The Dismal Science

Thomas Malthus is often credited with the notion that economics is a dismal science. In, An Essay on the Principle of Population..., he argues that population will always outstrip the resources necessary to sustain it.

Some would say that the subsequent centuries have shown him to be overly pessimistic, although poverty has been a fact of life for many world citizens forever.

In 2008 there are signs that the Malthusian vision may apply more broadly than just in "undeveloped" nations.

The world is awash in pollution, people, resource shortages, and other elements which could overwhelm the fragile systems which exist to nurture the human race.

The 6 billion people inhabiting the planet today are already feeling the pressure.

That number is expected to grow dramatically in the coming years. It is unclear from where the energy, water, and other resources needed to provide a decent life will come.

The basic framework for economic theory continues to be from Adam Smith's Wealth of Nations (1776). Modifications accomodating the depression era adjustments of Keynes and new mathematical structures of recent years have not changed the basic structure of economic theory.

Economics as taught and practiced today still assumes unlimited resources and negligible externalities. Needs of future generations are ignored. This not unlike the Federal Budget process which ignores the massive debts with which we are condemning future generations.

The Invisible Hand, like the General Will, is a wonderful metaphor, but it is not always operative.

Today we can do better. The analytical and information tools of complexity and actuarial science are available te lead us out of the wilderness. We can include demographic trends, probabilistic scenarios, multifractal models, and agent based methodologies which provide perspective on the complexities of our global economy.

We just need the will.

Lee