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Insects have economies too: Is there a connection between climate change and global deflation?


So we’ve got two megatrends going on in spaceship Earth. One is climate change. The other is global deflation. Are the two connected?

The conventional view of deflation is that it is due to short term factors that lead to lower demand, absolutely or relatively. But there’s a growing suspicion that this may be a long term phenomenon spurred by what Laurence Summers calls secular stagnation. That would be due no doubt to aging populations, declining fertility and fewer people entering the labor force.

But could there be another path to contagion here? Could it be that climate change is directly impacting the human population in ways that we haven’t considered yet? And that this is leading to lower absolute demand or lower demand growth and thus global deflation?

Here’s a straw in the wind. Research from NASA indicates that global plant productivity is declining. Why? You might have thought it was going the other way due to warmer temperatures and faster growing seasons.

But nope. The problem is drought. As in California, Sao Paolo and Beijing running out of water. That means that plants have less to drink and so produce less.

So we can safely say that global plant growth rates are declining. That means that insects and animals that live on plants are being affected too. So the animal world is already seeing its own form of deflation in fewer plants, fewer insects and animals to eat them, therefore lowered demand for plant food and therefore lower prices to insects for plants. Insects have economies too right?

So how would this translate to humans? We can grow our own plants so why would we have a problem? Well there’s another straw, declining human fertility.

The conventional wisdom has it that human fertility rates are declining due to social changes; more women working, a lower proportion of young people in the population, more compelling entertainment than sex for young people in the form of videogames and Facebook.

But there could be another factor, namely rapidly falling sperm counts in men. I have posted about this previously.

Male sperm counts are about half what they were ten years ago in the developed world. No-one knows why. The best working hypotheses are pollution and metabolic disruptors in the food supply.

But could climate change be causing it, just like it’s also impacting the plant world? Could the causes of the decline in plant productivity also be mirrored in some fashion in the human world with the same effect of declining human reproductive productivity?

Yet another straw; declining labor productivity globally. Christine Lagarde, the head of the IMF has recently broadcast her concern about how rapidly labor productivity is falling. She would see it as a result of lower demand. But is that lower demand also due to climate change, just as it is in the plant world? Are negative interest rates really a climate rather than purely a demand phenomenon?

Of course this is a radical thesis. But it’s becoming clear that if secular stagnation is real, as increasingly people are coming to think, then we have to look for long-term causes, not just the latest changes in the stock market or changes in the value of the dollar.

In the 18th century, the famous French philosopher Montesquieu postulated that the higher temperatures in the southern hemisphere made people lazy; that warmer climates impacted human productivity. For many years that was seen as specious or even racist. Maybe he was right after all.









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