This unlearning economics chap: can he actually read?

Saw this on Twitter:

Unlearning Economics ? @UnlearningEcon

@worstall responds with a piece where he effectively denies resource constraints, stating my point better than I could: http://www.forbes.com/sites/timworstall/2012/03/24/we-dont-consume-resources-we-create-them/

In which I write the following:

One of the points that economists have a really hard time getting over, probably because it is so counter-intuitive, is that we human beings don’t really consume resources, we create them. This has implications for huge swathes of the environmental movement and also for certain parts of the Peak Oil theory.

Please note that I’m not trying to state, as no economist is, that we do not live on a finite Earth. That there isn’t some limit to the number of copper atoms available to us, or that oil or natural gas are out there in truly unlimited quantities.

The argument is, rather, that while there are indeed such hard limits to availability they are so far away from our current situation that they’re irrelevant (for example, the hard limit for tellurium is 120 million tonnes and we use 125 tonnes a year). Thus an entirely different dynamic comes into play, one in which we humans create resources by developing the technologies that make them available to us.

This is a denial of resource constraints?

WTF?

13 comments on “This unlearning economics chap: can he actually read?

  1. You describe resource constraints as being “so far away from our current situation that they’re irrelevant”.

    It seems fair enough to summarise that as “effectively denies resource constraints”.

    Also, you might want to consider that the reason that economists have such a hard time getting that point over, is that it isn’t true.

    “Develop the technology to exploit” is not synonymous with “create”.

    Tim adds: Actually, it is true, in the way that most people describe “resources”. Take “resources” of oil, of minerals, of metals.

    The definition of a “resource” of any of these is the stuff that we know where it is and that we have the technology to extract it. If we develop a technology to extract more then resources increase.

    Now we could say that this isn’t the real meaning of resources. I’m up for that if anyone wants to. But if we do go with some other definition of resources then we’ve got to stop using this definition to define the resources available to us. For all the calculations of resources running out (Club of Rome, all that sort of stuff) use as their definition of resources the stuff that we know where it is and have the technology to extract it.

  2. It’s not the definition of “resource” I’m objecting to, but “create”.

    The definition of a “resource” of any of these is the stuff that we know where it is and that we have the technology to extract it.

    Fine.

    So we *find* them and *develop the technology to extract* them.

    We do not “create” them, not as most people understand the word.

  3. You’re all excellent at being rude but not so great with anything else. The fact that economics *says* it is taking limited resources into account is not sufficient to prove it does. Talk about failing logic.

    As I emphasised, economics assumes resources are limited at any one time, but there’s no talk of when the reservoir will run out completely. This is exactly what I said, and what your article restates.

    To think we can overcome the laws of mathematics by growing exponentially, forever, is incredibly naive. Technology may have kept up so far but that doesn’t mean it will continue to (and I genuinely hope I’m wrong).

    Tim adds: “The fact that economics *says* it is taking limited resources into account is not sufficient to prove it does.”

    Eh? That the first thing you learn in GCSE economics (no, go look at a syllabus) is that resources are limited does not show that economics agrees that resources are limited? What?

    “As I emphasised, economics assumes resources are limited at any one time, but there’s no talk of when the reservoir will run out completely.”

    We talk about when resevoirs will run out all the time. We’re shit out of whale oil for a start.

    “To think we can overcome the laws of mathematics by growing exponentially, forever, is incredibly naive.”

    So you’ve not got to the components of GDP in your course yet then?

    You know, “the *value* of goods and services at market prices” thing?

    It is most assuredly true (as I have written a number of times and in a number of places) that there are physical limits to physical growth. But that does not mean that there are physical limits to economic growth: for we are measuring the value, not the tonnage.

    Dear God, even Herman Daly gets this point: why don’t you?

  4. but there’s no talk of when the reservoir will run out completely.

    Because we’ll have a water substitute by then. Or be able to produce it by desalinating seawater. Or some other technique that means that reservoirs are either no longer around or no longer used for storage of drinking water.

    Note for the usual suspects – not my analogy, so apologies for extending it not quite to breaking point.

  5. Larry, using oil as an example it’s true we don’t create the crude oil resource. It was created using natural processes over millions of years. But we do create refined oil (petrol, diesel, etc.) with the help of technology.

    As the resource of crude oil got more limited (constrained) the technology to extract it has also progressed. So to start with it was only possible to drill for oil on land. Now we can drill for oil in the middle of the sea using huge floating concrete structures.

  6. “We do not “create” them, not as most people understand the word.”

    Electromagnetic spectrum.

    A very valuable resource, billions of dollars changes hands to obtain the right to use the most valuable parts of it. A created resource.

  7. SadButMadLad, I don’t disagree with any of that that. We create things out of the resource. We create ways to extract the resource. We don’t create the resource.

    A. No. The electomagnetic spectrum has been around since the big bang. And humans have been using “the most valuable parts of it” since the evolution of the eyeball. No-one created it.

  8. SE,

    But this is an assertion. It’s possible we will find a water substitute, but we can’t rely on it.

    Check here:

    http://www.tedauch.com/2010/05/21/forget-peak-oiltry-peak-n-p-and-k/

    There is evidence that certain resources are running out. I’m not happy about this, but denying it on the grounds that there just has to be a miracle breakthrough before we run out seems spurious at best.

    I mean, economists apply opportunity costs to everything – why not growth itself?

    Tim adds: “I mean, economists apply opportunity costs to everything – why not growth itself?”

    Sure, why not? Do remember to use economic methods of analysis in your analysis. But the idea? Sure, right on!

    Now, my answer is that current average global GDP per capita is around $8,000. We need that to be higher for all to live as we all would wish all could.

    Yours is…….?

  9. It’s possible we will find a water substitute, but we can’t rely on it.

    Oh, dear. But, but, but …

    We have got mass desalination plants supporting large populations. Different substitution. Market economics rather than central planning.

    Sighs.

  10. Tim, I won’t discuss what I think GDPPC should be as it’s a red herring. But if you agree there are limits to growth then we have nothing to argue about.

    SE,

    I’m glad you have such faith in future outcomes that you can’t possibly know about. But I do not.

  11. when I sudied economics, we learned of the short run, the long run and the very long run. Have these concepts been forgotten?

  12. I’m glad you have such faith in future outcomes that you can’t possibly know about. But I do not.

    I appreciate you don’t get out much – you’ve got so many lectures to ignore. But we already have mass desalination plants supporting large populations. It’s not a future technology.

  13. The argument that “we have always overcome resource constraints in the past, therefore we always will in the future” works until it doesn’t.

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