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Malthusians and Schumpeterians

Scott Jagow Dec 17, 2009

They sound like names from Gulliver’s Travels, but no, we’re talking economic philosophy here. We probably need to rent a university auditorium somewhere, set up a couple of lecterns and have a Malthusian and a Schumpeterian slug it out in a debate.

Our economics correspondent (and resident Schumpeterian) Chris Farrell brought this up on the Marketplace Morning Report today.

You might be familiar with Thomas Malthus. He studied population growth and resources among other things. He was a pretty pessimistic fellow who believed that society’s advancement would eventually be ruined by having too many babies: “The power of population is indefinitely greater than the power in the earth to produce subsistence for man.” In other words, the natural resources will run out, my friends.

On the other hand, Joseph Schumpeter introduced the idea of creative destruction. Current examples abound. The death of newspapers giving way to online media. VHS to DVD to download. Cassette to CD to MP3 and so on. Schumpeter contended that the destruction of established technologies and companies was part of a cycle of innovation that helped society progress and improved living standards for everyone. With respect to resources, he explained it this way:

“[What counts is] competition from the new commodity, the new technology, the new source of supply, the new type of organization … competition which … strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives.”

So when oil or metal prices soar, companies start looking for alternatives, and the ensuing life-and-death struggle leads to advancement. The alternative energy boom is the most obvious current example, and since the whole world is meeting in Copenhagen, this is a good debate to be having. Chris’s interview this morning prompted this comment:

Interesting piece. I will try to be less Malthusian in the future. But your piece reminded me that was Newt Gingrich’s answer to global warming: “I’m sure we’ll think of something that will get us out of this jam and won’t cost us lots of money.”

Will we? Are you a Malthusian or a Shumpertarian?

By the way, if you haven’t visited our Copenhagen Summit Blog, there’s lots of interesting stuff there.

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