Grantham on Malthus

Jeremy Grantham makes the case that where people think Malthus was wrong, he was actually right, and vice versa:

The essence of Malthus’ work (1798 and later) was that humans, like all other creatures, would tend to grow in numbers up to the limit of their ability to find food. Perhaps he should have left it there because that seems like a reasonable proposition and clearly defines the first 200,000 years of our existence. But he tried to define this equation more mathematically by saying that our potential breeding rate was exponential, or compound, compared to our food production rate, which was arithmetic. Arithmetic growth, he argued, would allow for, say, 500 pounds more grain per acre, per year, which would become a smaller and smaller percentage gain. His simplification was that food production would proceed in the series 1, 2, 3, 4, 5, etc., where population would grow in the series 1, 2, 4, 8, 16. You can see the problem. And it is precise enough to describe the rat population problem in the Back Bay in Boston. You can’t control them by rat traps – they can out-breed your traps – but you can limit them by restricting their food supply.
Through the 20th Century and until recently Malthus’ critics said, yes, okay, the world’s population has indeed been growing fast, and if anything at an accelerating or hyperbolic rate, but, no, the food supply has not been arithmetic but has compounded and kept up with the people. Q.E.D. Malthus was wrong.
Well, it turns out that the criticism is short-term in its focus and also wrong. Agricultural progress is by nature arithmetic and Malthus, living in a farming community, knew that. If compound growth were possible ingrain productivity, then eventually a single corn plant would have to produce a ton of food, or, in human terms, 6-foot tall Dutch women would one day be 40 feet tall. Each species has a limit that tends to be approached at a decelerating rate. More convincingly, a recent report in Nature Communications  proves the point. The authors looked in great detail at all of the important grain-producing areas by individual grain – wheat and corn in the Midwest, wheat in Ukraine and Australia, rice in Japan and Thailand, corn in Brazil, and so on. They studied the progress in productivity year by year and attempted to describe each grain area as best they could mathematically. To get to the bottom line, not a single one could be described in exponential (or compound) terms. At best they had a steadily declining percentage gain or an arithmetic (or linear) increase. Even less encouragingly, many grain areas were best described as asymptotic to zero: that is, clearly heading eventually toward zero. Therefore, Malthus in this key component was perfectly right. So, how come we aren’t all starving? Well, we had not one, but two, non-repeatable windfalls. First, there was new land. Malthus had no idea that west of the Mississippi, in Australia, and in parts of South America there were vast new agricultural lands to exploit. Second, there was a realization that adding more nitrogen, potassium, and phosphorus could remarkably increase output, especially in the depleted soils of Europe, coupled with the discoveries of how to make nitrogen fertilizer and where to mine potassium and phosphorus. The use of fertilizer since 1950 more than quintupled per acre but today often reaches limits beyond which production actually falls. The increased use of fertilizer is also unsustainable in that environmental damage is often severe and the mined resources are, of course, depleting. In recent decades, despite the increased use of genetically modified crops and related technologies and continued progress in more traditional plant breeding, the growth rate in the productivity of grains is steadily declining (as described in the Nature Communications article mentioned above). So, surprisingly perhaps, and despite two stays of execution from new land and fertilizer, Malthus was right in one of his two basic propositions despite continued comment to the contrary. The implication of this from an investment point of view is that we should count on a steady, if erratic, rise in the price of food. This in turn will work to suppress economic growth – a small amount in the case of rich countries and a dangerously large amount in the case of poorer countries.
We live, though, in a strange and complicated world and Malthus’ second proposition of the compound growth of population, which traditionally was accepted because the data so obviously confirmed it for 160 years, turned out to be totally wrong. Since 1961 that accelerating compound growth has stopped and has so sharply decelerated that it appears nearly certain to go negative within the next several decades: the number of new babies globally has in fact already started to decline. ("Peak Babies!")

There are a lot of interesting points here, including that predictions are hard, and that even though you may be wrong a lot, about a bunch of different things, you might eventually be proven right, even though when that happens you'll be long, long dead.  While I would say that Malthus was correct about arithmetic increases in agricultural production, the massive increases in yield from fertilization and breeding are very impressive.  But from an agricultural perspective, the diminishing returns of those advances in genetics and fertilizer are worrisome, but do likely indicate that there will be money to be made in food production in the future.  Maybe not this year, maybe not next, but eventually.