Danger: mind-broadening ahead
24 April 2014 08:21 (South Africa)
Opinionista Ivo Vegter

A glass half-full

  • Ivo Vegter
The myth that we're running out of resources seems deeply ingrained in some people. That doesn't make it any more true.

"Cite your sources!" a scientist yelled, stamping his feet and declaring that he would stop reading The Daily Maverick because he took issue with something, somewhere in a column of mine.

What exactly it was that so offended this guy was unclear. I offered to provide suitable citations for whatever point of fact irked him, if he would only tell me what it was. I suggested that the reader comment facility might be a good place to raise such objections. This did not satisfy him, and he refused to specify what he thought was wrong with my argument. He felt comfortable shouting insults – disingenuous! bad science! bullshit! – regardless.

One should ignore idiots like that, I know. However, there is a risk that a few among his 46 Twitter followers might fall for the implied authority of a self-proclaimed scientist, and dismiss not just my own work, but also that of my colleagues and editors at The Daily Maverick. Therefore, I will offer a response.

For a start, this fellow clearly labours under the misconception that everyone who makes an argument in a public forum has the time and resources of a tenured academic at a state-funded university. It grieves me to point out that a columnist can neither afford the time, nor the expensive journal subscriptions that academics get at taxpayers' expense, to produce something as rigorous as a refereed journal article. Besides, academic papers do not make for good reading in the mainstream media. If they did, fewer people might share this guy's misconceptions.

I am prepared to support any factual claim I make with which a reader wishes to take issue, but doing so in advance for every line in a column would be a ludicrous undertaking. A typical economics argument is high-level. Many premises are highly general. If I had to provide detailed support for every point on which I base a conclusion, I'd spend months writing a column, instead of days, and it would run to dozens, if not hundreds, of pages. If I did that, I'd have to get a day-job as a shelf-packer, ditch-digger or burger-flipper.

This column is intended in part to illustrate these points.

What are we running out of?

After a week of bickering by this aggressive, high-minded nut, I finally began to suspect that his biggest concern was my view that in general, we're not running out of resources. This being a sufficiently limited subject to cover in, say, twice the length of a regular column, this is what I propose to support below, complete with citations.

To counter my general argument, and in spite of the detailed points I made about resources that do become scarce, he cited one example: fish.

It is true that many fish stocks are under severe pressure. This is also an exceptional case. Fisheries are among the rare resources that are not adequately protected by property rights, but are subject to communal, bureaucratic planning. As a result, fishing has become a classic empirical example of the hypothetical "tragedy of the commons". Because they cannot ensure future property rights, fish stocks are not managed responsibly by owners who wish to maximise both their present and future productivity.

There are partial solutions, although it remains a hard problem to solve. Individually transferable quotas for particular species have shown some success in protecting certain stocks. New Zealand offers an extensive case study[1]. Another success story is the recovery of Pacific halibut stocks[2]. Still, even in the limited environments in which they have been introduced, such systems suffer from problems, including the difficulty in establishing original ownership rights to quotas, inadequate enforcement, bureaucratically establishing a "maximum sustainable yield" and "total allowable catch", unintentional bycatch, and quota busting.

However, citing one apparent counter-example does not prove the general case.

In fact, it does not even contradict the economic argument I made: If a particular species becomes too scarce, or it becomes too costly to harvest it, its market price will rise, which will prompt a combination of investment into more efficient production, lower consumption, and a search for alternatives. Economics is not a zero-sum game. Scarcity is not a crisis, but a problem to which the price mechanism is the solution.

A similar example is wood. Many classic species with highly desirable qualities, such as teak, walnut, oak and mahogany, have become rare and expensive because of high demand and dwindling supply. As a result, many consumers of wood have switched to less costly, more abundant species, or have developed entirely new substitute materials, such as plastics.

This is how the price mechanism ensures that resource depletion does not become an economic disaster.

The scarcity bet

In the absence of detailed knowledge of undiscovered or unexploited resources, price is a good proxy for anticipated scarcity. Even the high priest of resource scarcity and author of The Population Bomb (1968), Paul Ehrlich, conceded as much when he accepted Julian Simon's bet to select five resources that he believed would, over the subsequent decade, increase in scarcity, and hence in their real, inflation-adjusted price.

At the time, he and his cohorts, Berkeley physicists John Harte and John Holdren, sneered that they should "accept Simon's astonishing offer before other greedy people jump in" as the "lure of easy money can be irresistible"[3].

Despite the astonishing advantage of being able to nominate any resources they liked, Ehrlich and friends lost the bet on all five counts and spent the next few years devising excuses as to why.

Wrote Simon: "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 increased scarcity occurred."[4]

Of course, as we have seen with fish and wood, prices do not always decline. The resources boom that followed the famous Simon-Ehrlich wager is likewise testament to that. Is it true, however, that many resources are under such pressure as ocean-bound fish-stocks or tropical hardwoods?

As it turns out, it is not. Though in principle finite, few resources are really particularly scarce.

Ecomentalists with a shallow understanding of economics might grasp at the term "finite" and make wild conclusions about the need to conserve resources, recycle them, or place them under the coercive management of politicians and taxpayer-funded green groups. However, finite does not mean scarce. The earth may be finite, but it is extremely large.

The mass of the total human population[5] is 440 million tons[6]. The mass[7] of annual oil production[8] is 11.6 million tons. Total annual global coal production amounts to 6.2 billion tons[9]. The earth's crust weighs about 136.5 billion billion tons[10].

Now I'm not proposing that we mine all of the earth's crust, but a sense of scale is useful. Our mineral resource extraction efforts amount to perhaps one billionth of the earth's crust. We're not about to dig a hole to Australia, which would indeed be unfortunate.

Measuring mineral mining

To get an idea of how much we have left of the most common resources before we run out, let's go down the list, ranking them according to how much they contribute to global GDP. The presentation in my source[11] is convenient, but since the data is from 1997 I took the precaution of cross-checking against a current report[12] in case a surprising reversal happened in the intervening years. In all cases, "reserves" means the known amount that is economically extractable.

First up, cement, at 0.376% of global GDP. We have extracted 1.5 billion tons to date. We have no idea how much is left, but it's enough.

Next, aluminium, about one third as important to our economy in terms of value as cement. We've produced 21.2 million tons. There's 23 billion tons of bauxite in the ground that we know of. At 1997 consumption rates, we've got enough for several centuries. If that ever runs out, there are vast non-bauxite sources of the stuff, albeit at higher cost.

We've dug up a billion tons of iron ore, but there are 240 billion tons left in the ground, enough for at least two centuries.

Copper once seemed to be under more pressure. In 1997, it appeared that we had enough for half a century, having produced 11.3 million tons, with reserves of 320 million tons. Copper reserves indicated in the most recent data amount to 540 million tons, however, with much more estimated to be merely undiscovered. If reserves are growing despite growing consumption, a panic over running out would seem to be premature.

Gold is pretty rare, and reserves have been slowly declining. This makes it a good currency, and many economists would argue that the global economy melted down because we stopped using it, rather than because we over-used it.

Nitrogen is the next most important raw material. All we know about reserves is that we have "sufficient" left.

Zinc production has amounted to 7.8 million tons, with reserves of 190 million tons, sufficient for over half a century. Zinc was the subject of a scarcity scare in the late 1990s[13], but current reserves remain at 200 million tons, with an estimated 1.9 billion tons still in the ground.

I could continue, but this is boring me to tears. These six minerals account for 80% of global resource production, so they constitute a sufficient sample to establish that, in general, we're not running out of resources.

What's more, in drawing conclusions from these numbers, the assumption that all things will remain equal is wrong. The copper and zinc examples demonstrate this. In response to scarcity, more exploration occurs, better extraction techniques are developed, or industry turns to alternatives, and, hey presto, reserves increase.

As with resources that are genuinely under pressure (which most are not), the price mechanism mediates between supply and demand, incentivising producers to step it up and consumers to cool it down whenever supply is too low or demand is too high, and vice versa.

The demand-driven boom of the 1990s and 2000s did raise the price of commodities, but in the specific cases cited above, as well as in the overall commodities market, prices took a tumble when demand dropped again in response to the recent economic downturn[14]. They remain high enough to offer a rich incentive to producers to explore further and become more efficient, and for consumers to economise or substitute cheaper alternatives where possible.

This is why even in the few cases where particular resources are under pressure, there is no need to "do something" – such as apologising for having children, raising taxes, making recycling laws, or enforcing rations – until price makes us adjust anyway.

Why are we still arguing this?

This debate should have been settled decades ago. In a 1997 Wired Magazine article entitled The Doomslayer, Ed Regis wrote:

"A more perfect resolution of the Ehrlich-Simon debate could not be imagined. All of the former's grim predictions had been decisively overturned by events. Ehrlich was wrong about higher natural resource prices, about 'famines of unbelievable proportions' occurring by 1975, about 'hundreds of millions of people starving to death' in the 1970s and '80s, about the world 'entering a genuine age of scarcity.'

"In 1990, for his having promoted 'greater public understanding of environmental problems,' Ehrlich received a MacArthur Foundation 'genius' award. ...

"[Simon] always found it somewhat peculiar that neither the Science piece nor his public wager with Ehrlich nor anything else that he did, said, or wrote seemed to make much of a dent on the world at large. For some reason he could never comprehend, people were inclined to believe the very worst about anything and everything; they were immune to contrary evidence just as if they'd been medically vaccinated against the force of fact. Furthermore, there seemed to be a bizarre reverse-Cassandra effect operating in the universe: whereas the mythical Cassandra spoke the awful truth and was not believed, these days "experts" spoke awful falsehoods, and they were believed. Repeatedly being wrong actually seemed to be an advantage, conferring some sort of puzzling magic glow upon the speaker."[15]

It is probably futile to argue with a "scientist" who is capable of unburdening himself of such glib nonsense as that the world's population cannot live at first-world consumption levels, as if this makes a point about overpopulation. Population growth is dangerously low in first-world countries, and is declining in the developing world too, resulting in an ever-decreasing rate of population growth[16]. The declining growth rate has prompted famed bond fund manager and investment author Bill Gross to call it "deep demographic doo-doo"[17].

Whatever the case, it is patently clear that not everyone lives at first-world consumption levels. Pointing out that the world's population cannot live at poor-world production levels is an equally trivial truism. The confused fellow must have been so indignant that he missed the part where I said people can only consume as much as they produce, or is produced on their behalf by others.

This does not mean that those who produce enough for high living standards must reduce their standard of living, but that those who have low living standards can raise them by producing more.

That resource depletion is not an imminent danger should ease the minds of those neurotic people who condemn consumption whenever they get a break from teaching their children which type of shopping bag makes them the least evil little parasites. It should silence those confused eco-nuts who implicitly deplore the development of the poor world, because higher living standards mean higher levels of consumption.

Instead of banging on with their never-ending fantasies of global catastrophe, perhaps these misanthropes could learn not to despise humanity, but to celebrate the productivity, resourcefulness and ingenuity of which free people are capable.
To the disgruntled scientist, I say this: I trust you will find this column adequately supported by citations.

I do not expect that you will believe me when I say resource scarcity is not a crisis, either on empirical grounds, or as an economic basis for humanity's future prosperity.

You would, however, be wrong. Besides its prodigious length, that may explain why you don't want to read this.

Citations and further reading:

[1] Lock, Kelly and Leslie, Stefan. New Zealand's Quota Management System: A History of the First 20 Years (April 2007). Motu Working Paper No. 07-02.

[2] Chu, Cindy. Trent University. The Issue: the Race for Pacific Halibut (undated blog post). Her detailed research paper can be purchased here.

[3] Simon, Julian. The Ultimate Resource 2 (1996). Princeton University Press. pp35-36.

[4] Simon, Julian. The State of Humanity (1996). Wiley-Blackwell. p24.

[5] Source for population: World Bank, World Development Indicators.

[6] Source for average human body mass: Elert, Glenn (Ed.). The Physics Factbook.

[7] Oil Industry Conversions

[8] International Energy Agency. Oil Market Report (2009). (PDF)

[9] US Energy Information Administration, World Total Primary Coal Production, 1980-2006. (XLS)

[10] Morancy, Tye. The Mad Sci Network.

[11] Lomborg, Bjorn. The Skeptical Environmentalist (2001). Cambridge University Press. p139, referencing the US Geological Survey database of 93 minerals in 1998.

[12] US Geological Survey Mineral Commodity Summaries (2010). (PDF)

[13] Association Zinc Fonderie France report. (PDF)

[14] Index Mundi Commodity Price Index history

[15] Regis, Ed. The Doomslayer. Wired Magazine, February 1997.

[16] United Nations Bureau of Economic and Social Affairs. World Population Prospects, The 2008 Revision (highlights). (PDF)

[17] Gross, Bill. Investment Outlook (August 2010).

  • Ivo Vegter
IvoVegterBW

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He approaches issues from the perspective of individual liberty and free markets. He grew up in the deep south of Johannesburg, and learnt his politics reading the Weekly Mail and Vrye Weekblad at Wits University during the early years of the country's transition to democracy. He recently left the city for the lower cost of living of Knysna, where he continues to write about everything under the sun. He is always right.

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