Synopsis:
Through analysis of crises, observations of common denominators emerge; that call into question the central dogma of Malthusian Economics. The notion that unlimited desires of a growing population would always outpace the productivity of an economy just doesn’t appear to be the case under study. What appears to be the case rather, is market bubbles and even severe economic crises occurring due to expected returns being interrupted by limitations of the populations ability to facilitate them with purchases. This is observed to inflate markets and eventually the bulk of the economy; resulting in debts that exceed the means of individual markets and even a nation’s Gross Domestic Product.
The Malthusian Assumption:
The Malthusian assumption actually predates Malthus. Malthus just formalized it in his work. Since then, big business models have been modeled with more than ample funding and systemic incentives to maximize usage of the funding toward capital gains. These are incentives imposed upon the markets; and funding in excess to cover the initial expenses. Assuming that the Malthusian assumption is correct; this would promote the market’s support of the growth, needs and desires of the population.
Confirmation Bias and Cognitive Dissonance:
The global economic equation with maximizing profit margins and thus investor returns is maximization of increases in the Gross Domestic Product. This is favorable to a nation state because it also maximizes internal revenue. This of course funds military protection, building and maintaining infrastructure, bureaucratic overhead, social services etc.. For a nation state, maximization of internal revenue is the bottom line. It’s the main resource for a nation to provide protections and services to it’s population. It’s thus also the main resource for a nation to compete with and stave off vulnerability to being overtaken by other nations. The advantage that one nation gains by overtaking another is the resources and population that comes with it. This would likely make a nation more competitive and less vulnerable on the global stage. The collective needs and desires of a nation thus promotes confirmation bias; that inhibits it’s ability to attribute economic crises to their root influence; and that influence appears to be hyper-vigilance in national security, that eventually has a negative impact on a nation’s security.
Resource Availability:
To be more precise, it doesn’t appear to be the case that resources are intrinsically limited. Effectively questioning the scarcity of resources is as easy as going outside and looking up. The difference between intrinsic scarcity and artificial scarcity is thus availability. Economics has the term Equilibrium to describe what is happening when resources appear to be scarce; meaning the projected need is out of balance with the projected availability. As an economy becomes more complex, new products and services provide greater reach to resources; thus making more resources available. This is also substantially enhanced by technological development; not only due to our increased capability, but also due to the added efficiency that tends to accompany it. Greater efficiency in usage of resources is the next best thing to increase in abundance of resources themselves.
Systemic Incentives vs Carrying Capacity:
An economy serves to promote the survival and sustenance of a population. This includes the aspects previously discussed and more. In order for an economy to successfully serve this purpose, it must cohere to the initial conditions. Where Malthusian models fail is with systemically coercing markets to outpace acquisition of available resources… including human resources. Malthusian models outpace population growth and tangible and intangible resource acquisition. More recently, Malthusian models have systemically coerced markets to outgrow their means by imposing unsustainable, quarterly quotas on financial returns. This happens partially because market growth outpaces population growth; due to an excess in initial funding, that rapidly saturates markets. This of course makes the quarterly quotas difficult to maintain; due to the lack of growth that accompanies market saturation.
Since the increase in profit margins is what directly increases the value of shares, market saturation immediately stagnates increases in share prices. This particular market force becomes an immediate signal to investors to sell the shares they own. This would of course have a negative impact on the financial resources of the company. Since said company is valued by the sum of the value of shares outstanding, all investors selling would result in total liquidation. This is an extremely powerful and coercive market force that tends to lead to cutting costs in critical complexity, price gouging and many forms of fraud and moral hazard. This also tends to lead to collapse; whether or not followed by rebuilding.
These outcomes scale to the markets and the economy and the global economy as a whole and beyond; because of the loss of established complexity that accompanies it. The collapse of a business is a loss to a market. The collapse of a market is a loss to a nation’s economy. The collapse of a nation’s economy is a loss to the global economy. Though an economy is indeed more than the sum of it’s parts, it is greatly weakened with the loss of it’s parts; due to the integral nature of it’s parts. Loss of established complexity has a far reaching negative impact; as the loss of an integral feature has a negative impact on the surviving complexity. This can be explained as simply as the loss of business that produces products and / or services for other businesses leaves the market short on resources. This is a chain reaction of sorts as the business that are being affected are affecting other businesses. Rapid loss of established complexity is essentially what market free fall is; and it’s what one can expect when loss of established complexity is allowed to persist. This is an outcome that is not only expected when incentives are coercing market growth to outpace natural carrying capacity, it is observed.
System Dynamics and Management:
Rigid systems are difficult to manage by design. Systemic incentives are the main source of system rigidity; and they are currently observed to complicate and even subdue efforts to manage troubled economies. This is expected, due to the fact that systemic incentives blew the bubbles that have been recently, ineffectively addressed. As a consequence, economies have been becoming more and more unstable over the past several decades; and there is no reason to expect any other ultimate outcome than collapse. The replacement of system dynamics with systemic incentives not only promotes serious long term consequences, it also makes management improbable when the consequences arrive.
Closing:
This article has criticized the initial conditions imposed by global economic policy. The arguments were intended to show how hyper-vigilance in national security sets unsustainable precedents in economic policy that drive economies into boom and then instability and vulnerability. This is something that we have been aware of since the time of Adam Smith; however confirmation bias brought about a revival with the works of Thomas Malthus and another more recent double down with the central dogma of Macroeconomics. They both promote rigid coercion toward maximized production with the notion that the population is an infinite source of demand. This is not only an unsolvable problem, due to it being an imaginary problem, it’s also a distraction from the real observed issue of recurring punctuated equilibrium, that clashes with this incoherent fundamental of global economic policy.