Money, Greed, and God--Part IX

An Inexhaustible Resource

The eighth myth—and last of the economic myths discussed by Richards in his book Money, Greed, and God: Why Capitalism is the Solution and Not the Problem is the Freeze Frame Myth which assumes that natural resources in aggregate are fixed and limited and that eventually the human race is going to run out of them.

This is a very important chapter. Much of modern apocalyptic scaremongering turns around the belief in the finite nature of resources. The world will be in crisis when oil runs out, for example. Or, water will become all used up and all living things will die.

Most often this myth is related to scaremongering about population growth—the more people, the more quickly scarce natural resources will be consumed. It appears such a common-sense assertion that once uttered, few doubt its truth. The solution usually offered is to restrict and control population growth by persuasion or compulsion, and to lower living standards so that everyone consumes less, thereby conserving for future generations.

Richards writes:

Whenever I speak about environmental issues, I always get asked about the “fact” that we're depleting the earth's resources. But it's not a fact. The truth, despite untutored common sense, is just the opposite. As long as we can preserve our economic freedom and the spirit of enterprise, we will not use up all our resources, nor will be run out of food, water, or energy. (Richards, p.185)

There are two kinds of natural resources—renewable and non-renewable. Trees are an example. Water is another, since it is naturally recycled. Other resources, such as oil, are finite and non-renewable. Once all the oil is used up, that's it—at least as far as oil is concerned. But some qualifications are required.

In the first place, we do not know how much copper, gold, iron, or oil resources exist. All we know at any one time is what we know. Discovering additional reserves costs money. What is very clear, however, is that when consumption rises or supplies shrink, the price increases. Higher prices justify funding additional exploration, mining and extraction. In addition, known sources of oil (for example oil-shale and oil sands) which hitherto have been ignored because of higher costs of extraction suddenly become economic to exploit with oil prices being higher.

Known reserves tell us how much it's worth to know about right now, not how much total oil there is to discover or exploit. We can be confident that we're nowhere near running out of oil simply because oil companies aren't hoarding oil and the price of gasoline isn't a million dollars a gallon. (Richards, p.187)

Moreover, as prices for oil rise, investing in substitutes becomes economically justified. So, alternative energy sources are investigated and developed. (No government initiatives or plans or programmes are required.) Under the personal property and free trade system that's what has always happened. Everybody that shops in the supermarket looking for the best deals understands this dynamic. So, as prices for oil rise, so does its supply as new and known reserves are exploited. Moreover, new (replacement) sources of energy are discovered and developed.

In fact, people in every era of recorded history have worried about running out of whatever resource they're using at the time. England began to experience lumber shortages in the 1600's. They got so severe in the 1700's tha the island came close to being stripped of its forests. People feared a complete loss of wood. So what happened? Wood became too costly to use as a fuel in most places. That encouraged innovation with other resources, like coal. The English eventually switched to coal, and over time, English forests returned. . . .

So after the switch to coal, did all of England rest easy and quit worrying about running out of resources? Hardly. In 1865, a prominent social scientist named W. Stanley Jevons wrote a book proving to his satisfaction that England would soon exhaust its coal, and the economy would grind to a halt. It didn't happen, and there's still plenty of coal available more than 140 years later.

Did such experiences teach the doomsayers to qualify their warnings? Nope. The same unqualified claims of disaster quickly emerged with petroleum as well and have continued down to the present, despite one prediction after another biting the oil-stained dust. (Richards, p. 190f)

As Sheik Yamani, founder of OPEC put it, “The Stone Age came to an end not for a lack of stones, and the oil age will end, but nor for a lack of oil”.

Moreover, when it comes to energy, the earth is not a closed system. Every day more energy pours onto the earth's surface via the sun. But how to harness it—that is the problem? It is always the same problem—and human ingenuity and knowledge and skill is required to solve it. But, with those magic ingredients there currently is, nor will there be, a shortage of resources. A Chinese proverb says, “if you want one year of prosperity, grow grain. If you want ten years of prosperity, grow trees. If you want one hundred years of prosperity, grow people.”

We conclude this series of posts, leaving the last word to Richards:

We know market economies grow. So why do we often fall for claims that contradict what we already know? Because we forget what late economist Julian Simon called “the ultimate resource”--the creative imagination of human being living in a free society. The more human beings in free societies there are, the more inventors, producers, problem solvers, and creators there are to transform material resources and to create new resources. Man, not matter, is the ultimate resource.

This is the most important economic truth, and Christians should have expected it all along. It's ironic that a nonreligious economist like Julian Simon would see that truth so clearly, while so many of our Christian leaders miss it.

One Christian leader who didn't miss it was Pope John Paul II. In his 1991 encyclical, Centesimus Annus, he said, “Indeed, beside the earth, man's principal resource is man himself. His intelligence enables him to discover the earth's productive potential and the many different ways in which human needs can be satisfied”. Read that again: “Man's principal resource is man himself”. Grasp that, and you'll know why we're not going to run out of resources. (Richards, p. 206,7)

Such a stirring and hopeful reality does not lead us to place our hope in man. For it is God Himself Who has endowed man with such gifts and appointed him as His sub-creator. Remove God from the operating world-view and hope eventually translates into fear and the counsels of despair.That is why , in our day, we live amidst a Culture of Catastrophism and superstitious dread, two hundred and fifty years after the Enlightenment first "banished" God from Nature, and asserted the autonomy of the human mind.