Saturday, February 23, 2008

Julian Simon, the limits to growth and infinite resources

The Earth's physical resources are finite. We threaten our future if we try to live beyond those means, so we must build a sustainable society that guarantees our long-term future.
The above quotation comes from a document describing the philosophical basis of the Green Party. The late economist, Professor Julian Simon, rejected this view in his book, The Ultimate Resource 2. To quote from Chapter 3 (entitled "Can the supply of natural resources - especially energy - really be infinite? Yes!"):
Chapter 2 showed that natural resources, properly defined, cannot be measured. Here I draw the logical conclusion: Natural resources are not finite. Yes, you read correctly.
So here we have a deceased but influential economist claiming that resources are infinite! Note the "properly defined" bit above. The following paragraph from the summary of Chapter2, illustrates the thinking here:
Material-technical forecasts of resource exhaustion often go wrong for two reasons. (1) No matter how closely defined, the physical quantity of a resource in the earth is not known at any time, because resources are sought and found only as they are needed; an example is the increase in the known supplies of such resources as copper, as shown in table 2-1 and figure 2-1. (2) Even if the physical quantities of particular closely defined natural resources were known, such measurements would not be economically meaningful, because we have the capacity to develop additional ways to meet our needs - for example, by using fiber optics instead of copper wiring, by developing new ways to exploit low grades of copper ore previously thought not usable, and by developing new energy sources such as nuclear power to help produce copper, perhaps by extracting it from sea water. Thus the existing "inventory" of natural resources is operationally misleading; physical measurements do not define what we will be able to use as future supplies.
What Simon has demonstrated is that it is hard to measure what resources are available in the earth, that we don't know what future means of providing those resources or substituting for them will become available and it is thus hard to define what resources the earth can/will ultimately provide to humanity.

However he has not demonstrated that the earth can provide us with "infinite" resources, merely that we do not know what resources it could ultimately provide us with. However Chapter 3 is where he attempts to demonstrate that resources are in fact "infinite". I shall tackle the reasoning there in my next article.

One might ask why I am bothering with this. The answer is that, whilst Simon is wrong about getting "infinite" resources from the earth, he has sound arguments to make about the economics of resource usage/scarcity and I believe he goes wrong in an "interesting" way. Understanding where he goes wrong can help understand what the real situation is regarding "the limits to growth".

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