The limits to growth: the Malthusian spectre again?

Another important challenge to resources and environmental problems from non­economic researchers came from the Club of Rome. The Limits to Growth (Meadows et al. 1972) had a deep impact not only on researchers but also business leaders, who shared the feeling of an environmental crises, represented by population explosion, pol­lution, exhaustion of natural resources and so on.

Using a system dynamics approach, which was the newest analytical technique at that time, the authors, D.H. Meadows et al., explored whether human beings could maintain the economic growth and development enjoyed by people in advanced countries. On the presupposition that the world population would increase and capital accumulation would continue, they arrived at the conclusion that economic growth could not be sus­tained and that a catastrophe would hit the world, in which business-as-usual continued, owing to heavy pollution, exhaustion of natural resources, lack of food, and so on. This is nothing but the Malthusian spectre in a new guise.

The scholars involved were pessimistic as regards the development of technology: according to their model, further technical progress could not solve the problems. Consequently, to save human beings from disaster they proposed to stop both popula­tion increase and capital accumulation. Since, in addition to the heavy pollution in the 1960s-1970s, the first oil crisis struck the world in 1973 just after the publication of their book, curbing economic growth in advanced countries, the book became widely accepted.

After the two oil crises, however, increases in prices of energy and other natural resources drastically reduced demands for energy and resources on the one hand, and accelerated development of new technologies which contributed to savings of energy and natural resources on the other. Thanks to these, advanced countries experienced again moderate economic growth and development.

Furthermore, strict regulations against pollution were introduced in almost all advanced countries, inducing development of pollution prevention technology. As the PPP was adopted as the basic concept of anti-pollution policies, pollution came to be felt as a cost by firms, so that pollution prevention became a priority for them. In big cities, such as London and Tokyo, air quality was greatly improved.

Exhaustion of energy and other natural resources was avoided, and pollution prob­lems were solved, at least in advanced countries. Despite the prophecy of the Club of Rome, the Malthusian spectre fortunately did not make itself felt (Nordhaus 1974). It turned out that the price mechanism works much better than Meadows et al. had thought: actors in markets respond flexibly to the increases in scarcity of energy and natural resources. Pollution prevention policies triggered the development of new tech­niques that helped to fight the problems under consideration.

Yet it cannot be denied that the Club of Rome as well as Hardin had an important effect on economics. Particularly, around the time when the transboundary environmen­tal problems such as climate change (global warming), depletion of the ozone layer, soil erosion, destruction of rain forests, and so on became a world concern in the late 1980s and the early 1990s, another Malthusian spectre loomed, and we could not help but remember their warnings. Yet, this time, economists were well prepared for pioneering environmental studies, establishing resources and environmental economics as fields of economics.