Book 1: Capitalism at Work: Business, Government, and Energy

Chapter 7 Internet Appendix

7.1 Pre-Malthus “Malthusianism”
7.2 Did Malthus Change His Mind?
7.3 Coal: The Great Liberator
7.4 Jevons as a Malthusian
7.5 Precedent to Jevons
7.6 Unnecessary Alarmism?
Bibliography: Chapter 7 Appendices

7.1 Pre-Malthus “Malthusianism”

Thomas Malthus, like Adam Smith, was more a synthesizer than a creator of ideas. Before Malthus, the theory that population was a drag on prosperity had been “a familiar one in England for some time” (Mitchell, 1967:1, 238). Joseph Schumpeter described Malthus’s contribution as an “effective co-ordination and restatement” of “so large a number of writers that we may speak of them as widely accepted at the beginning of the [seventeen] nineties” (578). Gertrude Himmelfarb stated:

[Malthus] formulated the terms of discourse on the subject of poverty for half a century—and not only in respect to social policy (the debate over the poor laws, most notably), but in the very conception of the problem…. Whatever difficulties there were in his theory, however faulty the logic or evidence, it gripped the imagination of contemporaries of all ranks, classes, callings, and persuasions, as few other books have ever done (126).

Malthus put the population question in a form that made it the center of one of the greatest intellectual and policy debates in history. Malthusianism as used today connotes alarmism and pessimism toward population and economic growth.

7.2 Did Malthus Change His Mind?

Malthus’s second edition (1803) was” a vastly more learned, a more thorough, and necessarily a more extensive book” than the first edition, released in 1798 (Mitchell:1, 258). Was it substantially different? Joseph Schumpeter characterized Malthus’s revision as “a completely new work which … contains an entirely different theory” (579–80). He added, “the introduction of the prudential check (‘moral restraint’) … makes all the difference” (580). However, Schumpeter continued, the new theory, while providing greater elasticity, did not rescue the fallacious theory overall.

Julian Simon stated, “Malthus essentially repudiated his simple first edition theorizing in later editions” (1981: 374, fn. 35). Rothbard spoke of “the much weaker, indeed, contradictory, second edition of the Essay” (2:107). Yet, noticed Schumpeter, Malthus “clung to his original conclusions as much as possible” (580). Malthus’s revised thinking that humans could control population was not a statement that they could or would do enough to avoid what he continued to see as “vice or misery” (1803: 13).

Malthus stated in the second edition that while he had “endeavored to soften some of the harshest conclusions of the first Essay … the conclusions of the former Essay will remain in full force” (1803: 3). Malthus thus can be considered a “Malthusian” in the end as at the beginning—even if “moral restraint” was outside of “misery or vice.”

Malthus’s view did not stem as much from an innate pessimism (like that of W. S. Jevons) as from the context in which he wrote. William Otter observed, “It has been sometimes said and repeated publicly, since the author’s death, that the view Mr. Malthus himself took of the principle of population, was a gloomy one. The remark is true, though somewhat uncharitable, for the fault was in the position of the author, not in his mind” (xlv). Otter went on to explain (xlvi) how Malthus was dealing with an attack on social institutions based on exaggerated notions of the perfectibility of man (the view of William Godwin) and malincentives created by government poor relief that were leading to indiscriminate births.

Still, Malthus was a Malthusian. Concluded Otter:

“It must always however be a matter of regret that Mr. Malthus was led to the important conclusions of his essay, through the avenue of such a controversy [over perfectibility and bad institutions]; had he been at liberty to select his own path it would have been a more cheerful and consolatory one, more bright with the rays of divine benevolence, more congenial in truth to his own mind” (xlvii–iii).

If Malthus had lived longer, he may well have changed his mind. Malthus possessed a “love of truth” (Otter, l) and strongly believed in empirical verification (Weir: 291). If so, then Malthus, if alive today, would repudiate Malthusianism and neo-Malthusianism—at least for capitalist settings where the ultimate resource of human ingenuity, aided by abundant capital, would prevail over what otherwise would be severe resource constraints.

As it turned out, “after 1850, the interest of economists in the population question declined,” and “the controversy subsided for the unscientific reason that people had more pressing concerns in a world in which a spectacular fall in the birth rate and a no less spectacular torrent of unsaleable foodstuffs and raw materials were about to set in” (Schumpeter: 582). Schumpeter added in reference to Malthus’s false alarm: “Mr. [John Maynard] Keynes said somewhere that economics is a ‘dangerous science.’ It is indeed” (ibid.).

Malthus’s theory of population has been soundly refuted, much like the labor (cost) theory of value that also dominated his era (Weir: 291–93; Simon: 1990). Yet the anti-population lobby continues as an important component of the modern environmental movement, placing particular emphasis on the developing world, where a lack of market institutions does put population growth in conflict with the means of subsidence.

7.3 Coal: The Great Liberator

W. S. Jevons described coal as the “Mainspring of Modern Material Civilization” (1865: vii). He was the first to recognize that coal, as utilitarian energy, was the resource needed by other resources, what Julian Simon and others would later call the master resource (Simon, 1996: 162; Bradley and Fulmer: xiii). In Jevons’s words:

Coal, in truth, stands not beside but entirely above all other commodities. It is the material energy of the country—the universal aid—the factor in everything we do. With coal almost any feat is possible or easy; without it we are thrown back in the laborious poverty of earlier times (1865: vii).

Coal, and carbon-based energies in general, represented a sea change from what had passed as energy before: falling water, wind, and fire. Coal not only generated warmth, it fueled motion in a much cheaper and reliable way. Coal gas and coal oil advanced illumination. “Gaslighting, one of the most neglected of the ‘great inventions’,” stated one economic historian, “allowed many artisans and craftsmen … to work longer hours and reduced the cost of night work” (Mokyr: 14). Coal also powered the engines that increased the productivity of coal mining itself.

The relationship between coal and England’s ongoing Industrial Revolution, one that Jevons saw, has been appreciated ever since. “England[’s] … underground mountain of coal,” noted historian David Levine, “was the motor-force in the revolution of production that created modern industrial society” (1987: 97). Coal fueled industrial revolutions in other European countries as well, although none was as favorably situated as England (Church: 758).

The coal age was, of course, the story of the steam engine and innumerable other devices and machinery, and of the science behind them, Newtonian mechanics. Fuel and machines together propelled the Industrial Revolution; coal needed machinery as machinery needed coal. The greatest example was the railway. Explained one historian:

With coal and the steam engine, Britain now had the necessary ingredients for one of the most important technological advances in the history of transportation: the railroad locomotive. In 1830, when the nation’s first major railway was opened between Liverpool and Manchester, Britain entered the modern transportation age. The first locomotive, called the “Rocket,” traveled as fast as 25 miles an hour. At a time when a loaded horse-drawn wagon needed not an hour but at least a whole day to travel 25 miles, the railway represented almost blinding speed. Many people wondered if the human body could endure the strain (Botticelli: 60–61).

Machinery must be invented, produced, and applied. Coal must be discovered, mined, and applied. All this cannot be done without incentives and financial capital, which point to the primary framework enabling the Industrial Revolution,capitalism, and the fuel of capitalism, reason.

Was capitalism’s industrial revolution good for humankind? The original interpretation, beginning in the 1880s, was that the manufacturing life in the cities was a step back for individuals and society.

Industrial life in the eras of Adam Smith, T. R. Malthus, and W. S. Jevons was certainly hard and fragile, and nowhere more so than in coal mining (Bald). But beginning in the 1920s, a less emotive and more factually grounded interpretation emerged—life, however brutish by today’s standards, was improving in the eighteenth and early nineteenth centuries. As tough as things were, productivity and wages were rising, more people were being born and surviving, and people were living longer.

Life in the country was as difficult as or more difficult than life in the city, explaining the migration to urban areas. Life in India and China, without an industrial takeoff, on the other hand, was plagued by disease, starvation and other “unmechanized horrors” (Ashton, 1948: 161). In relative terms, the Industrial Revolution—the “puberty of nations” (Landes: 132)—was better than life without an industrial takeoff. Industrialization did bring new problems such as air pollution from coal soot (Church: 780–82), but statistics confirm that health was improving overall because of increasing wealth.

Capitalism’s Industrial Revolution, and the machines and energy to run them, was a great human liberator. It is difficult to put a negative face on “the substitution of machines for human skills and strength, the developments of inanimate sources of power (fossil fuels and the steam engine), the invention, production, and use of new materials (iron for wood, vegetation for animal matter, mineral for vegetative matter), and the introduction and spread of a new mode of production, known by contemporaries as the factory system” (Landes: 132).

Jevons’s understanding of how coal gave England a comparative advantage in the world economy was reconfirmed by later scholars. Joel Mokyr (33), for example, observed: “Coal-rich Britain would focus on Newcomen engines, while coal-poor Switzerland would find economic success in precision-intensive low-energy industries such as watchmaking and engineering.”

Nearly a century and a half after Jevons first published The Coal Question, the end of coal has not come for Great Britain. The industry has just been downsized by intense interfuel competition from natural gas and oil. The world is swimming in known coal reserves and estimated (“probable”) resources. Proved world coal reserves at the beginning of the twenty-first century represent about 200 years of production at current rates (International Energy Agency: 121). The current reserve estimate of more than one trillion short tons is the highest ever and four times the estimate in the mid-twentieth century (Bradley and Fulmer: 89).

Globally, coal is by far the most abundant member of the carbon-based energy family. It is also more geographically diverse than crude oil or natural gas. China, India, the United States, and Europe are the major coal powers. The coal age could still be young—if political forces allow its physical abundance to be turned into actual usage in the decades and centuries ahead.

In terms of energy consumption, the global market share of coal in 2000 was 24 percent, second to petroleum (39 percent) and about the same as natural gas (Energy Information Administration: 85). In Jevons’s day, coal was catching up to wood in the world market, led by the United Kingdom. Jevons was correct to see the United States as the forthcoming coal power. In 1850 the United Kingdom produced more than ten times the coal produced in the United States; by 1900 the United States had pulled ahead, and by 1950 the U.S. produced more than twice as much coal as the U.K., a gap that would grow to almost thirty times by 2000 (Daemen: 464). As Jevons anticipated, the United States turned out to be a mighty coal province well after coal production peaked in the United Kingdom.

7.4 Jevons as a Malthusian

Jevons substituted coal for Malthus’s corn (Jevons, 1865: 150). Both Jevons and Malthus saw increasing scarcity from geometric demand growth that could not be matched by increasing productivity on the supply side. This was due to diminishing returns toward the individual unit (land or mine) whereby increasing units of labor and capital increased productivity (output) less than proportionally—and even negatively past a certain point. It also resulted from diminishing returns applied to all land and mines (such as within the United Kingdom) as explained by David Ricardo.

Jevons’s pessimism and, in the final analysis, alarmism, put him in the Malthus camp. However, neither Malthus nor Jevons feared absolute exhaustion. Malthus saw food production as increasing but at a slower rate than the demand for food; Jevons took pains to argue against the view that “some day our coal seams will be found emptied to the bottom, and swept clean like a coal-cellar” (1866: xxix). Yet a century after Jevons wrote, the name of Malthus became associated with the total exhaustion of a resource, as in the 1972 Club of Rome study, The Limits to Growth, the subject of chapter 9 in Capitalism at Work. In this sense Jevons was not a “Malthusian,” although the two are linked together in the history of economic thought (Peach: 1018; Mosselmans: 36).

Jevons, unlike Malthus, gauged supply in terms of its associated cost of production. Though Jevons underestimated how much improving technology and interfuel substitution would temper the demand for, and thus scarcity of, coal, his marginal cost approach was sound. Noted M. A. Adelman:

The ending of The Coal Question was alarmist, but the book was the real start of mineral economics. Jevons explicitly renounced the notion of running out of the stuff and posited the real problem as rising marginal costs. Then he went on to the determinants of cost: depth, thickness, water content, etc. He then made a primitive econometric analysis of British coal, showing the shape of the curve. He ‘forgot’ some things—increased knowledge of British coal geology and technological progress in both mining and use. But if energy economics had been pursued as a serious subject, the next generation would have caught and corrected his mistakes, and we would have ended up with a more reliable body of knowledge 75 years before we did. Well, that’s life (communication of January 23, 2003).

7.5 Precedent to Jevons

Jevons was not the first to question whether Britain could continue to meet its growing coal demand with low-cost supply. The first naysayer, as Jevons documents (1865: 1), was John Williams, whose 1789 tract, The Limited Quantity of Coal of Britain, was published nine years before Malthus’s An Essay on the Principle of Population. To this extent, “Malthusianism” began with energy and not population.

Jevons used well-established economic theory to work out the implications of increasing demand applied to a fixed but heterogeneous stock. David Ricardo (1772–1823) explained how “the most fertile, and most favorably situated, land will be first cultivated,” and how its value was greater given “the diminished returns … on the less fertile land” (1821: 49, 50). Ricardian rent—defined as the economic return to “the original and indestructible powers of the soil”—was something different from interest and profit, and it applied to mines, not only land (1821: 45).

Jevons benefited from Ricardo’s supply-side explanation of how the value of mines and metals change. In Ricardo’s words:

New and more productive mines may be discovered, in which, with the same labour, more metal may be obtained; or the facilities of bringing it to market may be increased…. On the other hand, from the increasing difficulty of obtaining the metal, occasioned by the greater depth at which the mine must be worked, and the accumulation of water, or any other contingency, its value compared with that of other things, might be considerably increased (ibid.: 86).

In the former case, the cost of mining and the price of the mineral fall; in the latter case—the one that Jevons several decades later applied to coal—the cost and price rise.

7.6 Unnecessary Alarmism?

How could W. S. Jevons, a gifted logician, mathematician, and statistician, and “one of the most genuinely original economists who ever lived” (Schumpeter: 826), so badly underestimate his country’s coal potential in The Coal Question? Why didn’t he revise his conclusions, at least partially (as did Malthus), as the decades went by? Petroleum came of age in the 1860s, and stories about natural gas were becoming more frequent. Other writers expressed confidence that science could effectively address the coal problem, but Jevons dismissed such optimism as unscientific (1865: 117).

In retrospect, the statistics of the day indicated that

Despite only small technical improvements in production methods, large and accessible reserves, a diversity of types and qualities of coal, a big labour force to draw from and improving means of transportation, coal supply managed to expand in line with the growing demand. This ensured that real prices remained relatively stable throughout much of the nineteenth century (Fouquet and Pearson: 18).

In a biographical essay, John Maynard Keynes documents how Jevons’s writings prior to 1865, some “half-baked,” had fallen short of winning the prestige or generating the income needed to continue his career as an academic. The result was the 1865 book “written to his extreme anxiety that his ideas should not be overlooked” (Keynes, 1933: 262). Keynes adds, “All the arts of showmanship are exercised to recall Political Economy from Saturn” (264).

Jevons was also a nonconformist who proclaimed his “protest against deference for any man, whether John Stuart Mill, or Adam Smith, or Aristotle” (Jevons, 1871: 276–77). His eagerness to differentiate depletable from nondepletable goods might have been inspired by this personality trait—but this required allegiance to Malthus.

As Keynes documented (1933: 266), Jevons hoarded writing paper in the belief that its future supply would become scarcer and more expensive. If Jevons was this concerned about timber, which is not a depletable resource (although property-right problems could make it appear to be so), it was quite natural for him to fear the future of coal.

Jevons appears to have been sincere in his effort overall. He was personally motivated to promote analysis and policies that were “good for the masses” (Harriet Jevons, 1886: 231). He said he would be “the first to rejoice” (1865: xvii) if he found reason to call off the coal alarm. At times he showed humility toward “the extent and complexity of the [coal] subject” (1865: xii). Leading intellectuals, such as John Stuart Mill and coal specialist Sir John Herschel, endorsed The Coal Question, indicating that it was the best thinking of the day. The government’s Royal Commission on Coal Supplies built upon rather than discredited Jevons’s empiricism and analysis not once but twice.

Jevons’s erroneous view of resources as a fixed stock rather than a flow from the inexhaustible ingenuity of humankind had a methodological underpinning. Jevons was more grounded in the natural sciences than the moral sciences (Black: 207–9). Economics to Jevons was about quantities, not purposeful human action, a methodological flaw. Instead of the subjective mind’s evaluation of quantities, Jevons focused on the physical itself. “Our science must be mathematical, simply because it deals with quantities,” Jevons wrote in his economics treatise (Jevons, 1871: 3). Had Jevons been more of a methodological subjectivist, he might have been more optimistic toward the future affordability of resources—or at least qualified his analysis more after the 1865 first edition.

A final explanation for Jevons’s fixed view of resources can be linked to the historical precedent of forest depletion. Why wouldn’t coal suffer the same fate as wood? Here, he failed to understand forest depletion as a property rights problem, a “tragedy of the commons.” When a resource is not privately owned, or where it is privately owned without clear legal rights, the asset does not have a capital (salable) value. Without this value, the market’s natural incentive for stewardship is absent. Thus short of government edict, the common asset is likely to be overused (become artificially scarce), and “depletion” can even turn into “exhaustion” (Rothbard, 1974: 181–89).

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