Hard and Soft Constraints: Why Malthus is usually wrong but sometimes right

A free market economic system is efficient at meeting human desires with limited resources; although the equity or justice of the situation will depend on government policy, such the tax system. Limited resources are a 'hard' constraint – we can't use what doesn't exist. For environmental problems, however, the problems are much more severe, because nature cannot enforce the limitations that may be necessary. The constraints are 'soft' – we can violate them, but at high future cost. Nature can in a sense 'punish' the future inhabitants of the globe, but those who are punished are not necessarily the same as those that have made the violations. Humanity must therefore impose restrictions on its own behaviour, including legal or financial incentives such as taxes or caps, or face severe damage to nature.

Full article here: [lf6e24]

6 comments:

steve said...

Greetings Steve

Looks fascinating - any chance of a wider window?

Best regards

TheClimatePhilosopher said...

Done.

Robin Smith said...

All you need to do is:

"Outlaw collection of rent by private interests"

That is, re-establish the equal distribution of wealth in society, to those who are "truly" creating that wealth.

Otherwise people will waste as much as they need to, to avoid impoverishment. Fear of want makes all other considerations moot.

It is not complex. No need to make it so with palliative sticking plasters, that will only offset the problem to a later time.

TheClimatePhilosopher said...

I think you are basically arguing:
a) because people have to pay rent (rent which represents scarcity) they have to work harder.
b) but of course people would still have to pay rent (even under Georgist reforms), whether it was collected by the government or by the landowner. The only difference is that land is taxed less and landowners taxed more
c) if we made these reforms, we would expect more labour, and a more efficient economy
d) but that wouldn't stop the environmental destruction. If we are not paying rent to the Saudis we'd probably go on more cheap flights, not fewer.


For an example of a soft constraint that we have failed to respect see Depleted Atlantic Fish Stocks Failing to Recover. Note that this was a product of free, unconstrained markets, where no constraints were respected, and no rent was paid.

I argue that we should be paying rent (tax) to the government on fishing (where currently we do not), and that tax should be used to reduce taxes on transactions in the rest of the economy. I argue that this would be better for the environment and for the economy.

Peter said...

Malthus is always right, It is the interim assumptions that are wrong.

e.g. Malthus thought food was linear. However over the time since Malthus humans have exploited exponential additional land and used fossil resources to increase productivity. It is only when innovations like these are exhausted will the final showdaon happen.

However in Malthus theory, he did not factor in fossil resources and the fact that they are exhaustable. I.e. They fail to increase linearly, but FALL catastrophically. Thus the Malthus will be crisis will be even more marked.

TheClimatePhilosopher said...

I see your point, that fossil fuel consumption will fall catastrophically.

But that's only true for oil. There's lots of coal. To the extent to which you can turn oil into coal there's no problem.

Except there is a problem of course. That problem is climate change.

If we mix up issues where there exists private property rights - and therefore a price signal, however imperfect (Oil Depletion) - and one where there is no private property rights (Climate Change), we will fail to get the point and we will be treated as economic illiterates.

Of course the oil crunch will have some economic effects, but they will be mostly to enrich the resource owners even further at the expense of everyone else; and to promote alternatives, both carbon-intensive and carbon-non-intensive. I don't want to underestimate the effect of the oil crunch - probably much bigger that the 70s recession.

But it's nothing to the economics climate change, which is not constrained even to first order. No system; no private properties; no scarcity at all -- big problem.