"I’m Sure Those Stupid Economists Have Never Thought of That!"

Paul Krugman explains why he is not as optimistic as as others that "human ingenuity and technological progress will solve all our problems":

Limits to growth and related stuff, by Paul Krugman: I’ve been getting some correspondence asking me where today’s resource concerns fit with the old “Limits to growth” stuff that received a lot of publicity 30+ years ago. Actually, there’s a bit of a backstory there.

In 1973-4, my junior and senior years in college, I was Bill Nordhaus’s research assistant, working on energy issues. (This is the same Bill Nordhaus who warned back in 2002 that the cost of the Iraq war would probably be a lot higher than the Bushies were letting on.) I spent much of the summer of 1973, in particular, in Yale’s wonderful geology library — though the real import of what I learned there didn’t sink in for a while, as I’ll explain in a bit.

Nordhaus, among other things, wrote a hostile review of Jay Forrester’s World Dynamics, which led to the later Limits to Growth. The essential story there was one of hard-science arrogance: Forrester, an eminent professor of engineering, decided to try his hand at economics, and basically said, “I’m going to do economics with equations! And run them on a computer! I’m sure those stupid economists have never thought of that!” And he didn’t walk over to the east side of campus to ask whether, in fact, any economists ever had thought of that, and what they had learned. (Economists tend to do the same thing to sociologists and political scientists. The general rule to remember is that if some discipline seems less developed than your own, it’s probably not because the researchers aren’t as smart as you are, it’s because the subject is harder.)

As a result, the study was a classic case of garbage-in-garbage-out: Forrester didn’t know anything about the empirical evidence on economic growth or the history of past modeling efforts, and it showed. The insistence of his acolytes that the work must be scientific, because it came out of a computer, only made things worse.

All this is old history. But there’s something else I learned from that summer, which is important.

Much of what I did back then was look for estimates of the cost of alternative energy sources, which played a big role in Nordhaus’s big paper that year. (Readers with access to JSTOR might want to look at the acknowledgments on the first page.) And the estimates — mainly from Bureau of Mines publications — were optimistic. Shale oil, coal gasification, and eventually the breeder reactor would satisfy our energy needs at not-too-high prices when the conventional oil ran out.

None of it happened. OK, Athabasca tar sands have finally become a significant oil source, but even there it’s much more expensive — and environmentally destructive — than anyone seemed to envision in the early 70s.

You might say that this is my answer to those who cheerfully assert that human ingenuity and technological progress will solve all our problems. For the last 35 years, progress on energy technologies has consistently fallen below expectations.

I’d actually suggest that this is true not just for energy but for our ability to manipulate the physical world in general: 2001 didn’t look much like 2001, and in general material life has been relatively static. (How do the changes in the way we live between 1958 and 2008 compare with the changes between 1908 and 1958? I think the answer is obvious.)

But anyway, while the Limits to Growth stuff of the 1970s was a mess, the history of energy technology doesn’t support extreme optimism, either.

Update: Krugman follows up here: Energy futures of the past.