Intro. [Recording date: September 9, 2019.]
Russ Roberts: My guest is Andrew McAfee.... His latest book is More from Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources--and What Happens Next.... The main theme of your book is a mouthful of word--dematerialization. It's not the prettiest word, but it's a really important phenomenon. What is it?
Andrew McAfee: Yeah. And we probably need to hire a good PR [Public Relations] firm to find a better word, and a shorter word, for the phenomenon. But, can I back up and explain how I became aware of it and what led to this book?
Russ Roberts: Sure.
Andrew McAfee: You know, like you, I spend a decent amount of time on Twitter, and that's where I get a lot of leads and pretty good ideas. And I was idly scrolling around--I think in 2015 or 2016--and I came across a tweet about an article called "The Return of Nature: How Technology Liberates the Environment." And I had to click on that. I do technology for a living. And it led me to an essay by Jesse Ausubel, who has been a guest on your show as well--
Russ Roberts: Talking about that article--
Andrew McAfee: talking about that article. And instead of some happy, clappy, vague thing about technology and Mother Earth, Jesse is, like you know, is a very, very rigorous guy. And he loves to count things. And what this essay was really about was him making the case that year by year in America we were using fewer molecules. Less material. Our economy was dematerializing, was the word that he kept using. And, it's kind of a striking point. And I didn't honestly believe it at first, because I walked around with this really unquestioned assumption that, as an economy grows--you know, America's economy has been growing at this relatively steady exponential clip for a long time now--and as a population grows, you know, we have to use more stuff to build that ever-growing economy. You know; and I would have said--yeah, of course, we use more steel, more after, year after year, more cement, more paper, more timber, more energy. Yanno: Duh. And, what Jesse was saying was, 'No, not any more.' Something changed. And our consumption of the lot of the most important molecules or materials in an economy had plateaued and was now generally trending downward. And I'm like, 'What?! That just doesn't work with my understanding of growth. Or business. Or anything.' And, so, I read the essay very, very carefully. And then I started to double-check his sources. And he did a great job of pointing to all of his sources. And I reached out to him, and he was lovely about replying. And I thought, 'Oh, my heavens: He's right. And, if anything, he's being too circumspect about this phenomenon. This is at least as big a deal as he's talking about.' And, it deserves an explanation. It deserves a full explanation or accounting about how this pretty profound change happened in our economies and our societies, and I think most fundamentally in our relationship with the planet that we all live on.
Russ Roberts: And, just to take a similar piece of good news: It's not just that the proportion of poverty of the world--citizens, the proportion of people who are poor--has fallen. There are actually fewer poor people. And, that's an extraordinary achievement in a world where there's a lot more people. And, your point, and Ausuble's point, is that it's not just we're using fewer dollars, less volume per dollar of GDP [Gross Domestic Product]. That would be an achievement. That would be impressive.
Andrew McAfee: That's productivity. Maybe we kind of expect that.
Russ Roberts: Yeah. But, it's absolutely less. And that is a stunning achievement. And it's not well known.
Andrew McAfee: And, that's why I decided to write a book about it. And you bring up this fundamental point which I also included in the book that, it's not just that the percentage of people around the world living in dire poverty has decreased. The absolute number of people living in dire poverty around the world has decreased. Like you, I spend a lot of time at this wonderful website called "Our World in Data." And, they did this beautiful essay about extreme poverty and showed all the numbers. And there are fewer people--not smaller percentage--fewer people living in extreme poverty today probably than there were 200 years ago. This is absolutely extraordinary. But, you can look at the growth in population and the growth in affluence over, you know, the past 50 years, since the first Earth Day in 1970, and you could think, 'Okay. That's good news for humanity. Yay, us.' But, we have to be beating up the planet more, year after year, in order to fuel that growth. We have to be taking more from it, polluting it more--just treating our earth more poorly. And I want to be super-clear: We have not--I don't think that we have yet achieved absolute dematerialization in the developing world and low-income countries. I am very sure we have achieved it in the United States, which is 25% of the economy. From the data that I've seen, I'm pretty confident that we are at or near that point in a lot of the rest of the rich world. And, one of the conclusions from this, and one of the things I try to say in the book, is: 'Gang: The implication is really, really clear. We have to help the rest of the world get rich. That will bring them past that hump of maximum exploitation of the planet. And they're going to start to dematerialize, as well.'
Russ Roberts: Yeah; but in the background of these kind of stories--and I use that word 'stories' loosely because I think it's mostly facts--but, there are stories that use facts; that's a good idea. There are fantasies. But there are other stories--
Andrew McAfee: Like, you know, we human beings love narratives. We love to tell a story. But, let's make it a story that lines up with the evidence, with the facts.
Russ Roberts: What I love about this story--both pieces of it that we've started talking about, the use of resources and the fall in absolutely poverty, is, it reminds people something that is not intuitive, which is: The world is not always zero sum. There are places where the world is zero sum. There are places where economic activity means some people gain and some people lose. And we'll get into some of that along the way, I suspect. But it's really important to remember that that can't be--that can not be--the most common phenomenon, because otherwise the world's standard of living on average would be the same as it was a thousand years ago, 500 years ago, a hundred years ago. That the only way in this zero-sum world that people would get wealthy would be by impoverishing others.
Andrew McAfee: Impoverishing somebody else. Right.
Russ Roberts: The fact that enormous numbers--billions of people--are better off than they were 20 years ago, 40 years ago, certainly centuries and millennia ago, means that economic activity need not be zero sum.
Andrew McAfee: And, I think it's really important for people like you and me to keep stressing that, because it is pretty counterintuitive. It's kind of easy to walk around thinking, if I'm getting rich, somebody else must be getting poor. 'We live on a finite planet. That means that our economy, our prosperity must be finite. And there must be some kind of beggar-thy-neighbor economic growth going on.' And the thing, Russ, that I've always loved about your work is that you keep driving home the correct point that that is not true. Where there are so many more people than there were 50, 100, 200 years ago, there is so much more affluence than there was at any earlier point in time. And then the point that I'm trying to make with this book is that, while those things are going on, we are in the process of turning a really, I think, a fundamentally important corner, and now learning to tread more lightly on our planet. As opposed to the pattern that held throughout the industrial era, which is: Human prosperity increases but we kind of beat up on our planet. We dig more mines; we chop down forests; we clear more crop land; we polluted; we wiped out animal species. And, we're not out of all of those woods yet, but, wow, are we doing a better job now.
Russ Roberts: And it's just radically different. Let's start with a little bit of history. Not too much. I'm more interested, probably, than some of the average listeners. But, I want to talk about three people in the history of economics and economic thought who worried about these issues. That would be Malthus, William Jevons, and Alfred Marshall. Now, I just have to preface the Malthus part--I'll let you expound on Malthus as you do in the book--but, it's important--well, go ahead. Start with Malthus. He's a doom-and-gloom kind of guy on paper, at least.
Andrew McAfee: Yeah. He's the original gloom-and-doom kind of guy, right? Because he wrote this essay right at the end of the 18th century where he essentially said, 'Guys, I've done the math and most of us are going to starve and there's nothing we can do about it.' And the point he was making is that if you don't put any checks on it, human populations tend to grow exponentially--you know, 2 people, 4 people, 8 people, 16 people. And then Malthus stated, without a lot of supporting evidence, but he stated that our ability to grow food did not increase exponentially. It only increased linearly--2, 3, 4, 5, 6. And he said, 'Guys, do the math. That does not look very good for us.' And he brought up this term: he called it vibrations or oscillations, and he said, 'The way this has worked, and the way it's going to continue to work, is that population goes up; and then we exhaust our ability to take more from the land--more food, more whatever. And as a result, we starve; we have bad things happen. And our population goes back down. And it's only when that population goes back down that the land can give us enough that we can then be prosperous: We can have more kids. Population starts to go back up.' So, he essentially described this really unhappy pendulum between high population and low prosperity, and low population and high prosperity. And one of the crazy things that I learned when I was researching the book was that Malthus was a deeply lousy forecaster. And we can--I'm sure we'll talk about this: He was one of the world's worst forecasters. He was actually broadly correct as a historian.
Russ Roberts: Absolutely. He gets a raw deal. He had deep insight--
Andrew McAfee: Yeah. He was half right, in a really important way, at a really important juncture in history. He just happened to write his essay at exactly the wrong time.
Russ Roberts: Yeah.
Andrew McAfee: But he didn't do any actual historical analysis. Other people have done that analysis; and I'm sure you've had a lot of them on your program. Gregory Clark has one of my favorites, because he does this really, really beautiful digging over long periods of time about population and prosperity. So, I include in the book a graph that Clark drew that examines prosperity versus population from 1200 to 1800 in the United Kingdom. And it worked just like Malthus said it did. We were--there were lots of English only when they were super-poor; and there were more prosperous English only when there weren't very many of them. And the population kind of swings back and forth by a factor of 3 over the course of the centuries. Things got a little bit better in the 1700s because of improved agriculture. But, throughout the 1700s, by Clark's estimates, the average Briton was worse off than they were in the year 1200. We just lived in this kind of Malthusian trap kind of a world, up until--drumroll, wait for it--up until the Industrial Revolution.
Russ Roberts: So, let's turn to, now, what--a number of things that you point to in specific that changed how we can get food from the earth, for starters, and many other aspects of prosperity. But, the steam engine changed everything. And it's not obvious--it wasn't obvious when it was created that it would. And it wasn't obvious probably for quite a while. And I think most people would struggle to think how it did change everything. For me, I think about things like, 'Oh; there were trains that could take things around.' But that's certainly not--
Andrew McAfee: Exactly. We could make fabric more quickly because you had factories with steam power in them.
Russ Roberts: Which helped. But that's not the main part of the story.
Andrew McAfee: That's not the main part of the story. And, I didn't understand this at all until I started writing the book, because, you know, I walked around--based on previous books that I'd co-written with Erik Brynjolfsson and previous work that I'd done, I came to the conclusion that the Industrial Revolution did in fact change the course of human history like nothing before or since. You just have got all kinds of evidence that makes that point. And then, the broad reason why it was pretty clear, was that up until then, the only energy sources we could draw on were our muscles, muscles of domesticated animals, wind power, and falling water to drive a water wheel. And then all of a sudden the Industrial Revolution comes along and we can take advantage of these crazy amounts of energy stored in the earth's fossil fuels. Okay; great. Like you just pointed out, that misses kind of an important step: What exactly allowed us to massively increase both our population and our prosperity, because we could draw on fossil fuels? Is it just that we had trains? Is it just that we had factories? And, for me, the fundamental answer was No: What allowed us to escape that Malthusian trap was the fact that our agricultural productivity skyrocketed after the steam engine, after the Industrial Revolution. And, at first, I'm, like, 'Hold on. I don't get the link there.' And I thought, 'Oh--we had steam powered tractors.' And it turns out people built a couple of them; they were terrible, because they were extraordinarily heavy; and English farms, like all farms, are really muddy places. So, that wasn't it. Now, one of the most fascinating things that I learned when writing this book is that the Industrial Revolution is an agricultural story in large part because of fertilizer. Because of things like sodium nitrate in the deserts of Chile; guano--bird droppings--off the coast of South America; bone deposits all over the world. And what the Industrial Revolution actually did was allow us to build steamships that would go down, grab that fertilizer, bring it back, put it in an English factory that turned it into really powerful fertilizer; move that factory via a steam-powered train out to the farms; and then, when you fertilize a farm properly, it turns out the productivity of that farm skyrockets. And you essentially get out of the trap that Malthus identifies. You can actually feed exponentially increasing numbers of people. And you can feed them a better diet over time. This, to me, was kind of an 'Aha!' moment as I was researching and writing the book.
Russ Roberts: Yeah; and the presumption would have been--and I think it is in the minds of most of us--that if you are going to have 7 billion people, most of the earth's surface is going to have to be devoted to agriculture; and so much of it isn't suitable. It's either ocean, or it's mountain, or it's too rocky to farm. And we push everything to feed the world's people: we would have to push everything into agriculture. And, of course, the opposite has been the case.
Andrew McAfee: Yeah. And again, in particular in the rich world, where we have lots of technology; we have very strong institutions so that nobody can come in and just take your farm away from you; and we have a lot of competition, so that farmers really want to economize on land, rent, and fertilizer and stuff like that. A crazy thing has been going on, and I've got a graph in the book that shows this, I think, very, very clearly: The tonnage of total crops produced in America keeps going up. We're an agricultural powerhouse. The total tonnage of American agriculture keeps going up, while we use less fertilizer in total, year after year, less water for agriculture year after year, now. And, since about the early 1980s, we have given an amount of farmland back to nature equal in size to the State of Washington. That land is no longer economically productive or a great idea to farm, so the total--again, the total footprint on our planet, in just about all the ways that matter, is going down while our output, while our affluence, is going up. And we see this reflected lots of different ways. The rich world, for example, is generally reforesting, because we just don't need the land for farming any more. So, as you point out, a lot of these really dire estimates that we've been making in the past, they turn out to be wrong because of this one-two punch, I believe, of innovation--you know, 'Eureka!' coming up with things over and over--and, really intense competition that spurs companies to take advantage of all this innovation.
Russ Roberts: And force them, through that competitive process, to share the economic benefits with customers rather than just having higher profits. And I think that's another part of the story that doesn't get fully understood or fully appreciated.
Russ Roberts: But, I want to just mention--I want you to just mention--in passing, because there are so many other things to talk about that are interesting. But I mention Jevons and Alfred Marshall. This show is called EconTalk. So, we should probably mention why they are in the story. Talk about what Marshall and Jevons' insights were, and why one was right and the other was probably not right.
Andrew McAfee: Yeah; and like you, I share this super-nerdy love of really rich chapters in economic history. So, after the Industrial Revolution had been kicking along for, maybe, 75 years, a guy named Stanley Jevons [William Stanley Jevons--Econlib Ed.]--
Russ Roberts: Is it Stanley William? William Stanley? Did I?--
Andrew McAfee: We should go look this up, but it's one of the things we [?]--I think it's William Stanley--
Russ Roberts: We'll look it up while you're talking. Go ahead; you go ahead.
Andrew McAfee: So, we're just going to call him Jevons. Jevons wrote this book called The Coal Question. And, he kind of threw water--he kind of rained on the parade of the Industrial era, because he said, essentially, to his countrymen and England, 'Gang, the good times are going to stop and there's nothing we can do about it.' And he made a really interesting point. He said, 'Look, we're becoming fantastically wealthy because of steam power and because of coal. And, we have plenty of coal right now.' But, he said, 'I've looked around at how much coal the country has and how we're going to increase our use of it. And again, the math looks pretty dire. And we're going to run out of coal,' I think he said within the next hundred years of the time he was writing. That's piece of bad news Number One. Piece of bad news Number Two was he said, 'We cannot solve this problem.' And, what he said in particular was wonderful, he said, 'We can make more efficient steam engines. But that won't decrease our overall use of coal.' Because, what he said, which is broadly correct in a lot of cases, is that, when you decrease the price of something--and in this case, the energy that you get from coal, what will happen in many cases is that you will use more of that thing overall, not less. You won't economize, because when the price goes down, you keep finding more and more uses for it. So, when steam power from coal was relatively expensive, you used it for great big factories and you used it for coal mines--maybe for taking the water out of coal mines.
Russ Roberts: Extraction; yeah.
Andrew McAfee: But what Jevons said was, 'When steam power gets cheaper, Holy Toledo! We're going to find more uses for it. We're going to put it on boats. We're going to put it on trains. We're going to put it on small, little factories. We're just going to dot more and more steam engines all over the economy. And as a result, our total use of coal will not slow down. It won't level off. It will keep going up.'
Russ Roberts: And, of course, it's an empirical question of whether that fully offsets, somewhat offsets: it could just mitigate it. But, it's working the other direction. He's right about that.
Andrew McAfee: Yup. And, at the time he was writing, he was absolutely correct about that. And what a modern economist would say is that Jevons was just discussing the price elasticity of demand, which is a thing that economists think about all the time now. So, he gave this kind of gloomy view. And, if you wanted to push back and find a little room for optimism in the 19th century, you might say, 'Okay, but doesn't there come a point at which we human beings just decide that we have enough?' You know: We get more affluent; you can't eat 20 meals a day. Twenty houses don't do you very good. You can't take 600 train trips a year. So, could we get to a point where our desires are kind of satisfied? And, as a result, our economy levels off; and our exploitation of the earth levels off? And so, you could walk around thinking that until Alfred Marshall comes along and says, 'Actually, no. That's just not how it works, at all'--
Russ Roberts: Around 1900.
Andrew McAfee: Right around 1900, with that foundational book, Principles of Economics, that he wrote. He said, 'That misunderstands human nature.' And, for all the things that we lionize Marshall for--like you know, he's a giant in the field of economics, to me the thing that he got most deeply right was that human wants and needs just don't seem to level off. And I put this passage from his book in More from Less, where he just beautifully articulates that, as we get more affluent, we actually want even more. We want more of the things we already have. We want better things than we currently have. And--this was his deep insight--some clever innovator, entrepreneur, or marketer is going to figure out that we want things we haven't even thought of yet. And is going to offer us those things; and we'll say, 'Heck, yeah.' And, as a result, Marshall was saying, was kind of economic growth will continue, because our wants and needs will continue to grow. But the clear implication from that, if you follow Malthus and Jevons and all the stuff that we'd been thinking about up until then, is that we're going to continue to take more and more from our finite planet over time. So, you put all those ideas together, and as we head into the 20th century, you've got this kind of gloom review about how we're going to beat up our planet as population and prosperity keep increasing.
Russ Roberts: Yeah; and I just--you know, your example--you can't take 600 train rides or you can't eat 20 meals--so, it's true you can't eat 20 meals a day. Well, you can, but most of us--that, we don't want to. But what we do want is better food. We want fancier food. So, we might only want--we're only going to ride in one car at once; but we might own two or three. But we're not going to own 40. But of the two or three we own, there's almost a limit to how much we can improve them. Glorify them. Fancify them. Use them as a form of prestige, or just high quality. And that's true across the board. And the most important point, of course, is the last one, which is: New stuff comes along that we couldn't have imagined, that we can now afford--because we've saved resources elsewhere. And we love those things. We're doing one of those things right now: You're listening--listeners, most of you are listening on your smart phones using an app like iTunes. That's an incredible thing that was unimaginable 20 years ago. Twenty years ago! Fifteen years ago--whatever it is. That's a--you know, no one would have said, 20 years ago, 'Boy, I think we need a way to listen to people talking over the Internet.'
Andrew McAfee: Right. Right. Via our phones, without any physical media--with a compact--where's a compact disk [CD] that you're listening to this thing called a 'podcast' on? This stuff is just crazy. And, to take it back in time, it would be hard to impossible to imagine the volume of commercial air traffic or air travel that happens now, back when we were still in the age of steam. So, innovation keeps happening, technology keeps happening. Innovators and entrepreneurs have these eureka ideas about things that we might want. We keep growing the economy. We keep growing our prosperity. But, the assumption has always been: We keep taking more resources. We keep treating our earth more and more poorly as we go about satisfying all these wants and needs.
Russ Roberts: And eventually, this beautiful, this treadmill--not beautiful--this treadmill of excessive consumption will end up--first of all it will come to an end because we'll run out of stuff, and secondly, it will have dire consequences for all other aspects of our lives. The skies will continue to get darker from pollution as we try to enjoy all this consumption.
Andrew McAfee: Yep. And, one of the things I did for this book was go back and read a lot of the most important, most popular books and articles written around the time of the first Earth Day, in 1970, which was really the dawn of the environmental movement in America and around the world. And, man, it was a gloomy time, because people were laying out the argument that you just laid out. And you could look at America's use of resources over the course of the 20th century up until about 1970 and you would have a lot of justification for that line of argument. Like, we're going to continue to use more and more, and this is going to come to a really bad end. Because, I include in the book, graphs of how much fertilizer we used year after year, how much metal, how much energy we use to drive an economy. Year by year from 1900 to 1970, the economy has this kind of, you know, ski-jump look to it: We grew very quickly but so do all the graphs of our total resource use over this 70 year period. We just had this kind of Cookie Monster, 'Um-nom-nom-nom-nom,' economy. We were just voracious about using up the earth. And, it's really understandable why people would start blowing the whistle really hard around 1970, and saying, 'Gang, we cannot keep doing this.' I didn't realize this, but the picture "Earthrise"--you know the picture that we've all seen of that half earth, that astonishingly beautiful, bright blue, wrapped in clouds, rising over the surface of the moon that was taken in 1968? People pointed out: that's when the sense of the space age changed from what it means for all these rocks out there--rocks and stars and space--to what it means for this astonishing blue thing that we all live on. And that was one of the driving forces behind this day-long celebration, or day-long festival, in April of 1970 called Earth Day. Which, you and I are old enough to remember some of this stuff. A lot of people are too young to remember how big a deal the first Earth Day was. And, the dominant thoughts of the environmental movement that grew up around it.
Russ Roberts: And I have a few quotes from the book. I'm going to read a couple of them, because they are--I think, actually, I was going to say because they are entertaining. I think they are more than entertaining. I think they are very important to be aware of how people felt around this time. I might read--let me read a few of them. These are from various sources [See More from Less, p. 61, for sources--Econlib Ed.]:
"Dr. S. Dillon Ripley, secretary of the Smithsonian Institution, believes that in 25 years, somewhere between 75 and 85 percent of all the species of living animals will be extinct."
These are all quotes from around the 1970s. Here's another from Pete Gunter, a professor:
"Demographers agree almost unanimously on the following grim timetable: by 1975, widespread famines will begin in India; these will spread by 1990 to include all of India, Pakistan, China, and the Near East, Africa.... By the year 2000 or conceivably sooner, South and Central America will exist under famine conditions. By the year 2000, thirty years from now, the entire world, with the exception of Western Europe, North America, and Australia, will be in famine."
That turned out to be wrong--
Andrew McAfee: Yeah. And that's kind of a serious understatement on your part, right?
Russ Roberts: Yeah. Yeah. Two more. Life magazine:
"By 1985 air pollution will have reduced the amount of sunlight reaching earth by one half."
And, finally, Nobel Prize winner George Wald estimated, around that time, 1970:
"Civilization will end within 15 or 30 years unless immediate action is taken against problems facing mankind."
And I'm going to--that's enough of the quotes. I want to make it clear for my listeners who are worried about climate change: You are, too. And we're going to come to that. The point of this is not to say that all pessimism is foolish. But, it's close to that, at least for me: that a lot of pessimism is misplaced or foolish.
Andrew McAfee: And what's fascinating is, I think we have some insight now about which flavors of pessimism are misplaced and which ones are not. So, if we look at those thoughts around the time of Earth Day, and the things that the first wave of the environmental movement was concerned about, I think they were kind of two for four. Because, as I looked at it, they seemed to be making four points over and over again. There are too many people; we have to control population by fiat, by central planning, by coercive means, if necessary. That's Number One. Number Two: Because of growing populations, we are going to run out of resources; and whether those resources are metals or minerals or cropland or whatever, we're flat going to run out. Number Three was: We have to stop polluting the planet. And, that came up in at least one of your quotes. And, Number Four: We are driving animals to the brink of extinction or to the point of extinction, and we need to stop doing that. So, as I look at those four things--and they were said in all different combinations--the reason I say that the first wave of the environmental movement was two for four, was: They were right about pollution. And, Russ, I know you and I both love market mechanisms and we're huge fans of decentralized, market-based economies. But, one thing I try to say in the book repeatedly is: It's way too naive to think that markets are going to deal with pollution on their own. That's chapter 2 of your econ 101 textbook: we need to intervene to drive down pollution levels. And so, the environmental movement was deeply correct about that. And, we've been successful. That's something people really underestimate. Pollution in the United States in almost all areas that you or I would care about is a small fraction of what it was in 1970. And then the other thing that the environmentalists pointed out to us is: We should stop killing our fellow species. And so, harkening back to the conservation movement and then the environmental movement, we took species that were at the brink of extinction--and, I'll talk about the United States, because that's where I know the evidence best. There were some, you know--the black bear, the Canada goose, the white-tailed deer, the beaver--these animals that we just think of as with us and sometimes pests in suburban environments--we had almost wiped them out, because our populations were so hungry for protein--
Russ Roberts: As we had wiped out other species, which you are very explicit about, that: this is a big problem--
Andrew McAfee: This is a big problem--
Russ Roberts: It's not like, "All of a sudden, we've got this problem in the 19th century.' No. We killed off a bunch of stuff--
Andrew McAfee: We killed off the Passenger Pigeon. We flat wiped that thing out. It was an incredibly abundant bird in North America. There are none of them any more. We came within a whisker of wiping out all the bison in North America. So, what the conservation movement, and then the environmental movement, said that was so important was: We need to stop polluting. And, we have to put measures in place so we don't wipe out other species. You know: the market will pollute if we let it. And the market wants all the inputs. And, you know, let's not make those animals an input to the market any more. The things that they were wrong about were the population crisis and the resource crisis. And the story of why they were so wrong about that is, I think, just a deeply instructive story.
Russ Roberts: So, let's turn to that. Before we do, though, I want you to summarize the range of dematerialization that's taken place. Early in the book, you have a number of charts that show, you know, what I would call a 'de-linking' from GDP [Gross Domestic Product] or the economic activity would be the right way to say it. The charts are GDP--not per capita; very important. Total. Total GDP, the total dollar value of economic activity, until about 1970, rises in lockstep, more or less with resource use. Suddenly, it appears--it looks--some time around 1970, there's a decoupling, a de-linking where either resource usage grows much more slowly than economic activity, or actually declines as economic activity continues to rise ever higher. So, give a range--give us a flavor of some of the measures of resource use that you're talking about that show those trends.
Andrew McAfee: And, one of the ways that I built on Jesse Ausubel's work, and the work of his colleagues, was to take some of the graphs that he drew and add that all-important line to it of the size of the overall economy. Because, when you do that, and now you can draw graphs instead of 1900 to 1970, you can draw them from 1900 to about 2015. And, you just see that the economy just continues to look like a ski-jump: it just grows exponentially. But, as you point out, our aggregate use of a lot of different kinds of resources, around 1970, starts to decouple. It starts to not go with them lockstep with growing the economy. It starts to grow more slowly. And then in a lot of cases, it starts to decrease in absolute terms. And the range is really broad here. It goes from metals that are pretty important for an economy: iron, steel, copper, nickel, gold. It goes to fertilizer. It goes to a lot of different minerals that we put into an economy. It goes to paper and timber. The year of peak paper and timber in America was actually 1990. And we're using, I think, between 30% and almost half less of those things than we were in 1990. To me, one of the most shocking graphs that I drew and that I included was total energy use in the country over that period of time. And, as you say: Absolute lockstep between growing an economy and using more energy year after year. But, the total energy use in America has been essentially flat from 2007 up through 2018. That is astonishing to me. Our economy is much, much bigger than it was before the start of the Great Recession. Our energy use in 2018 was absolutely just a tick, maybe a quarter of a percent bigger than it was over a decade ago. You know, this is a deeply weird--it is a positive phenomenon. But it's deeply, deeply weird phenomenon. And, when I looked, the U.S. Geological Service tracks about 72 different minerals--different things that you make an economy out of. I believe all but 6 of them now are past the peak, and we are now experiencing dematerialization in them. So, by far, the biggest of those 6 is actually gemstones. We Americans love bling. We love more bling year after year. So, gemstone use is not yet declining. But, most of the other molecules that you build an economy out of are on the decrease. A big exception here is plastics. Plastics are incredibly useful for a lot of things. But, plastic consumption used to be growing more quickly than GDP for the overall economy. Now it's growing less quickly. I think we are going to hit Peak Plastic in the United States before too long.
Russ Roberts: So, this Peak thing is really important to understand clearly, because, in the early days of EconTalk I got a lot of emails from people who wanted me to talk about Peak Oil. And, Peak Oil was this idea that we were going to, basically, hit the point where the amount of oil left in the earth would be declining--well, it's always declining because it's finite, more or less, effectively--and so we are able to offset that by finding new sources of oil and new reservoirs, but eventually we are going to be in the downward part where the reserves are not expanding fast enough to offset the usage; and that has dire consequences. Now, I've always believed that that was unimportant. But not for the reasons we are going to talk about. I thought that was unimportant because that's what prices are for. If that's true, prices are going to start to rise, discourage usage, look for alternatives, etc. But, something else happened, which was not foreseen--by me or anyone else, or few people, anyway--which was fracking, a technological innovation that radically changed how much oil and mostly, and also natural gas, very important, that we could get out of the ground. So, when we say we've hit Peak usage of all these various resources, normally that would be, 'Oh, my gosh; we're going to get poorer,' because we don't have as much available. There's not as much being used. So, therefore--the interesting part of this, just to make it clear because it's not--it's a little subtle--is that the peak, as you point out in the book, comes from a change in demand, not a change in the supply and availability--
Andrew McAfee: That's right--
Russ Roberts: Which means we can use less of these things and have a higher standard of wellbeing.
Andrew McAfee: That's absolutely right. And, like you say, it's kind of a subtle point. But, Peak Oil is this wonderful Exhibit A for this phenomenon. One thing I learned researching the book that the U.S. GAO [Government Accountability Office], which is kind of this important body that tries to get the facts straight and inform Congress, put out a report in 2007 called "Crude Oil: Uncertainty about Future Oil Supply Makes it Important to Develop a Strategy for Addressing a Peak and Decline in Oil Production." So, 12 years ago, we were still, in earnest, worried about this thing called Peak Oil, which was this point that envisioned in the future where our ability to suck more oil out of the earth was going to reach a maximum and we could only take less oil year after year. You know, for an oil-based global economy, that's a really, really scary prospect.
Russ Roberts: It's a good worry.
Andrew McAfee: Yeah. It's the kind of a thing we should have our eyes on. And the U.S. government did have its eyes on it. A story I didn't put in the book was, I have a friend who was working in energy policy in the White House at that time in the Bush II White House; and, he's from Texas. And he said he got a call from his dad one day in about 2007 saying, 'Hey, somebody wants to buy my mineral rights to do this thing called fracking in the area.' And my friend, who had spent his entire career doing energy, said to his dad in 2007--this is a guy inside the White House with access to the, you know, all the government's best ideas and information about the energy balance--he said, 'Dad, this is an old person's scam. Don't sign up for anything.' So, we took this idea very, very seriously. And that 2007 report from the GAO does not have the word 'fracking' in it, or 'hydraulic fracturing.' It doesn't appear anywhere. And, in retrospect, that looks like a pretty serious omission 12 years ago--
Russ Roberts: Twelve--
Andrew McAfee: Because, as you point out, this fracking revolution happened and has changed the world's energy supply. And, it just goes to show that fundamental technological innovation can be a very, very hard thing to predict. But it kind of goes in one broad direction, especially when you combine it with really, really tough, contested markets. It goes in the direction of letting us get more from less--of productivity. If fracking were more expensive, we would not be doing it. As you keep pointing out. That's what prices do for us. And so we now talk--we continue to talk about Peak Oil, but there's been this complete inversion. When industry insiders talk about Peak Oil now, what they're usually referring to is the year when global demand--demand--for oil will peak. And there are different estimates from that. But that's the discussion about Peak Oil, now. It's been turned on its head.
Russ Roberts: So, I waylaid you for a minute. I derailed you. So, when we talked about some of the other factors, I want to just let you continue talking about what some of the other examples of where we are using less. So, you mentioned metals. Now you've mentioned energy. We've talked about farmland before. What else? Anything else I'm missing? Anything big?
Andrew McAfee: The list of stuff--we're in America, and the only reason I keep harping on America is we have really good, systematic data going back to at least 1900, thanks to the USGS [United States Geological Survey]. In America there appear to be only a handful of physical resources that we are using more of, year after year. Most of them have declined. Things like energy--I think petroleum has basically leveled off. We're still going up in plastics. But the broad--it's not just that there's been a deep dematerialization of the economy. There's been a very, very broad dematerialization of the economy as well. Somebody else pointed out the same thing was true for the United Kingdom. To the extent I've been able to get decent data for the Eurozone, a lot of the same thing is happening there. So, I'm very confident about the situation in America. I'm cautiously confident that this is a pretty broad, rich-world phenomenon. Not yet a low-income country phenomenon, but as we said earlier: Let's help those countries get rich. They will go through the Peak stuff and start to dematerialize, as long as we have these twin forces operating. And my explanation for why dematerialization is happening is about these twin forces of tech progress, and, in the book I say 'capitalism,' because that encompasses a bunch of things. But, think about it as really, really intense competition combined with property rights and contract rights and the things you need to actually make you innovate because you think you'd be able to keep the rewards of that innovation. While you also face nasty competition.
Russ Roberts: So, alternatively, one might believe that--and one would be led to this belief by looking at the charts--it would be somewhat reasonable to look at the charts, of which there are a number--not too many. And I also want to tell listeners that there also aren't that many pages on Marshall and Jevons and Malthus. So, even though--
Andrew McAfee: This is not a book about economic history--
Russ Roberts: Yeah. Even though Andrew said he likes to nerd out on that like me, the truth is, it's not an important part of the book. So, if you're not one of those nerds, do not be discouraged. You can still enjoy the book. Trust me. A lot of fascinating stuff in the book. And most of it unrelated to the History of Economic Thought--
Andrew McAfee: to 19th century economics.
Russ Roberts: I won't put in that ad for you, Andrew.
Andrew McAfee: Thank you for that.
Russ Roberts: So, but looking at the charts, one would be prone to commit what, one of my favorite fallacies--Post hoc, ergo propter hoc: After this, therefore because of this. And so, you would look at the data and you would say, 'Wow. Right around 1970, a lot of these trends started.' I have to add, by the way, that according to many economists, the 1970s were our most prosperous time. I think those people are wrong--as listeners are very well aware. But, you could look at this and say, 'Something changed in the 1970s, certainly with respect to this resource-usage/economic-activity connection. And obviously that's cultural. Earth Day came along and changed the way people looked at the world.' That's a--and if you were an activist or an environmentalist, it's certainly a plausible argument. It seems to be supported--it is supported by the crude looking at the data. And you point out, which, I'm just going to give this list here, and then I'll let you expound on it--you said there were really four recommendations from Earth Day that, going forward, which you call CRIB--C, Consume less; R, Recycle; I, Impose limits; B, go back, back to the land.
Andrew McAfee: Right.
Russ Roberts: And so those four ideas, which a number of people embraced in varying degrees, varying numbers of people embraced in varying degrees--some people did go back to the land; lots of people began recycling and continue to recycle to this day. I have a son who calls himself a minimalist. It's a little bit of an illusion: He's not really living in a loincloth with a fire in a cave, which is, I think, the real minimalism. But he tries to consume less; doesn't like to have multiple things: he thinks he doesn't need them; and so on. All these things are part of our culture. And some of them did come from Earth Day. And you could argue, and that's what saved, or is going to save, our environment. Why are they wrong? You think they are wrong.
Andrew McAfee: Yeah. And I think they are demonstrably wrong. So, I point out this CRIB strategy: If we want resource use to go down, if we want to save our planet from ourselves, we have to voluntarily decide to consume less. That's the C. We have to recycle. That's the R. We have to impose limits on pollution, on animals, on our own consumption, that's the [?]--
Russ Roberts: population
Andrew McAfee: Population. Absolutely. And B, we have to walk away from this technologically sophisticated economy that we've built. Which is eating up the planet--
Russ Roberts: poisoning us--
Andrew McAfee: poisoning us and eating up the planet--and go back to the land. So, that's the CRIB strategy. Let's quickly look at each of the four of those. Have we, as a people--and again, I'll talk about America--have we voluntarily decided to consume less? Man, you look at the economic growth statistics: it is really hard to make that case. Economic growth has slowed down a bit since 1970, but that's only the post-War decades had really, really fast economic growth. I have trouble accepting that Americans as a whole have decided to adopt your son's less materialistic lifestyle. We haven't all turned into any flavor of Buddhist monks. Americans like their stuff. Russ, like you know, every serious book that talks about America has to include a de Tocqueville quote. So, one of mine is, he points out how fond Americans are of their material comforts and their things. We haven't turned our back on that. So, I really don't think that you can make the case that we, as a society, have decided to consume less--even with really recent phenomena like minimalism and mariecondo[?] and stuff like that.
Russ Roberts: Yeah. Correct.
Andrew McAfee: We have recycled. Recycling is kind of a big business in America. But, it's important to be clear: Recycling is a different phenomenon than dematerialization. Dematerialization is about total demand for things like plastics and paper and metals. Recycling is about how we produce those metals and paper and plastics. We produce them by recycling, in many cases. The point I want to make is that, no matter how much recycling is going on, total demand for those things is going down. So, recycling is a different phenomenon than dematerialization. We did impose limits, as we talked about earlier. We imposed really important limits on taking animals, hunting them, putting them on the market--
Russ Roberts: Fishing. We changed fishing rights.
Andrew McAfee: Yup. And on pollution, on befouling our planet. And those have been just crown jewels of policy and of the environment movement. However, most of the world did not impose any real limits on, you know, how much, how many materials? How much stuff could a company use as it makes a car or a piece of furniture or a house or something? I'm really not aware of the Materials Use Board in America that sets hard limits on how many bricks you can have in your house. I just don't think that thing exists. There have been a couple exceptions. Energy efficiency mandates for appliances: You can make an argument that those have done some good. But, in general, we did not centrally plan the materials use of our economy. It's just not a thing that we did, in almost every place around the world. We did--one country did impose limits on population growth. It was China with the one-child policy. It was a policy failure. It was a moral catastrophe. And there is a paper by these Chinese demographers that I put in the book: they compared the one-child policy to the Cultural Revolution and the Great Leap Forward--these two horrific convulsions in Chinese society in the 20th century. And this group of authors said, 'Yeah; the one-child policy will have longer-lasting, worse effects than either of those two things.' And, it turns out that the one-child policy was deeply unnecessary, because Chinese population growth was already slowing down by a lot when they put it in place. So, the one time we did impose limits on population, that's just an absolute failure at every level that you want to think about. And then, finally: Did we go back to the land? A few of us did. And there was this movement. And Stewart Brand, who is one of my heroes, was part of that movement, with the Whole Earth Catalog, to say, 'Look. If you want to turn your back on advanced society, you probably want to learn how to plant crops and dig a well and, you know, chink up the holes in your log cabin. We'll help you go do that.' There was a back-to-the-land movement. It was small. It didn't last very long. And when you look at that compared to the rise in urbanization, there's just absolutely no comparison. So, the CRIB strategies were not really the strategies that we followed.
Russ Roberts: So, before I forget, I just want to mention two things in passing, and then I want to move on to some examples of how technology and what you call capitalism made a difference. First, we should mention the name Julian Simon--hasn't been mentioned yet.
Andrew McAfee: Amen.
Russ Roberts: I'm sad that he is no longer with us. I would have loved to have interviewed him for EconTalk.
Andrew McAfee: Yeah. I'd love to hear that.
Russ Roberts: And, he wrote some extraordinary books where he basically professed great optimism about the ability of human beings to solve problems using the one thing that is not scarce, which is our creativity. So, obviously you and I are both his heirs in many ways.
Andrew McAfee: And, again, like with Steward Brand, I'm a complete Julian Simon fanboy.
Russ Roberts: And, the second thing I want to mention--I'm just going to mention this because I think it's important, to put it on the table--I sometimes get accused of being an anarchist. I am not an anarchist. I do not believe--when I say I'm a capitalist or a free marketer, I don't believe in no government, or government shouldn't do anything, or we should have anarchy or anarcho-capitalism. I'm totally happy with government enforcement of property rights, police, national defense: I understand that they'll make a lot of mistakes in those areas but I think they're fine. And if I had to pick the one top-down thing that government does pretty well, it is pollution control. Although it often chooses an ineffective way of doing that. But, still, the net effect is still very positive. Having said that, I do want to point out that many of the trends in cleaner air were started well before Earth Day, well before the Clean Air Act, and well before the Environmental Protection Agency [EPA] was started. And there's a lot of interesting things to ask about why we haven't done even better, and whether there are some underlying, bottom-up forces that are partly, if not totally responsible for some of the improvement. And, finally, we can also talk about a different top-down solution to these problems of externalities and spillovers, which is the courts and torts and damages. And we've gone to a very different model, which is top-down, regulatory, specifying often even what technologies should be used, which, like, scrubbers in the case of energy plants. So, it's a little more complicated, but I hear you; and certainly I also want to bend over backwards to say this is not a bad thing. Mostly a good thing. The magnitude of it is not obvious to me, but I do think that that list of CRIB--they were 1 for 4. Imposing limits was basically a good idea. I find it surprising how little of it shows up in the data.
Andrew McAfee: Fascinating. Yeah. And then, like you know, there are these really rich discussions about the trajectories of environmental improvement before all these regulations went in place and before we set up this regulatory structure. And, it's fascinating research.
Russ Roberts: Okay. But let's move to the capitalism technology example. And I want you to talk about two examples from the book, and one that you've alluded to that's not in the book: which is, we're having this conversation over the Internet. Generally no CDs [compact disks] were pressed, are going to be pressed for it. There are people who used to listen to EconTalk on CDs because the Internet was expensive--
Andrew McAfee: Because you've been around a long time.
Russ Roberts: Yeah: I go back to the Stone Age, Neanderthal man was often using these devices. But, you think about what an incredible thing it is--and I've thought about this recently; I'm trying to clean up my house a little bit--I have a few hundred CDs. I don't even know if I'm going to keep--even just let them sit there. They are garbage. Unfortunately. I haven't put a CD in a CD-player in years. I just disconnected my VCR [videocassette recorder] and Blu-Ray player. Would I hook them back up? I have a whole bunch of VCR tapes and DVDs [digital video disc]. I almost--well, not almost--I haven't watched them in years. I watch everything over the net. And you think about how all that stuff that used to be produced now is in the form of electrons. It's an amazing thing.
Andrew McAfee: It's an amazing thing, and it adds up. And when you look at all the devices that have collapsed into your smartphone--
Russ Roberts: That was one of them. Go ahead, tell 'em. Tell this.
Andrew McAfee: One of the things that I found, that I put in the book, was this wonderful article by a retired newsman in Buffalo. And he loves to go around garage sales and just look for historical artifacts in Buffalo. He bought a stack of used, of old Buffalo newspapers from the 1990s and he found a Radio Shack ad from, I believe, 1991. And he said: 'You know what's interesting about this ad? There are 15 gizmo-type items on it,' he said. 'Thirteen of them have vanished into the phone that you carry with you in your pocket all the time, now.' And, they are a tape recorder and a camcorder and a film camera and an answering machine--
Russ Roberts: A radio.
Andrew McAfee: And a radio--
Russ Roberts: And a clock.
Andrew McAfee: And a clock radio. And, he just made this point brilliantly--that, Holy Toledo, that smart phone that we all carry around is this sterling example of dematerialization. The pile of stuff that it has replaced is not a small pile of stuff, is not a light pile of stuff. And I put some of this up on Twitter and somebody wrote back with this great research that they've done, and they said, 'That pile of stuff was also really, really energy-hungry. Your clock radio was weirdly energy-hungry.' So, this is just this amazing triumph of us treading more lightly on the planet. And, people get upset about the number of smart phones that have been made and they wind up in landfill. Yes, that is true. We've made a lot of smart phones; some of them wind up as trash in landfill. The counterfactual--what universe would we be in without the smart phone? That's the key question. And that universe would be using a lot, lot, lot, lot, lot, lot more stuff.
Russ Roberts: And you add to the list: compass, camera, barometer, altimeter, accelerometer, GPS [Global Positioning System]. They are all in my smart phone. Certainly atlases, CDs. And I have one for you that didn't make your list: Radio Shack. Gone.
Andrew McAfee: Yeah, exactly.
Russ Roberts: And so, not only is there not a brick-and-mortar Radio Shack--yes, there's a brick-and-mortar somewhere holding stuff. But not displaying it. A Radio Shack was a combination of display place and inventory control. We've kept the inventory. That's in a giant Amazon warehouse or it's built into the phone. But, the actual--the display part, we don't need it any more. Think of all the catalogs they used to print. And there still are catalogs. But they're dying.
Andrew McAfee: Not as many. And, you can still buy a pack of 10k quarter watt resistors. You just buy it from a place like Amazon. I am pretty sure the total number of molecules involved in getting that pack of resistors to you via Amazon is a lot smaller than if you went to Radio Shack to go buy that thing. And then, Russ, you bring up your CD collection. And I've got the same thing. And I have been reluctant to throw mine away--
Russ Roberts: Yeah; it's hard--
Andrew McAfee: because there's, you know, music I've been listening to for decades.
Russ Roberts: It's emotional.
Andrew McAfee: Some of it means a lot to me. But, then I thought: You can call up any of those songs any time you want--except when you are on a plane that doesn't have WiFi [wireless fidelity]--you pay $10 bucks a month to Spotify, and you have access not just to all of your music, but then it does a really good job of recommending other music that you might like based on your taste. This is not a close call. This is a better world for you and me as consumers. And, it's a world that uses fewer resources: It's better for the planet.
Russ Roberts: And the last one I want to mention is, just because it's one of my all-time favorites; I've used it a couple of times here on the program; it's just phenomenal. Because it's clearly driven by one thing, and one thing only, which is self-interest: it's about the profit motive. And that's the soda can. Or the can more generally. You quote Vaclav Smil: around 1960 the first aluminum cans were 85 grams. They are now under 13. They are under 13 grams! Just between 1972 and 2011 it's about a 50% drop in the amount of aluminum that goes into a can, because of the incredible innovation. And, bizarre: How could you make it better? You make it better because they figured out a way to make the top and the bottoms would be stronger, wouldn't need as much strength in the sides. It's wonderful. It's glorious. And it wasn't mandated; it wasn't a regulation. It was just self-interest working its way.
Andrew McAfee: Yeah. And in particular all the beverage companies realized nobody cares about the can. You and I don't pick the beer based on the awesomeness of the quality of the can. So, spend less money on that stuff. You still have to keep the beer fresh; you've got to protect it from bacteria--
Russ Roberts: You don't want the can to collapse. It's got to be strong enough--
Andrew McAfee: Yeah; it's got to be strong enough to transport it, and all that. But, man, we don't want to spend money on aluminum. It's just we want higher profits. And, one of the things that I hear you say over and over, and it's really triggering to a lot of people, as I'm sure you found out, is that this self-interest, this profit motive, this greed--we actually want this in our society. It's a really, really important force. And I categorically agree. And I think the chapter in the book that probably most warms your heart is the entire chapter about Adam Smith where I try to use his quotes to say, 'Gang, these objections that we had about markets and about capitalism--these are not new. These are being discussed very intelligently in 1776.' So, Adam Smith had that wonderful quote about the profit motive where he said
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. [An Inquiry into the Nature and Causes of the Wealth of Nations, Book I, Chapter 2, by Adam Smith.]
And then the other thing he said which I thought was wonderful was the he pointed out that this is not a bad thing:
Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens. [An Inquiry into the Nature and Causes of the Wealth of Nations, Book I, Chapter 2, by Adam Smith.]
Russ Roberts: And having said all that, for those listening, we are now about an hour into the program, and we're going to go for a little bit longer, I'm either afraid or happy to say. We're going to talk about the downsides, because neither Andrew nor I are blind cheerleaders for capitalism. But, I think what makes this book important, and not just educational--and there's a lot of education in it for anyone; and it's well-written. And it has two de Tocqueville quotes, so it's got to be good. And you tell us it's two: it's in a footnote. But the point is, is that capitalism gets such a bad rap as the destroyer of the planet. It has to be understood that it's more complicated than that. Yes, there are things to be worried about, and we're going to talk about those next. But, it's really important to realize that the profit motive, combined with the opportunity to lose money--because you've got to have profit and loss--with competition, has unleashed human creativity to make the world a less resource-intense place by a nontrivial amount. And that's, I would say, the punchline of the first half or two-thirds of your book. And it's extremely important.
Andrew McAfee: Thank you. The only thing I would add to that is, I think one of the most important products of that human drive, that ingenuity, that drive for innovation is the digital revolution. It's the computer, the network, the software, the smart phone. I am not sure--I actually don't know if we would have succeeded in dematerializing the economy overall if we had not invented the computer. Because, the computer lets us use CAD [computer aided design] systems to design that aluminum can that uses so little aluminum. The smart phone allows us to collapse all that stuff down. We would not have the fracking revolution without really, really powerful computers. So, Russ, you know I study technology; and I see technology hiding under every rock. I really see a lot of technology happening to allow this dematerialization, combined with these forces of profit and loss and competition that you talk about.
Russ Roberts: And I just want to quote your ode to the digital revolution reminds me of Marc Andreesen's memorable line--and we talked about it when he was on the program: "Software is eating the world." And, what he meant by that was that digitalization and software and the ability to carry immense amounts of computing power and on your wrist is transforming a lot of industries. But, the irony is--the paradox, whatever you want to call it--is that it's un-eating the world by your measure.
Andrew McAfee: Hah, hah, hah. I love that--
Russ Roberts: It's what's so beautiful: the world is doing better. The world--there's more of it left over. It's--the world is thriving in many ways.
Andrew McAfee: I hadn't thought--I love that. I'm going to use that. "We're uneating the world." Yes. We really are.
Russ Roberts: So, let's turn to the darker side. And I want to start with--I want to start with climate change, which you spend a large part of the book talking about, both the seriousness of it and the prospects for dealing with it. It's very much in the news; it's very much in the cultural air right now. And, despite the fact that we have reversed a lot of threatened populations through top-down mechanisms--and some bottom-up ones; you talk about various conservation efforts through nonprofits like Trout Unlimited and Pheasants Forever. However, a lot of the salvation of these species came through the Endangered Species Act, which brought a lot of costs but for those of us who care about animals it's been a wonderful thing. And yet, despite all that, the current cultural concern is deeply despairing about--despite all your optimism, despite all these improvements we've been whooping and cheering about for the last hour--a lot of people think we're just about to head over this enormous waterfall of disaster: 'Sure, maybe things are a little bit better now, but capitalism and all this economic growth and all this consumption is destroying habitat. We're going to lose an enormous number of species. And we're going to burn up the earth and we're all going to die.' So, what are your thoughts?
Andrew McAfee: Climate change is real. And it's bad. And the range of bad is somewhere between bad and catastrophically bad. And, they gave the Nobel Prize last year to Bill Nordhaus. Has he been on your program?
Russ Roberts: He has not.
Andrew McAfee: Oh. That would be a good--
Russ Roberts: But many economists worried about climate change have been.
Andrew McAfee: Yep. And, Marty Weitzman--
Russ Roberts: who has been--
Andrew McAfee: who wrote a beautiful paper, very much in line with Nordhaus. And the point these guys are making is a broad range of possible scenarios over the course of the 20th century [21st century[?]--Econlib Ed.] with climate change. The worst of those outcomes is catastrophically bad for us and our planet. And, there's a high enough probability associated with those catastrophes that we need to act now. I just, I love that way of thinking because I think it's rigorous and it gives me really a help, a clear way to think about that. So, let's take knowledge that we have this planetary issue going on and let's also acknowledge: we are not doing a very good job of dealing with it right now. And, my great frustration is that I think we have one--something close to a silver bullet in our policy toolkit and our economics toolkit. We have one extremely helpful and powerful tool in our technologies toolkit. And we're not using either of them. The incredibly powerful, near-silver bullet in the policy- or in the economics-toolkit is a revenue-neutral carbon tax. Or, if you are more a fan of cap-and-trade, stuff like that. It's using pricing, using market mechanisms to convince companies to turn away from high-carbon sources of making all of their stuff. Russ, this is a thing that you say all the--you say variants of this all the time: Businesses will run from increased costs like gazelle run when they smell a lion. They will generally--it's amazing how quickly they will change--
Russ Roberts: I wish I'd said that. It's a good line--
Andrew McAfee: how they'll change their behavior. What cap-and-trade or a carbon tax, revenue-neutral carbon tax, do is they just make this flavor of pollution more expensive. And businesses will react to that. And we can slowly ramp up the level of the tax over time, to give them time to adjust. Some of the economists that you've had on have thought through these things very, very deeply. This would be the, you know, Econ 101, no-brainer thing to do; and we're not doing it in any actual scale around the world. And when you look at the success of cap and trade for a sulfur dioxide pollution and some of the other historical chapters, you just get despondent that we haven't summoned the willpower to do clearly the smartest thing that we could do on the policy front. On the technology side, nuclear power has this terrible reputation and this reputation is actually apparently getting worse over time instead of better. And, we can understand. Fukushima was scary. Chernobyl was really scary. We had Three Mile Island in the United States. However--and I get skeeved out by nuclear power, quite frankly, because I grew up with Godzilla and movies and things like that. Russ, I think you and I both believe you always have to look at the evidence to check your intuition. When I looked at the evidence, my intuition about nuclear power was dead flat wrong. Nuclear power, by almost all the measures that I've seen, is the safest kind of power that we generate. Death rates, accident rates, pollution rates are quite, quite low with nuclear power. We get obsessed with how we're going to handle the waste for nuclear power. Meanwhile, the pollution from coal plants around the world kills--I'm pretty sure it's hundreds of thousands of people every year. We're just misallocating our attention like crazy. We have one energy source right now that is clean--super-clean--scalable, safe, and not intermittent. Solar and wind don't work all the time because it gets dark and it doesn't get windy all the time. So we have a technology that has all these properties and instead we're finding reasons to turn away from it. And, as much as I give credit to that first wave of the environmental movement for their victories, they are on the wrong side of this one, and I think it's a damn shame.
Russ Roberts: Yeah; and you're not alone in saying that. A number of environmentalists have bravely spoken in support of nuclear power. And, it's--there's a huge emotional issue there. I think we probably need to rename it. Heh. Call it something else that doesn't associate it with the scary power of nuclear weapons. But, it's too bad that it is off the table. And, of course, I think it's widely--I think; tell me if I'm wrong; I'm sure you know--it's widely used in France--
Andrew McAfee: [?] very widely.
Russ Roberts: For some reason, it's okay. And, it's doing fine there. That's correct, right?
Andrew McAfee: Absolutely. France and Sweden, I believe--I know France does. I believe Sweden either gets a majority or a near-majority of its electrical power from nuclear. So, we have country-level examples of how to do this. But, a lot of the green plans these days don't include nuclear; and I think it's just a category mistake. We have activists taking boats to conferences to call attention to the situation of global warming. That's probably a good PR [Public Relations] stunt. Russ, we are not going back to the age of sail. That is not a thing that is going to happen, unless we have a world war that takes us back to that tech variant.
Russ Roberts: I want to mention I'm talking with Andrew McAfee of MIT [Massachusetts Institute of Technology and I want to thank Plantronics for providing his headset, the Blackwire 5220.
Russ Roberts: Now, a lot of your book deals with capitalism writ large, which you want to defend; and critiques of socialism. And you point out that those are both hard to define. And I think a lot of the love of the word 'socialism' in today's cultural times is really a desire just for more redistribution. I don't think it's a desire for more top-down economic activity. But, in case some people are worried about that, you spend a few pages in the book explaining why Venezuela is a hellhole. And I want you to at least tell something of the story of the Soviet whaling tragedy--
Andrew McAfee: Oh, God--
Russ Roberts: for anybody who might want to romanticize governments that purport to be in favor of the people writ large using a top-down solution.
Andrew McAfee: Yeah. I spend a decent amount of time in the book just going chapter and verse through the situation in Venezuela, because it was just this super-clean experiment--not in social democracy. Not in Nordic-style welfare state: Those are capitalist countries. I try to make the point very strongly. Venezuela was just good old-fashioned Stalinist central planning. And the magnitude of the suffering and the dimensions of the suffering are hard to get your mind around. Just the catastrophe that's unfolded in this country. And I try to be specific about that. But, one of the other reasons I come down hard on, you know, totalitarian, centrally planned economies and societies is they take terrible care of the environment. Demonstrably. We have made our mistakes in the market-based, rich world, in the West. Absolutely. And, the history of whaling in the first half of the 20th century is a history of us almost wiping the species out. Let's put that on the table. We did that. Then, we signed, about 1948 I believe, we signed an international near-moratorium on whaling that almost all nations signed up with. And we said, 'We're going to continue to allow whaling,'--that changed, eventually--'we're going to continue to allow a small amount of whaling and every country is going to get a quota, a small quota of whales.' And the Soviet Union signed up for that. What they did instead--and we know this because some very brave scientists kept unofficial records that are now available, on the whaling ships--they killed--the total annual quota was something like 15,000 or 16,000 whales a year. Over the course of that chapter of history, the Soviet Union killed about 200,000 additional whales above and beyond their quota. Okay? That's lousy. The tragedy--where farce and tragedy meet, here, is that they didn't need them. The Soviet Union was already self-sufficient in energy, had huge oil reserves. The Russian people never had a taste for whale meat, like, you know Icelanders and Japanese do, for example. They didn't bring meat back to port. The story is that the centrally planned economy of the Soviet Union had a plan for the fisheries industry, and the fisheries industry had to bring back more tonnage every year. And whales weigh many, many tons. So, they just focused on killing whales to satisfy their progressive 5-year plans in the absence of any actual need to kill these animals. And the guy in charge of the fisheries industry had this chilling quote: one of the scientists on the whaling ships went to him and said, 'Comrade, we need to stop doing this, because we're going to kill all the whales,' and he said, 'and our children won't see any whales on the world.' And the guy said, 'Our descendants are not going to be the one to fire me from my job.' So, I just--I don't--I turn into kind of a [?]--
Russ Roberts: Incentives, incentives, incentives--
Andrew McAfee: matters. For not doing that. The Soviet Union was responding beautifully to the incentives that they set up, which was stripping the planet bare of all of the whales. And, I don't know, Russ, how much time we have left. Can we continue to talk about some of the things that I'm worried about, and about this issue of disconnection that we're seeing?
Russ Roberts: That's what I was going to turn to next. Exactly. Before we do that, I just want to make it clear what your stand is on Capitalism. Because it's such a complicated word; and you lay out in the book very nicely what you mean by that. And, you know, for example, a lot of people will tell me that Wall Street is an example of what's wrong with capitalism; and I say, 'That's crony capitalism.' That's where we didn't allow the profit-and-loss system to work. We have relentlessly bailed out large financial institutions, which have encouraged them to take imprudent risks and extracted money from the rest of us. That's an example of a zero-sum game. Actually, a negative-sum game. Almost certainly. And so, I think there's so much emotional around it. And what you're pleading for is something much narrower than the sort of cinematic images of Capitalism. You're talking about letting people pursue profits within property rights and competition that inevitably helps the world at large. And that's--tragically, that's a minority opinion that you are bold to put forward.
Andrew McAfee: And, a less triggering phrase is economic freedom. Which might have been a better one, kind of. But I wanted to go with Capitalism, because I want to confront people with, in many cases, their negative views about this system that we have. And, like you point out, a lot of what people, I think, are angry about is a perversion of Capitalism --is not actual competition. It's collusion. It's a cartel. It's regulators and the industries that they're supposed to be in charge of being way, way, way too cozy with each other. And again, I relieve on Adam Smith here: This is not new. Smith realized that these are perversions of capitalism. And, one of his other famous, famous quotes is
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices. [An Inquiry into the Nature and Causes of the Wealth of Nations, Book I, Chapter 10, by Adam Smith.]
Smith knew that businesses are going to collude and say, 'Look, I'll raise my prices if you raise yours, and we'll all make a lot more money.' We have to not allow that. Absolutely. But to think that that's inherently what Capitalism is, is just wrong. It's just a category mistake. And, another category mistake is to say that Capitalism equals the complete lack of a safety net. And I try to label that 'market fundamentalism.' Which is a philosophy that you hear off on some fringes sometime. Sweden has free markets, very strong property rights, free-flowing prices; it's a capitalism system with a very different social safety net than America has. These are both capitalist countries.
Russ Roberts: 1:18:18 Before we talk about disconnection and the social, some of the social problems we have in America today that could be put at the foot of Capitalism--I'm not sure that's fair, but it could be, and you certainly worry about it in the book--I want you to react to a different critique of your view. So, one critique of your view we've talked a lot about. Which is: 'Capitalism is terrible. It leads to spoiling the planet.' Etc. And you've showed, actually, it's the main force that's preserving the planet--at this point; there were times when it was true. You concede that; again, you are not a blind cheerleader. You understood, you understand and explain very clearly that there were times when that critique was relevant. This just isn't one of them right now. In fact, the opposite: It's the thing that's going to save us.
Andrew McAfee: And the reason I wrote this book is I do think we're at this really, really fundamental, heartening turning point where we moved away from the habit[?] of the Industrial Era, which is we grew our economies and, again, we had this Cookie Monster, 'Um-nom-nom,' voracious appetite for the world's resources. We still want to grow our economies, but we have now finally figured out how to do that while taking less, year after year, from the planet. I am absolutely a cheerleader for that turning point.
Russ Roberts: But I want to raise a different critique that you hear, and it's a vague one; and I don't like it, but I'd like to hear what your take on it is. Which is: 'Oh, it's a different version of the market fundamentalism. It's not Ayn Rand. It's Milton Friedman. Milton Friedman thought markets could solve everything; government was awful; markets are great,' and there's a critique, which I view as a straw-man critique and I don't think that's my view--there's a critique that says, 'You know, this obsession with markets and decentralization and bottom-up--that's naive. And it's dangerous. It's led to this lack of policy response to all these social problems because people will keep saying: Oh, the market will solve it.' What's your reaction to that?
Andrew McAfee: Russ, I think the reason you and I cheerlead so hard for markets is that they are the things that have been shown to generate prosperity, to improve the material conditions of life for people. And we keep on ignoring that, or misreading history, or getting it wrong. And it's really important to offer that corrective out there. The difference between an economy that grows at a somewhat healthy clip and an economy that grows at a healthy clip, over time that becomes a huge difference in the lives of people. I forget who said it, but you've heard this wonderful quote: 'The difference between 2% and 3% is not 1%. It's 50%.' And so, when you have exponential growth that's a little bit higher that adds up over time, the aggregate improvements in human prosperity are big, big, big. And you and I both believe that decentralized, bottom-up, economically free societies are demonstrably better at generating that prosperity. Now, let's be clear. There are challenges. We can't let markets do whatever they want. You have to rein them in, you have to intervene effectively--yes. Most of economics these days is the study of market failures, not market awesomeness. Great. Let's stipulate that. But, let's start the conversation by saying markets are what generate prosperity for people.
Russ Roberts: I laughed--I chuckled in the background there when you said 'the difference between 2% and 3% is not 1%'--meaning 1 percentage point, which it is. It is 1 percentage point different. But it's a 50% change, which means it leads to, over time, an enormous improvement. I chuckled because in an upcoming episode, which will have aired by the time this episode airs, is with George Will, where he mentions that line. That episode is not out yet--you haven't heard it. But, yes, I have heard that line and it's a very good one.
Russ Roberts: You are--you spend some time in the book, some space in the book in a nontrivial amount talking about what a lot of people are worried about right now--we've talked about a lot in the program over the last year--which are so-called deaths[depths?] of despair. A feeling of disconnection is what you call it. A feeling that the economic system is unfair. A loss of social capital. Of course, some of this may come from--it's going to be something we talk a lot about on the program coming up--may come from some of the technology that you and I are big fans of. It's led to some social challenges. Tyler Cowen in a recent episode defended technology in that way. But, a lot of people are worried about this. And, they are worried about the economic change that comes from what you call concentration--the concentration not just in size of certain enterprises like Google and Facebook but also the geographical concentration of economic activity in cities that has left more rural areas and small towns really struggling. So, what are your thoughts on that? What do you think we should be doing? And--go ahead.
Andrew McAfee: The first thing to say is that this unhappy phenomenon that you've just described, where we have this startling rise in deaths[depths?] of despair; we have decreased trust in loss of institutions in our society; we see the rise of populists and demagogues in lots of places around the world--this is a really, it's a very important phenomenon. It's a super-complicated phenomenon. And I think anybody who says, 'Oh, it's because of this one thing,' is either lying to themselves or lying to you. So, what I do not want to say, and the impression I don't want to give, is that I know what's going on here: I've got this thing nailed and it's x. The reason I included this in the book--and this is the sharpest departure from the optimism in the rest of the book--is, we do see this phenomenon of concentration. More from less sometimes means you need less overall. That's true of materials. I mentioned earlier that we've returned a Washington-state-sized amount of farmland back to nature since the early 1980s. That's great for the planet; you know, 'Woohoo.' There were people farming that land. And now that land is not economically viable for farming any more. To me, that's a really clear example of this phenomenon that we see where, in some industries, we need fewer acres of land, fewer establishments, fewer physical places where the activity happens. Manufacturing has fewer establishments, fewer factories, fewer places where manufacturing happens than it did a couple decades ago, even as manufacturing output increases. And, again, there's all kinds of reasons to celebrate that. If you were an assembly-line worker in a plant that has closed and the activity has moved elsewhere--it's become automated--that's tough for you. And what we don't see is this frictionless reassignment into a new and better job and people moving across the country as much as they used to. We see communities that are pretty clearly getting left behind by this economy, this globalized, [?]--
Russ Roberts: [?]
Andrew McAfee: yep--sophisticated economy that we're creating. And, those are a lot of little places where we see the most stress going on. I simply wanted to point that out, highlight that, and say that these forces of capitalism and tech progress that I'm so enthusiastic about: these might have some consequences for communities that we are just now starting to pay a lot of attention to. And the thing that I think, besides climate change, the thing that worries me the most, is that the economists' toolkit for dealing with those communities that are left behind is not a very full toolkit. We don't have a lot of good history with place-based economic policies, and when I hear economists kind of being frank about this, they say, 'You know, the playbook is not obvious, here.'
Russ Roberts: Yeah; no; and you give a list of some things to do, that we can do to help mitigate some of the harm from this: joining grassroots organizations, volunteering, working with vulnerable populations. These are--this is something that I think we are going to turn to. I don't think government is good at solving it--obviously. I do think the nonprofit sector is the place that innovation will happen, here. But, it's also possible that a lot of these problems, and a lot of problems generally--they are not about capitalism; they are not about socialism. They are about human beings. We are who we are. We have a nature that is social, and primitive, and built into--hardwired--into our DNA [deoxyribonucleic acid]. And, some of these changes, we're not going to cope with well. And I don't think we have coped with them well. Whether we'll cope with them better going forward--I think we will. So in that sense I'm an optimist: that cultural change will help us cope with these things. But, maybe not. Maybe not so much.
Andrew McAfee: No; this is an important point, because these changes are--they have a couple of characteristics, right? They're rapid. And, some of these are threatening to your sense of identity or your way of life or the way things have always been. When the factory closes, when the farm is just not economically viable any more, that is a blow not just to your bank account. And, Russ, I share your general optimism. I think if we put our minds to it as a people we could make real progress here. But, we're not putting our minds to it in a profound way, yet. And, you know, the classic policy toolkit is not nearly as full as it is for some other big issues, like climate change. I think we have a policy toolkit; we're just not using it very well. For this disconnection, for this feeling of alienation and communities getting left behind, I don't think our toolkit is as good. But that's not any grounds for hopelessness. We should just be aware of that.
Russ Roberts: Yeah; and it's not just economists, obviously: it sounds like the sociologists [don't?--Econlib Ed.] have their arrows in their quiver, either.
Andrew McAfee: Good point.
Russ Roberts: I guess the other thing to think about, and I don't want to push this too far, but: You point out, and I don't think this is pointed out often enough--a few people mention it--but, you know, when we talk about the 1% or cronyism, what we're really talking about there is a sense of unfairness. A sense of being exploited. And, some of that I think is true, as I alluded to earlier. I think we've coddled a number of sectors of the economy--finance being one; education is another, by the way. You and I have both benefited for that, which I wish hadn't happened, but enormous subsidies to our industry. So, there's a handful of places that really have exploited the public at large without as much of a return that you might hope for, and often not much of a return at all. At the same time, some of the perception of unfairness is exploited by those populist politicians around the world--
Andrew McAfee: Absolutely.
Russ Roberts: In the absence of facts, or facts that are completed--and I think there is some hope--I'm going to reject this view. I was going to say there's some hope we can do better by being more objective or providing more data, or whatever might be. The truth is, as you alluded to in passing: the whole informational landscape is so in shambles that the thought that we're going to solve a social problem by producing better information about it--through some kind of literacy strategy--I mean, I'm doing it, but it's quixotic. We have to face that. Right? I'm trying to put out a bunch of videos that make clear my view that the standard of living story is more complicated, whether the median worker has done better or not. But, the truth is, it's spittin' in a very big wind, there. Any thoughts on that?
Andrew McAfee: Absolutely. You mentioned earlier that human nature is such a powerful force. And one important aspect of human nature is that we have perceptions of fairness and unfairness, and feelings of getting a good deal or a raw deal. And, for some good reasons, a lot of people these days even in prosperous countries like America feel like they're getting a raw deal--when no bankers go to jail as a result of, in the wake of the entire Great Recession, but lots of people have their homes foreclosed on. That really contributes to a feeling of unfairness.
Russ Roberts: Correctly so.
Andrew McAfee: Those perceptions get stoked, by brilliant demagogues and populists and authoritarians. This stuff is just catnip. It gives them a great deal to work with, to convince people that this group over here, this group over here, is responsible for your problems. 'It's the Chinese,' 'It's Wall Street,' It's the Mexicans,' 'It's whatever,' that is causing your deal to become a bad deal. And, dealing with those perceptions is absolutely essential. And, Russ, like you learned, over and over again, unfortunately, you will never displace a feeling with a fact. So we had better figure out how to do better at this rhetorical battle of what's going on and what does a brighter future look like. Because, the nostalgia that we're seeing from different authoritarian leaders, and, 'If we can just go back to a coal-based economy we'll all get our jobs back'--it's just absolutely ludicrous. And, I think that there are challenges--there are problems that are associated with this economic inequality that we have. I think an even bigger problem is the perception of unfairness--regardless of the realities, the perception of unfairness that a lot of people have. I contrast where we are now with where we were in the mid- and late-1990s, when inequality was also skyrocketing, but, people's ways of life weren't being as disrupted as they are now. The workers at different income levels are pretty clearly seeing things get better for them over time. And, the perception just was different back then. So, I think that this disconnection, the stagnation that we're seeing, these perceptions, that what we really need to be tackling rather than trying to give a huge haircut to rich people because 'Economic inequality is the only thing that matters and once we solve that, everything will be okay,'--I wish I believed that.
Russ Roberts: Yeah. There's a temptation to think that--and this is the economist's temptation; maybe that might be a good title for a book: The Economist's Temptation--that all--
Andrew McAfee: I kind of like that.
Russ Roberts: Yeah; it's not bad. That all social problems are material, and so, just like 'It's the economy, stupid.' 'It's money, stupid. If we just give everybody more money, we'll solve all these problems.' Now, I'm not a big fan of redistribution. But, I would say that even if you are a fan of it, I think it's naive to believe that it's going to solve these problems of identity, belonging, mattering, feeling dignity, autonomy, and agency that some economic change has disrupted. And, listeners know I'm a big fan of making it easier for people to move. And changing the way we regulate land use in our cities to make it easier for people to go to where the jobs are. And that would be good for the environment, also.
Andrew McAfee: Yeah. I absolutely--I think that's right.
Russ Roberts: My guest today has been Andrew McAfee. His book is More from Less. Andrew, thanks for being part of EconTalk.
Andrew McAfee: Russ, this has been a blast. Thank you.