Malthus : Solow – Quagmire – Technology for the Business World sustenance

Thomas Malthus : Robert Solow

Malthus (1766-1834) Anglican Clergyman, political economist remains relevant after 200 years. One of the most influential thinkers of modern economics, Malthus was concerned with the relationship between human population and resources access. He sought to constrain the population to manage the scarcity. Malthus placed longer-term stability of economy over short-term expediency. Though Malthus argued around food, the prevailing energy demand growth of the increasing population along with prevailing environment (climate) degradation – would eventually be unsustainable.

Professor Robert Solow (1924- 88 batting), Nobel winner in economics (1987, for analysis of economic growth) brought forward the ‘Solow residual’, which brings forth the contribution of ‘Technological Innovation’ explaining nearly 50% of growth, that is unexplained by ‘Capital’ & ‘Labor’. Solow has remarkable skills in statistics with matching insightful understanding. Providing the alternative to Malthus, Solow’s article originated “sources-of-growth accounting,” which economists use to estimate the separate effects on economic growth of labor, capital, and technological change.

Modern world of data-intensive scientific discovery (4^th paradigm science) is going to test the Mathusian –vs- Solowian models and extend the philosophy beyond economics, into other domains like environment, energy, terrorism and corruption!

Business Role

Businesses clearly have a major role to play in any strategy that tests the sustenance of this planet. They are the engines of the economies – i) devouring a disproportionate share of the world’s nonrenewable resources; ii) producing disproportionate share of its emissions; and iii) generating disproportionate disparity in incomes.

As every econometric measure and every thought is pursued as a business, driven by the funding generated by the businesses, it remains faithful for the businesses. We have a new quote replicating Abraham Lincoln’s – Economics of the Business, by the Business, for the Business shall not perish from the earth.

All other things of the planet ranging from politics, sociology, ethics, morality, research, science and face-book are driven by this emphatic link to businesses. The technology innovation which Solow proposed is alone capable of extricating the planet from this very-short-term singularity of dependence on businesses. The Data-Intensive-Scientific-Discovery or 4^th Paradigm Science is the way!

World Leaders’ nightmare

Each year the World Economic forum surveys experts and industry leaders to assess their level of concern over 50 global risks (divided into 5 categories), collating the ‘likelihood’ and ‘impact’.

Rank	Most Likely	Most Impactful
1	Severe Income Disparity	Major systematic financial failure
2	Chronic fiscal imbalances	Water supply crisis
3	Raising green-house gas emissions	Food shortage crisis
4	Cyber attacks	Chronic fiscal imbalances
5	Water supply crisis	Extreme volatility in Energy and agriculture prices

India with 1.2 billion population, possibly double-logarithmic income disparity may see more intense impact of these factors even if they happen in 2015 or 2020. A synthetic model of such income is in figure below:

Technology elements for sustenance

Establishing reliable and comprehensive databases is primary. GOI has taken-up the Public Information Infrastructure projects (PII). Businesses internally need to establish equivalent Business Information Infrastructure.

Developing transparency, analytical insight and decision-making using the data is the basis for converting the technology into business development and sustenance.

All other conventional aspects like Processes, People etc. are incapable of providing the kind of differential which Solow points to!

Data Driven Business is alone sustainable business that follows Solow’s model of innovation. The Solow residual is >>75% which is hidden in the data. Any amount of Capital or Labor cannot themselves retrieve this loss.