"The man who prefers his country before any other duty shows the same spirit as the man who surrenders every right to the state. They both deny that right is superior to authority."
Lord Acton

Tuesday, March 8, 2011

More Peak Oil and Resource Depletion Debunking

There are many, Jim Puplava over at Financial Sense, and others who are devout followers in the idea of "Peak Oil". I believe they are about half correct.  If we were to look at the world in a static state, without any innovation, or reaction to prices, their predictions would hold true.  However that's not the world we live in, and we're very fortunate for it!

 The US has some issues, of that we can be sure. I'm very worried about the government's incessant printing of currency, and interventions into the markets. Of all the horrors and painful periods that have happened in history, most were caused by some government "expert's" design, or demented plan. Best case, any long-term planning and design that would be done by government would likely be wrong and an inefficient allocation of resources. By wrong, I mean that the government would have taken resources from individuals that could have used them for their own benefit (their own oil price mitigation strategy). The government wastes these resources, with a proven reliable track record, to the point that there are little or no net benefits, or benefits a very small group of people from the "investment". This continued activity has created a culture of rent seeking further diminishing the financial resources for productive uses. We all witnessed how the government approached a problem most American's recognized: healthcare, and we saw how effectively that was dealt with. What makes anyone think energy would be handled considerably better, or differently for that matter??

Some say we should raise the taxes on oil to incentivize conservation.  I do not agree, it is both impractical and detrimental and anyone who did so would be slaughtered in elections. That just adds more cost to productive people and organizations, that are probably working on solutions at the moment.

Many advocate that the government should start a building spree of nuclear power plants.  I don't dispute people's desire to have more nuclear power, but I don't want the government involved, and I want the market to decide what is economically feasible. I would suggest that the nonsensical regulations and barriers to building nuclear plants be removed. Obviously we need to have some safety laws, but certainly these can be streamlined. We have a fleet of nuclear warships that are designed for, and subject to offensive military and insurgent attack! It shouldn't be a problem to build a power plant in Kansas, Texas, or California on American soil especially of a proven safe modern design.

Prices are the signal to humans, that a substitution should be made, resources conserved, and alternatives developed. It is economics pure and simple. Unfortunately these lessons of economics have been buried far back on the shelf of academic instruction, so as it is far better to get a self instructed education than to get it from some lofty institution of higher learning. Hayek, Adam Smith, Mises, and Julian Simon are hardly core curriculum!

We have moved beyond every resource shortage in the past. It worked every time with increasing jumps in productivity and joltingly accelerating at each step. Mathematically, this is an envelope curve, a typical example is shown below in regards to the energies achieved by accelerators.  Innovation has no limit!  That is the real force moving humanity forward.  It's a critical and very counter-intuitive idea, but it is true, empirically and historically:

example here. I have my own ideas of what I will do when the price reaches a point, but there's no reason that it needs to be the same thing as my neighbor. A completely different strategy may be appropriate for him.

This fear of "exhaustion" of resources has happened at every turn in world history. One such case documented in Matt Ridley's book "The Rational Optimist" and one of the oldest examples, in 1798, Robert Malthus (the first Malthusian) famously predicted with his "Essay on Population" that food supply could not keep up with population growth, and that the population of the world would die back. This gap in time wasn't necessarily easy, but it ended soon enough to greater prosperity. In 1830 someone discovered the vast quantities of bird droppings on the South American and South African coasts on islands that didn't get any rain. The bird droppings were nitrogen rich and had been accumulating for hundreds of years. Guano mining became very profitable. Around 1880 the droppings were becoming more scarce, so the miners turned to saltpeter and mineral deposits in the Andes mountains, which were ancient bird islands. Those reserves went eventually into decline.

At the beginning of the 20th century, the world was in crisis once again with Malthusian predictions on the dying off of humanity, until the development of both a stronger wheat crop, and the invention of fertilizer production from steam, and the internal combustion engine.

We have seen both an increasing shallowness in the impact of the Malthusian pause between innovations, and an decreased duration. The "bad times" that are linearly projected to be die-offs and global disasters are getting less bad and shorter, before the next innovation comes along.  This is something that Julian Simon and others have written about for decades.

1 comment:

  1. Well written. I was getting kind of sick of the exponential doomers myself. There's probably a Plato quote knocking around somewhere about there being too many people on the planet.