Tuesday, August 19, 2008

Finite Resources vs. Infinite Resourcefulness

People and prosperity threaten the planet and our very existence!! We’re running out of oil! Of fresh water! Clean air!

“Glaciers are melting, plants and animals are being forced from their habitat, and the number of severe storms and droughts is increasing.” An Inconvenient Truth current website (1)

“Big squeeze on the world’s freshwater resources looms as populations mushroom and incomes rise. “Facing the Freshwater Crisis.” Scientific American August 2008

“World oil demand is surging as supplies approach their limits.” National Geographic, current website (2)

Our consumption is excessive. If we continue to consume our natural resources, there will be nothing left for the future.

Use less. Do it for the children!

Limit. Limit. Limit. Do it for the poor!

A significant number of environmental concerns center on this fear of using up some important resource: oil, rainforest, fresh water, open space, biodiversity. The concern is genuine. The fears are real. People then work to pass laws which intentionally slow production and hinder (even prevent) consumption. The express purpose is to make us poorer in the short run with the hope of preventing poverty in the long run.

It’s common sense. Save today in order to have some available tomorrow. It’s how our bank accounts work, so it seems logical to apply the same reasoning to resource use. But there is a catch. All of economic history, up to and including today, demonstrates that the more we exploit our natural resources, the more available they become. (3-7) How can this possibly be? If we use our “limited, non-renewable resources” we have to end up with less, right?

Actually, no. And here is why.

We don’t simply “use up” existing resources; we constantly create them. We continually invent new processes, discover new sources, improve the efficiency of both use and extraction, while at the same time we discover cheaper, better alternatives.

The fact that a particular physical substance is finite is irrelevant. What is relevant is the process of finding ways
to meet human needs and desires. The solutions, and thus what we consider resources, are constantly changing. Oil was a nuisance, not a resource, until humans discovered a use for it.

In order to survive and flourish, human beings must succeed at fulfilling certain needs and desires. This can be accomplished in a multitude of ways using a multitude of materials. The requirements of life set the goals. How these goals are met does not depend on the existence or the availability of any particular material. Limits are placed not by the finiteness of a physical substance, but by the extent of our knowledge, of our wealth, and of our freedom. Knowledge. Wealth. Freedom. These are the factors which are essential to solving the problems we face.

“The Stone Age didn’t end because we ran out of stones.”

Think for a minute about how we have solved the problem of meeting basic needs throughout history:

Transportation: from walking to landing on the moon
Communication: from face-to-face conversations to the World Wide Web.
Food: from hunting and gathering to intravenous feeding and hydroponics.

Shelter: from finding a cave to building skyscrapers
Health care: from shamans to MRIs and neurosurgery.

How does progress happen? A synopsis of the process is provided by the main theme of Julian Simon’s book, The Ultimate Resource 2:

More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run, the new developments leave us better off than if the problems had not arisen, that is, prices eventually become lower than before the scarcity occurred. (9)

This idea is not just theory. Economists and statisticians have long been analyzing the massive amounts of data collected on resource availability. The conclusion: our ability to solve the problems of human existence is ever-expanding. Resources have become less scarce and the world is a better place to live for more and more people. (3-7) Overall, we create more than we destroy as evidenced by the steady progress in human well being and there is no evidence for concluding that this trend can't and won't continue. Doomsday predictions have been with us since ancient times and they have consistently been proven wrong.

The science of economics has a crucial perspective to offer in the debates on resource scarcity and environmental policy. As economics professor Steven Horowitz explains, “The problem of scarcity –and how to handle it- are at the center of the discipline.” (10) The claim that resources are not finite goes against our common sense, but, that’s when science has the most to offer: when the facts, and their cause and effect connections, are counter-intuitive. What seems obvious may in fact be wrong. Science is what allows us to discriminate.

Economist Julian Simon refutes the environmentalist focus on "finite resources" with an extensive presentation of empirical evidence as well as a theoretical explanation for the long-term decrease in resource scarcity. He also offers several possibilities as to how we could continue to increase our supply of minerals, energy and food, while simultaneously improving the quality of our air and water. (3) Economist Dr. George Reisman offers both an economic and philosophic analysis of functionally unlimited resource availability in “Natural Resources and the Environment,” the third chapter of his treatise on economics. (11) Indur Goklany provides updates to the evidence that economic growth and environmental improvement go hand-in-hand.

Resource development, economic progress and environmental improvement do not take place in a political vacuum. The connections between freedom, wealth and human-well being are documented and analyzed in at least two projects, the Economic Freedom of the World and the Index of Economic Freedom. Economic liberty, in particular the right to property, is an essential ingredient for releasing the potential of technology and innovation to solve the challenges we face. Here too, economists have much to add to our understanding on the mechanisms of resource (and wealth) creation. It is their stock and trade.

The finiteness of any specific physical resource is made irrelevant by the presence of the ultimate resource: human ingenuity unleashed in a free society.

(For details and an in-depth analysis, check out Simon and Reisman. For a short and to the point introductory explanation of the key ideas, check out the article by Horowitz. Since The Freeman allows reproduction of its articles, you can read the article posted in my blog below. )

1. http://www.climatecrisis.net/thescience/
2. http://ngm.nationalgeographic.com/2008/06/world-oil/roberts-text
3. Simon, Julian The Ultimate Resource 2 Princeton University Press, Princeton NJ, 1996
4. Moore, Stephen and Simon, Julian It’s Getting Better All the Time Cato Institute, Washington, D.C. 2000
5. Lomberg, Bjorn The Skeptical Environmentalist: Measuring the Real State of the World Cambridge University Press, 2001
6. Goklany, Indur The Improving State of the World: Why we are living longer, healthier, more comfortable lives on a cleaner planet. Cato Institute, Washington, D.C., 2007
7. Reisman, George Capitalism: A Treatise on Economics, Jameson Books, Ottawa, IL, 1996
8. I am working to locate the source of this quote and will add it when I find it.
9. Simon, 1996, pg 59
10. Horowitz, Steven "Economists and Scarcity" The Freeman, June 2008
11. Reisman, 1996, pg 63-6611. Reisman, 1996, pg 63-66


Beth said...

My post makes many of the same points as Horowitz, and probably not as well. I almost decided to simply publish his article and leave it at that (I do believe in the conservation of energy, especially when it is mine!) But there is much to be gained by the intellectual exercise of trying to write out the argument myself. So, here's my attempt to organize my own thoughts in a way that (hopefully) communicates my ideas to others.

Beth said...

Posted for Charlotte:
I love this, Beth.

I don't know if I told you, but I am going to be doing 2-hr workshops once or twice a month at LCS, the small private school where I'm teaching Latin, and where Steven is going.

I'm thinking about including some of your blogs as a reading assignment.

Thank you for keeping up the great work. Do you have any feedback from the blogsite as to how many hits you get, statistics on how widely read they are, etc?


Anonymous said...

So the earth can sustain 10 billion people, 100 billion, 1000 billion?

EROEI has no effect?

Finite productive land not an issue?

Reduce ore yields not a problem?

Standard of living for ALL members of the population can be maintained?

You could try doing a computer model with a lot of real world parameters and look at projected quality of life indicators in 20 years to see how your textbook theory pans out.

Beth said...


Did you actually read the article? I realize this brief post is not a definite argument, but my claims are not just a "textbook theory." A large amount of historical experience backs up these claims.
This coupled with the fact that as a nation grows richer, its population growth declines, countering the fears of over-population.
If you would like to look at more details, I would highly recommend the works of Goklany and Simon. For a book that addresses the energy issue specifically, I suggest The Bottomless Well by Peter Huber and Mark Mills.

I realize that this is a vastly different view than the main stream, but on an issue this important, I hope you are willing to at least give some alternative point of view a read. Sometimes we can learn the most when we take a closer and open-minded look at our most basic assumptions.

Joe George said...

This is hilarious...and sad at the same time..You really think you can keep taking as an organism and not have consequences on the whole...Have you noticed here in 2013 the differences...How bout watching the movie HOME put out by the French on youtube..or the other DOC End of the Line..Or read Bill McKibben's Eaarth.. or Oil and Honey...You can not make a finite project out of infinite resources..and for all the people that are doing better..a 7th of the planet are dying off..Get off thinking there is a solution through consuming..We don't create any resources..the sun helps create plants and in turn animals..and we as an animal consume...consume a lot...cuz we need expensive keyboards to type on which uses expensive metals...If you want to talk change...Quit eating meat..look to the sun for energy, and start making local gardens in every community on every friable patch of soil...and quit driving gas guzzling vehicles...and buying plastic crap. Grow hemp and giant grasses...build solar panels and use public transportation...NOW not tomorrow..now! There were 3 other king salmon fisheries that just failed this year in Alaska..and the Halibut returns are decreasing..WHY? Cuz of CO2 increases...and over fishing...Wealth is a problem..Why do we hoard wealth..for what reason...when millions are starving in the street and we wage war over the poors heads. Get off this drum beat kick that wealth is good...wealth might be the solution..but the wealthy sure don't see it that way..they rarely lose wealth unless they can gain. Many don't do that..by many do.