Are we on the path of ‘Limits to Growth’?

Probably the most important thing you need to know about the 1972 book entitled Limits to Growth is that it makes no predictions. Rather, the much maligned study provides scenarios for thinking about the future of resource use, pollution, population, food, and industrial production.

Limits to Growth detailed three scenarios originally, one of them called business-as-usual or BAU. Since then, countless scenarios have been run using the same model–called World3–and some of them are discussed in updates to the book, the most recent published in 2004. Many of the scenarios including BAU result in a collapse of industrial production and population some time this century.

What has surprised those reviewing the model used by Limits to Growth researchers is how closely reality has tracked the original BAU scenario. A recent review suggests that the signs of societal collapse may be around the corner based on the observed trends. But the components of that model have yet to turn in deleterious directions which would suggest trouble.

The review says that if those indicators follow the path suggested by the BAU scenario, we should begin to see the signs of decline by next year with per capita industrial production falling (but not necessarily total production). The knock-on effects in agriculture and services would result in a rise in the death rate from 2020 onward and a decline in world population starting in 2030.

No one can know whether such a scenario will unfold. There are many reasons to believe it will be delayed, perhaps considerably. One of the Limits to Growth authors believes that a collapse will occur only after 2050.

According to the review referenced above entitled “Is Global Collapse Imminent?” the thing to watch is the amount of capital we must spend to get resources:

Until the non-renewable resource base is reduced to about 50 per cent of the original or ultimate level, the World3 model assumed only a small fraction (5 per cent) of capital is allocated to the resource sector, simulating access to easily obtained or high quality resources, as well as improvements in discovery and extraction technology. However, as resources drop below the 50 per cent level in the early part of the simulated 21st century and become harder to extract and process, the capital needed begins to increase.

As the authors point out, that’s just what we’ve seen with oil. Bernstein Research has noted that major oil companies now say it is costing them $92 a barrel to produce new oil from the highest cost fields. That’s way up from 10 years ago and indicates a rise of 14 percent PER YEAR from 2001. Oil is priced based on the marginal barrel of supply. The Saudis can produce oil from their fields for far cheaper, but you won’t find them offering it at lower prices!

As capital costs mount for extracting other resources, we’ll find that society doesn’t have as much wealth left over for everything else including maintenance of the current infrastructure and industrial plant. And, that’s what the authors of Limits to Growth are talking about. The economy doesn’t grow because the infrastructure and industrial plant that growth depends on cannot be properly maintained.

As the review explains, the Limits to Growth authors also understand one very important thing that their critics don’t. The review uses oil and natural gas to explain:

But the protagonists of oil and gas gluts have not understood a crucial point. They have essentially confused a stock with a flow. The key, as the LTG [Limits to Growth] modelling highlights, is the rate at which the resource can be supplied, i.e. the flow, and the associated requirements of machinery, energy and other inputs required to achieve that flow.

So, here is a key conclusion:

Oil and gas optimists note that extracting unconventional fuels is only economic above an oil price somewhere in the vicinity of US$70 per barrel. They readily acknowledge that the age of cheap oil is over, without apparently realising that expensive fuels are a sign of constraints on extraction rates and inputs needed. It is these constraints which lead to the collapse in the LTG modelling of the BAU scenario.

What’s important about the Limits to Growth model is not any precise dates which we might get from running a scenario. What’s important are the markers described by the researchers as harbingers of limits. Those harbingers have begun to appear.