Quotation of the Day…

by Don Boudreaux on July 13, 2011

in Complexity & Emergence, Environment, Growth, History, Innovation, Myths and Fallacies, Technology

… is another from the superb economic historian Gavin Wright.  This one is from page 10 of his paper “The Myth of the Resource Curse” (co-authored with Jesse Czelusta) in the March/April 2004 issue of Challenge:

There is good reason to reject the notion that American industrialization should be somehow discounted because it emerged from a setting of unique resource abundance: On closer examination, the abundance of American mineral resources should not be seen as merely a fortunate natural endowment. It is more appropriately understood as a form of collective learning, a return on large-scale investments in exploration, transportation, geological knowledge, and the technologies of mineral extraction, refining, and utilization.

Wright and Czelusta here make the Julian-Simonesque point – and back it up with data from the empirical record – that the size of resource ‘endowments’ is variable and, more importantly, largely a function of human ingenuity.  Human beings – and not molecules buried in the ground – are the ultimate resource.  The latter become resources only through the creativity, choices, and actions of the former.

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{ 23 comments }

Henri Hein July 13, 2011 at 9:39 pm

As a bay-area resident, I love seeing this kind of work coming out of Stanford.

vidyohs July 13, 2011 at 10:06 pm

“It is more appropriately understood as a form of collective learning, a return on large-scale investments in exploration, transportation, geological knowledge, and the technologies of mineral extraction, refining, and utilization.”

How aptly does the recent discovery of rare earth minerals in the mud at the bottom of the ocean in the south central Pacific demonstrate the truth and accuracy of that statement.

How long has the rare earth containing mud been there, just being mud; and, it is still mud and will be until someway is found of mining it from the depths at which it has been found.

Josh S July 13, 2011 at 10:15 pm

Africa is the most raw material-rich continent on the planet. It’s also the poorest.

vikingvista July 13, 2011 at 11:26 pm

That’s because they have so little government spending.

Economiser July 13, 2011 at 11:39 pm

*Like*

Subhi Andrews July 14, 2011 at 12:03 am

Man you are good. Gave me a good laugh. :-)

tkwelge July 13, 2011 at 11:36 pm

If you compare the population growth rates in the US during the 1800′s to the 1900′s it would be fair to say that the abundance of natural resources was probably more than eaten up by increased birth rates and immigration. After all, babies are not terribly productive and require a lot of resources to support, meanwhile even abundant natural resources do not come online automatically. They have to be, as the article mentioned, discovered, collected, marketed, and utilized for other purposes before they really benefit mankind.

I wouldn’t say that the abundance of resources contributed nothing to economic growth, but it was probably more than eaten up by population growth.

US
1800 to 1900
1900 to 2010
Population (millions) 2.70% 1.29%

tkwelge July 13, 2011 at 11:38 pm

Also, compare that to the UK, which had reached it’s resource limits years ago.

UK
1830 to 1900
1900 to 2008
Population (millions) 0.78% 0.37%

Gil July 14, 2011 at 12:10 am

Creative, intelligent humans are a scarce resource. Destructive, dull humans are aplenty and not much of a resource.

HaywoodU July 14, 2011 at 6:52 am

…and the latter mostly work inside the beltway.

Manfred July 14, 2011 at 8:55 am

I do not disagree with Gavin Wrights quote, nor do I disagree with Donald Boudreaux’s interpretation. But, if I may, I would like to add to Gavin Wright’s quote the following comment: Yes, human knowledge, research and ingenuity was determinant in all the development of the natural resources, but there was an “institutional” framework there that allowed it. Like respect for property rights, a fairly honest judiciary that enforced private contracts, laws that applied more or less equally to everybody and everybody understood that to be the case, and everybody respected the laws; there was a legal framework that allowed private enterprise to flourish, invest and keep the returns to investment. And all of this was widely accepted in society, without envy of “the rich” and without resentment of the “millionaires and billionaires” that do not pay the “fair share”.
This point may sound trivial, but IMHO it is not. An institutional framework that allows human knowledge and research to flourish into private enterprise is absolutely key for development.

Don Boudreaux July 14, 2011 at 9:07 am

You are correct. And Wright – in this paper and elsewhere – does acknowledge that important fact.

vidyohs July 14, 2011 at 10:21 am

“Institutional framework” = euphemism for government.

Yes Manfred, but perhaps you might have noticed that it was the people who believed in and practiced those ideas to achieve the desired results of ownership and equality before the law, that created the institutional framework. So the framework existed before it was institutionalized. Government did no creating what-so-ever, it was not the creator, it was the created.

So much has been done, and still is done, in spite of that government, not because of it.

People, like minded with the founders of that institutional framework, still believe in property rights; yet, the institutional framework, having assumed an all powerful status, no longer views property the same way, see the Kelo decision as an example (others exist as well). You only own your property if some one able to bribe the state doesn’t want it. Which also speaks eloquently to the concept of equality under the law as well, does it not?

And, so many people can not see how that “institutional framework” has become more of a roadblock to progress rather than a road improvement and maintenance department.

vikingvista July 14, 2011 at 10:41 am

Yes!

Manfred July 14, 2011 at 12:22 pm

@vidyohs

Sure, I agree. This “institutional framework” is somehow “endogenous” to the process; it changes with the attitudes and preferences of the people, and over time it can become something completely opposite to what it was initially. And as you say, “…so many people can not see how that “institutional framework” has become more of a roadblock to progress rather than a road improvement and maintenance department.” Yep, I agree with that.
And if I may add, that is what it makes the current situation so sad.

vidyohs July 14, 2011 at 1:27 pm

I am glad that we could share a foxhole, but your use of the word sad to describe a situation where I see the “institutional framework” has taken on a life of its own and is seemingly entirely now uncontrolable by its creators, is a word of understatement. It scares the shit out of me because it is bad and can easily slip into the horror of Mao’s Red China, or Stalin’s Soviet Union.

Look at VikingVista’s comment on the following post by Don.
“vikingvista July 14, 2011 at 11:40 am
Beautiful! And one of the interventions to increase AH is to transfuse blood from the right arm to the left arm, through a leaky catheter.”

That is a truthful, accurate, and succinct summation of the situation today. The only way it can be sharpened is to suggest that the catheter inserted into the left arm is actually not hooked up to anything and it is just pretend blood draining into the left arm, which describes the consistent and habitual borrowing of money we can’t possibly repay and spending it freely as if there is no end or reckoning.

The problem with the people of America is that they scare me in their willingness to look away, to deny, and to acquiesce. “Transfuse blood from the right arm to the left arm, through a leaky catheter.” When I go out my door and enter America I know that there is a substantial majority of people made up of looney left wingers and a sizable grouping of looney right wingers as well, all who can have their noses rubbed in that truth and will still not understand or be willing to pull the catheter.

They will not accept discomfort, they will not voluntarily accept a temporary decrease in their lifestyle, and they don’t give a damn about who pays for the comfort they have.

Chris Swilley July 15, 2011 at 11:09 am

vidyohs, I would like to post the bulk of your post on facebook, may I do so? Thanks.

vidyohs July 15, 2011 at 9:10 pm

Be my guest, sir.

Jim July 15, 2011 at 6:17 pm

There is a cultural component to the institutional framework as well, mostly driven by Judeo-Hellenic values.

It is not a coincidence that ALL the most successful developing nations were colonized by the British. We can argue all we want about imperialism and war and religion, but there it is.

There are many components to this complex living organism we call an economy, which of course brings us back to Dierdre McCloskey.

Michael E. Marotta July 14, 2011 at 10:51 am

The Microlithic Revolution used less rock and achieved more productivity. Copper and tin are less abundant than iron which is rarer than aluminum, yet we did not enjoy the Aluminum Age in 700 BCE. If whales are sentient, they probably deified John D. Rockefeller; and he had no idea that my iPod would have this rubbery-like shell that clips to my belt. By what sorcery do people in The Netherlands, Hong Kong, and Japan live well, or live at all?

Ultimately, government controls on economic activity are prohibitions against intelligence.

kyle8 July 14, 2011 at 2:15 pm

I always thought that a very very weak argument. Russia has way more resources than North America. Natural gas, petroleum, coal, gold, silver, bauxite, rare earth minerals, lumber, you name it, they got it. But the Russian economy has always been a basket case throughout history.

Mexico, is also blessed with very abundant natural resources as well as a large and hard working population, but they are also backward and pathetic.

There has to be something else, like my tag-line says. “Nothing succeeds like freedom, nothing works like Liberty.”

Dan J July 14, 2011 at 2:56 pm

Discovering more raw materials in places once unreachable is great ingenuity, but I thought what was meant by these guys, is the great human ingenuity of finding uses of these materials and extending their uses further and further requiring less of the material to satisfy our wants. For instance, if human ingenuity in the Mideast were to find a way to make sand a huge ‘new’ material in production and of creating wealth.

Becky Hargrove July 14, 2011 at 9:11 pm

I see precious little online, how resources would not be what they are without the minds of humans. This is not the first time you have highlighted human skill and I thank you for your effort.

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