JEL - review of collapse

Journal of Economic Literature Vol. XLIII (December 2005), pp. 1049–1062 Are We Collapsing? A Review of Jared Diamond’s Collapse: How Societies Choose to Fail or Succeed SCOTT E. PAGE∗ Jared Diamond’s Collapse: How Societies Choose to Fail or Succeed (Viking Penguin, 2005), tells the dramatic decline of past civilizations—the Easter Islanders, the Anasazi in the Southwestern United States, the Mayans in Central America, the Norse Vinland settlement in Greenland. These civilizations did not slow
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  1049 se; what distinguishes these experiments isthat Plott assigned musical notes to eachbid. The higher the bid, the higher the asso-ciated note. A bubble sounded like a childplinking at the upper end of a xylophone.Amid this plinking, bidders became edgy and placed extremely low bids. These firstfew low bids produced deep, primitivedrumbeats that appeared to come from adistant source. They portended the bubble’sinevitable collapse. Easter Island Modern Easter Island is mostly desolate.Most of its topsoil has blown out to sea. Allbut a handful of bird species have departed.Its srcinal forests and ecosystems nolonger exist. From the air, a patch of new ∗ Page: Univerity of Michigan. I would like to thankEric Ball, Jenna Bednar, Aaron Bramson, Anna Grzymala-Busse, Michael Mauboussin, John Miller, and Ted Parsonfor their comments on earlier drafts and thoughts.  Journal of Economic LiteratureVol. XLIII (December 2005), pp. 1049–1062 Are We Collapsing? A Review of JaredDiamond’s Collapse: How SocietiesChoose to Fail or Succeed S COTT E. P AGE ∗  Jared Diamond’s Collapse: How Societies Choose to Fail or Succeed (Viking Penguin, 2005), tells the dramatic decline of past civilizations—the Easter Islanders, the Anasazi in the Southwestern United States, the Mayans in Central America, the NorseVinland settlement in Greenland. These civilizations did not slowly fall apart; they suffered drastic reductions in population and productivity. In Diamond’s account, their collapses result from mismanaged resources, lost friends, gained enemies, cli- mate changes, and most tellingly, their cultures and beliefs. Diamond provides capti- vating histories and an engaging explanation of the sciences required to piece thosehistories together, but his logic and his prescriptions would benefit from greater famil- iarity with some basic principles of economics and a richer understanding of human nature.Charlie Plott: Musical Director  In his basement Caltech experimentaleconomics laboratory, Charlie Plott onceran a double auction experiment, in whichparticipants buy and sell a stock that has aprobabilistic payoff in each period. Withprobability one half the stock paid $2.00,and with probability one half, it paid noth-ing. These experiments generated pricebubbles: the stock would often sell for$32.00 with only ten periods left, far morethan the stock could have possibly paid individends. The creation of bubbles in anexperimental setting was no great feat per  experimental forest rises like a growth of moss on an otherwise barren rock. Thisobscure island tucked away in the Pacific would seem to be of little interest to anyoneother than geologists, who would all tooeagerly explain how the island formed fromthree volcanoes that rose up as plates shift-ed over a stationary magma source in theasthenosphere. Yet Easter Island beckonsus. Not the island itself, as much as the 887maoi that sit upon it. Maoi are large carvedstone heads ranging in size from four toseventy two feet. Some of these maoi sportbright red granite headpieces called pukao.Some rest atop ahu, giant stone platformsthat represent great feats of construction.Not only do the maoi, pukao, and ahuintrigue us, so does their placement. Themaoi are not aligned neatly in rows, nor arethey arranged in a pattern that suggests analien created crop circles. Instead, theirplacement suggests interruption. Two hun-dred and eighty stand upright on ahu that would seem to be their final destinations,another hundred or so lay strewn along theprimitive roads, and the remainder, nearly half of the maoi, reside in the Rano Rarakuquarry, still waiting for delivery. What caused this interruption of civiliza-tion on Easter Island? An enemy attack? Afatal disease? A technological advancementthat led them to abandon rock carving?None of the above. Neither guns, nor germs,nor steel. The answer is collapse. InDiamond’s account, the thickest dullestheads on Easter Island belonged not to themaoi but to the chiefs who destroyed every last tree while building them. If the civiliza-tion on Easter Island ever spawned a Lorax,the character from Dr. Seuss who “speaksfor the trees,” that Lorax either arrived toolate or lacked the charisma to derail a socie-ty bent on making ahu and maoi despiteshrinking forests and thinning topsoil. Thesame can be shown of the Norse settlementin Greenland. No one shouted “Stop!” as thecattle herds grew larger and larger and thetopsoil became thinner and thinner.Diamond presents these histories of col-lapse as allegories, as rich descriptive para-bles that we can help our modern civilizationavoid a similar fate. He claims thatunchecked, we too will collapse, that we willrun out of fossil fuels, topsoil, and even sun-light. To save us from this fate, Diamond has written this book. Like the low bids in Plott’sexperiments, it is a low drumbeat thatresounds amid the more optimistic soundsthat fill our days: the high pitched eight pas-senger SUVs, the McMansions with two anda half story foyers, and the fresh gray soleflown in each morning from the coast of Dover. It is a welcome and needed sound.For even if it turns out to be a bit too low,the reflection it provides comes at little cost.If it does ring true, and it may, collapsing ouroptimism could prevent the collapse of our way of life.The natural question to ask then is whether allegory is accurate or, less demand-ingly, whether Diamond convinces? The evi-dence is mixed. As history and science, Collapse succeeds marvelously. Buy it. Readit. Anyone with an interest in how cultureand institutions influence societies’ abilitiesto manage resources and solve common poolresource problems will be spellbound. Aspredictive modern social science, the effortis less successful. It does not miss the mark,it is not wide left as some claim, so much asits main argument oversimplifies and over-generalizes. The book’s historical richness isnot balanced by an equally sophisticatedconnection to the modern world and itscapabilities.Ofcourse,thereareparallelsbetweenpastandpresentcommonpoolresourceproblems.Buttherearealsodifferences.TheNorsebuilttheirroofsfromirreplace-ablesod,andwefuelourcarswithirre-placeableoil.TheEasterIslandersandtheMayanswereboundintheirthinkingby theircultureasarewe.Wecutdownmoretrees,usemoreoil,andpollutemoreriversthanweshould.And,likepastcultures,ourscannotbealteredquickly.Wecannotreada 1050  Journal of Economic Literature, Vol. XLIII (December 2005)  fewbooks,hearafewcogentarguments,orlearnofagapingholeintheozonelayerandsuddenlybecomeacollectivist,pro-environ-mentalpeople.Thatsaid,ourself-interestedculturediffersinoneimportantrespectfromthoseofthepast;itseffectscanbemanipulatedinwaystheotherscouldnot.Oursophisticatedpolitical,economic,legal,andsocialinstitutionsallowustochannelandharnessourselfinterest.Theseinstitu-tionsprovideleversuponwhichwemay stand,andthey(andnotanthropologistsandtelevisionasDiamondclaims)maybeourlastbesthope. Four Books in One Collapse is really four books in one. Thefirst book describes the collapse and survivalof past civilizations. In it, Diamond con-structs a multicausal theory of collapse thatexplains why societies on Easter Island andGreenland collapsed and why the 1,153 resi-dents of Tikopia continue a three thousand year experiment in sustainable civilization.This first book, like most ambitious projects,mixes brilliant insights with logical gaps. Thesecond book, interwoven with the first,describes how scientists reconstruct the par-ticulars of past civilizations and climatesusing bones, houseflies, and core samplesdrawn deep from bogs. Some of these tech-niques will be familiar: isotope analysis of bones reveals clues of diets and overlappingdendrochronology—comparing tree rings of trees with overlapping time spans—allowsscientists to reconstruct centuries of rainfalldata. But other techniques are more novel.Scientists can now uncover details about pastcivilizations’ diets by sifting through the crys-tallized trash heaps of long dead pack rats.And, some techniques are so amazing thatthey seem to have been developed by anadult version of Encyclopedia Brown. Whoelse would have combined the knowledgethat during droughts the heavy form of oxy-gen (isotope oxygen-18) becomes moreprevalent with the realization that molluskstake up oxygen forming their shells to piecetogether data about the duration and severity of droughts?Book three is a thick, blunt allegory. Theearth is an island and we are Easter Islanderscutting down old growth forests. They builtstone heads and beautiful churches, webuild super highways, giant stadiums, andbig box department stores. This is not a mere“as-if” connecting, but an integrated linkagebetween past and present. The EasterIslanders, the Norse, the Mayans, and theAnasazi did not anticipate their collapses,and neither do we. Book four outlines how we might save ourselves from a similar fate,a guide for how to alter our behavior. Booksthree and four should delight environmen-talists, as Diamond makes their case elo-quently and forcefully. But these same twobooks will infuriate many readers, particular-ly economists. Of all the technologicaladvancements that have been made over thepast two hundred years, Diamond chooses tohighlight DDT and chlorofluorocarbons(both of which were abandoned when foundto be harmful), and leaves out computers,medicine, planes, trains, and automobiles.Those may not be entirely good, but they’renot all bad either. The Telling of the Collapses Diamond’s stated goal was to understand why societies collapse. By collapses, hemeans unsustainable trajectories that pre-cipitously fall. He means civilizations within which everything seems to be hummingalong fine until one day the bottom falls out.Think James Dean’s fiery death on thePasadena freeway and not Ronald Reagan’sslow agonizing decline.Taking a scholarly approach that one hopesmany emulate, Diamond describes the footand a half high stacks of paper he gatheredon each civilization, immersing himself inevidence before coming to any conclusions.(Paperlessness being next to godliness withinthe environmental community, one hopes Page: Are We Collapsing? 1051  that this is metaphor and that he downloadedthe material rather than printing out a stackof paper ten feet high.)Most of us (economic historians notwith-standing) would not have bothered withsuch a fact filled undertaking. The reasonbeing that economics can provide an austeremathematical explanation for collapses. Thiscomes as no surprise; economists have anaustere mathematical explanation for justabout anything. In this instance though, theeconomic model proves relevant. It goes asfollows: a society’s output consists of laborand capital applied to some naturalresources. In its starkest form, the modelassumes a single natural resource, with aninitial quantity denoted by  Q . We can eitherassume that Q is renewable, in which case Q both decreases from extraction,  X  , andincreases from regeneration, R , or that it isnot, in which case Q inexorably decreases. If the natural resource is not renewable, col-lapse is unavoidable. As every child knows,eventually the Halloween candy, like our oil, will be gone. But as long as the PeanutM&Ms last, we might as well enjoy them.If, instead, the natural resource is renew-able, and if its level and regeneration rateare known, then choosing a rate of extrac-tion that is balanced by the rate of regener-ation, i.e., setting  X  equal to R , results insustainability. Of course, a higher rate of extraction leads to collapse. In the civiliza-tions Diamond studies that did collapse, theresources were renewable but  X  exceeded R . In Iceland, Tikopia, and Japan,  X  did notexceed R , at least not for long, and the soci-eties succeeded.At first, then, it appears that Diamond ispromoting a single factor explanation.Civilizations that wisely manage theirresources survive. Those that do not col-lapse. But Diamond argues that this expla-nation is incomplete. First, why did thosepast civilizations choose  X  larger than R ?Second, if these mistakes were made in thepast, could not the same mistakes be madetoday? Why would not  X  have been chosenoptimally? The most compelling explanationis that Q and R  were imperfectly known.Consider two extremes, one in which Q and R are known, as we might think would betrue of forests (I’ll challenge that claim in asecond) and another in which Q and R areunknown, as might be true of topsoil.Failure in the former case is, for lack of abetter word, dumb. (The term boundedrationality just doesn’t quite have the neces-sary force here.) And Diamond had betterhave a compelling explanation for how asociety could watch Q fall year after year anddo nothing about it.Failureinthelattercaseisnoembarrass-ment.If  Q and R arenotknown,thentheonlycertainsustainablepathistoset  X  equaltozero.Amorereasonablestrategymightbetochoosean  X  thatworkedinanother,similarlocation.And,infact,theNorsefol-lowedthisapproachinVinland.Sadly,thisstrategyonlysucceedsiftheregenerationrate, R ,inthenewlocationisequaltoorsmallerthan R intheoldlocation.Asitturnedout, R inScandinaviawaslarger,andtheirVinlandcivilizationcollapsed.Oops!Bywayofcomparison,thosewhosettledtheUnitedStatesfoundarelativelylarge R ,andtheyprospered.However, in Diamond’s theory, misman-agement of renewable natural resources isonly part of why societies collapse. The fullexplanation, which is his thesis, rests on fouradditional causes:  institutional and cultural failures , environmental change , a loss of allies , and a gain in enemies . His mostdetailed case study demonstrating this thesisis the Norse Vinland settlement on modernday Greenland. The Norse settledGreenland in 980. By 1450 they had run outof fuel and were eating their baby calves tosurvive the harsh winter. Without question,the Norse overextracted. They overharvest-ed their forests to such an extent that they had no wood to build boats. They depletedthe precious, slowly regenerating topsoil by grazing cattle and sheep and even cut the valuable turf to make the walls and roofs of  1052  Journal of Economic Literature, Vol. XLIII (December 2005)
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