The cage match!
In this corner, Megan McArdle and Parson Malthus:
Megan McArdle: Economics of Contempt:
Call me crazy, but I think a permanent doubling of food and energy prices would slow our rate of economic growth pretty significantly. How long it would take incomes to recover "at current rates of economic growth" is irrelevant when the doubling of food and energy prices would lower the rate of economic growth.
Given that we and all our machines run on either food or energy, it's a pretty safe bet to say that doubling their prices would have a sizeable impact on growth.
In this corner, Greg Clark:
China, India and Malthus - Los Angeles Times: Thomas Malthus warned in 1798 that population pressures would forever keep food and energy scarce and incomes low. In the 200 years since, world population has grown sevenfold, to 6.7 billion. Yet food and energy have become cheaper and more abundant. Malthus's dystopia, it seemed, belonged in history's junkyard. But, suddenly, rapid growth in China and India and the consequent scramble for increasingly scarce resources has revived the Malthusian specter. By 2050, 9 billion people in a world where all have U.S. consumption standards would need eight times as much oil and five times as much food than the planet current uses. Is the future a world of $10-a-gallon gas and $20 Big Macs?
Two things allowed growth to occur from 1750 to 2000 with declining commodity prices. First, only a small fraction of the world grew rapidly.... The West was alone in its voracious appetite for raw materials and energy. Second, fossil fuels cheaply substituted for land in agriculture by increasing crop yields.... What will happen depends on the race between technological improvement and growing demand.... [N]o one can predict which force will win. A "full world"... may also be one of cheap and abundant commodities. But suppose the worse. Suppose [commodity] abundance is over. Must we fear that?
The answer is no. First, the share of modern U.S. consumption devoted to raw food and energy purchases is small: 1.4% for food raw materials, 7% for energy. The U.S. economy can withstand enormous increases in food and energy costs with little damage because food and energy are even now so extravagantly cheap that most of both are squandered in uses of little value. In my town -- Davis, Calif. -- there is a traffic jam outside the main high school each morning as healthy teenagers are ferried by car or drive themselves a few miles to school. They are ferried from houses that are heated, air-conditioned and lighted, most of which rarely gets used by people.
Currently in the U.S., we consume the energy equivalent of six gallons of gas per person per day.... Danes, for example -- whose public policy mandates expensive energy -- use the equivalent of only three gallons.... The Danes are not suffering.... Given that we can easily reduce consumption when costs go up, a permanent doubling of the prices of food and energy would reduce income by less than 6%. At current rates of economic growth, incomes would recover from such a shock in less than three years. After that, onward on our march to ever greater prosperity.
I call this one for Greg Clark. I am a utopian neoliberal optimist.