Industrial development would have been greatly retarded if sixty or eighty years ago the warning of the conservationists about the threatening exhaustion of the supply of coal had been heeded; and the internal combustion engine would never have revolutionized transport if its use had been limited to the then known supplies of oil (during the first few decades of the era of the automobile and the airplane the known resources of oil at the current rate of use would have been exhausted in ten years).
Hayek
Previous to the emergence of man, the earth was replete with fertile soil, with trees and edible fruits, with rivers and waterfalls, with coal beds, oil pools, and mineral deposits; the forces of gravitation, of electro-magnetism, of radio-activity were there; the sun sent forth his life-bringing rays, gathered the clouds, raised the winds; but there were no resources.
Zimmermann
The confounding of physics with economics has plagued a real-world understanding of mineral resources. The phenomenon of entropy and the laws of thermodynamics rule in their domain. But there is no economic law analogous to the physical conservation of matter. There is no law of conservation of value; value is continually, routinely created by the market process. And this value creation does not deplete.
Bradley Jr.
I encourage everyone to take the time to read Robert L. Bradley's superb, brief (28 pages), and intelligible history of resource economics, Resourceship: An Austrian Theory of Mineral Resources, which, among other things, provides another example of the statist, hence authoritarian, and more politically correct than economically informed nature of mainstream economics.
See also Be Fruitful and Multiply ..., Prosperity Protects the Environment, and Peak Oil, Peak Bird Excrement, Peak Anything.
I don't deny the Austrian point of view here. But not much is said in regard to population growth.
It took the last 10 years to add 1 billion people. The previous 10 years we added .8 billion people. In 10 more years we would have added more than 1 billion. Eventually we have an exponential problem where we add another billion in less and less time.
I'm no sure that the Austrian paper takes that into account. But I'm also not sure that it is necessary. Its concentration is on how that resource will be divided up. Not so much in denying that there is scarcity. And if there is scarcity they say it is due to interference in the market. Again, nothing wrong with that. But what about a world that will double in population in the next 50 - 70 years (7 billion to 14 billion)?
Thus, I'm not sure that the paper was designed to be against peak oil. But perhaps a description of how resource allocation works in a market that suffers from regulation.
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Posted by: Triple Hash | 12/28/2011 at 08:02 PM
Hi, Triple Hash. Maybe, this post might serve as a starting point:
http://redstateeclectic.typepad.com/redstate_commentary/2009/11/an-overpopulation-of-mathusians.html
Posted by: Georg Thomas | 12/28/2011 at 08:30 PM
Well, I understand that. But if one only looks at the last 100 years and sees that we added 5 billion in that time they may think we'll only add 5 more billion in the next 100 years. But we won't. We'll continue our growth exponentially.
At what point do you recognize that what you saw recently is not what you're going to see in the future? Yes, we can adapt, yes we are smart and can create new technology. But how long does knew technology take to replace resources that are being used up at a faster and faster rate?
If you take a thimble of gasoline from your gas tank and double that rate each time you take gas out of your gas tank at what moment do you realize that the next time you take gas out of the gas tank that you won't have any left? When it is half full? That certainly seemed like you had plenty, but it is too late to do anything about that. The next turn, you're out of gas.
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Posted by: Triple Hash | 12/28/2011 at 08:52 PM
Mainstream resource economics fails to perceive and explain the most glaring and most impressive feature of its subject matter, namely that mankind has developed by constantly expanding its resource base. Austrian resource economics as outlined in the paper explains why, and helps us to discern between actions that will damage our ability to continue to be increasingly resourceful (anti-liberty policies) and actions that foster our resource-creating ability (liberty).
Posted by: Georg Thomas | 12/28/2011 at 09:01 PM
"mankind has developed by constantly expanding its resource base"
in spite of the government. Who knows what would happen if the shackles were removed.
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Posted by: Triple Hash | 12/28/2011 at 09:03 PM
If you eliminate per assumption all counteracting factors (making them visible being the entire point of the paper), as you do, and focus exclusively on exponential depletion, then you are right to worry, and perfectly entitled not to see a solution. But this kind of selective narrowing of the model base is precisely what the paper is criticising in mainstream economics.
Also, your simple model isn't doing justice at all to the complex dynamics of population growth/decline. So before you begin to feel entitled to worrying seriously - consult this paper by P.T. Bauer:
http://www.independent.org/pdf/tir/tir_03_1_bauer.pdf
In the winter months, I tend to suffer from spells of sleeplessness, but now I must go to bed. So, you'll hear from me only tomorrow.
Posted by: Georg Thomas | 12/28/2011 at 09:23 PM
"in spite of the government"
Tom DiLorenzo's book, How Capitalism Saved America, has a really neat section about oil forecasting and government intervention into energy. The best part for me is describes a forecast of an impending oil shortage that leads to a call for the central conservation of oil by the Carter administration. That particular dire forecast was made by the CIA!
The court systems intervene also. Phillips vs Wisconsin (1954) gave the Federal Power Commission (aptly named) the power to regulate the well-head price of interstate natural gas. This led to shortages… which led to more government intervention.
I got Chris Martenson's book for Christmas and am looking forward to reading it while being very aware of the poor track records of doom-saying governments and individuals. However, it's best to keep an open mind - a condition which allowed me to consider the dotcom and housing bubble doomsayers. And they got it right.
Posted by: Eric Parks | 12/29/2011 at 07:57 AM
Austrian resource economists are not saying, there will not be shortages, even catastrophic one. As Eric Parks points out pertinently, there are and will be plenty of shortages. However, not because human beings are naturally hapless victims to absolute depletion. Destructive government action brings about such shortages, whether you look at famines or say, the considerable supply-side constraints for crude oil, a resource largely owned, mismanaged and manipulated by inefficient governments.
Posted by: Georg Thomas | 12/29/2011 at 11:03 AM