of literally millions of little innovations here and there. Now, for basically free (if you sign a contract today!) you can get an iPhone that is more powerful than any computer you’ve ever owned and fits in your hand. Civilization has done the same with food supply and countless other features of life. It’s why we’re living so long these days.
Ditch the linear thinking, and start living your life by the magic of compounding.
Technically, this was a book review. Don’t read any of the books listed above except The Bet—a wonderful effort with all the economic, ecologic, Malthusian and free market lessons you need in just a couple hundred pages. This is not the venue for a regurgitated refutation of all the dour financial arguments posited in the books above. MarketMinder has done it over and again.
A parting word. You often hear from Malthusian apologists it’s “rational” to worry about this stuff because, “What if it’s true? Shouldn’t we be prepared?” There is logic to that. Except … if you’re thinking in terms of investments, it means you’re basically, constantly, wrong. The stock market has been capitalizing on humanity dealing with scarcity for a very long time now—and the trend, even today, is up.