Although himself no doomsayer about the environment, Arnold Kling is unpersuaded by a key argument advanced by Marian Tupy and Gale Pooley in their new book, Superabundance.
Over a year ago I read – and enjoyed – the manuscript of what is now published as Superabundance. I’ve not, however, as yet seen the published book, so I can’t comment with any confidence on any of the details about what is or isn’t in the final version. But Arnold’s description of the parts of the book that are relevant for his critical assessment strikes me as accurately representing the book as I recall it.
Arnold’s criticism of Superabundance, if I understand it correctly, has two parts. The first is that Tupy and Pooley pay too little attention to the role played in commodity markets by speculators – and, hence, too little attention to the changes that speculators bring about through time in commodity prices. Arnold concludes from this fact that Tupy’s and Pooley’s comparisons of commodity-price changes through time to changes in the nominal wages of ordinary workers do not reveal what Tupy and Pooley believe these comparisons to reveal.
Tupy and Pooley find that, at least generally, the trend is for nominal commodity prices to fall relative to nominal wages, thus indicating that – at least compared to labor – most commodities are becoming more abundant.
I will not here defend Tupy and Pooley on this narrow point. Arnold’s criticism might well be devastating. I have to ponder further. Yet my initial reaction to this criticism issued by Arnold is that I don’t see that it undermines Tupy’s and Pooley’s point. If over time commodity prices are falling relative to wages, commodities are becoming more abundant relative to human labor (meaning, of course, more affordable by workers). It’s unclear to me why recognition of the vital role of speculators undermines this point.
Again, the fact that Arnold’s point here is unclear to me now doesn’t mean that I’ll not sooner or later come to see its validity.
The second part of Arnold’s criticism strikes me as more fundamental. This second point is that that Tupy and Pooley ignore the fact that many commodities, such as petroleum, are exhaustible. I believe that here Arnold’s criticism is mistaken – or, at least that in issuing this criticism Arnold misses the Julian-Simon point that is central to Tupy’s and Pooley’s project.
Julian Simon argued that the ultimate resource is human creativity. Hence, it is human creativity that creates resources out of the atoms and molecules mashed together in countless combinations by nature. Petroleum, for example, isn’t a resource “naturally.” It is a resource only because and insofar as human creativity has figured out both how to transform it into products useful to humans, and how to make it worthwhile for humans to perform this transformation.
If Simon is correct (as I believe him to be), then the very idea of an exhaustible resource is suspect. Given enough scope to operate, markets – most importantly the price system – will incite entrepreneurs to find new resources as the ‘need’ (that is, as consumer demand) for such resources arises or rises.
Within free markets, this Simon-esque process can be thought of as operating in two related ways. First, as the price of some particular ‘natural’ resource rises, entrepreneurs have incentives to explore for more of it and to tap more of the known deposits of it. (A similar outcome occurs when there is an exogenous fall in the costs of exploration or extraction.) Second, as the price of some ‘natural’ resource rises, entrepreneurs have increased incentives to find less-costly substitutes for that particular ‘natural’ resource.
I think that these two different effects of rises in ‘natural’-resource prices ultimately boil down to being the same thing. What motorists, for example, care about is having fuel for their automobiles. That the fuel is refined from petroleum or from pig waste is ultimately of no concern to motorists. So while it might make sense to talk of some particular mash-up of molecules (for example, petroleum) as an exhaustible resource, if we broaden the category to ‘sources of fuel,’ exhaustibility becomes doubtful, at least as a practical matter.
But even if we confine the discussion to a particular mash-up of molecules (again, for example, petroleum), I believe that the concept of exhaustibility is, at least in many case, less applicable than it seems. Suppose that pictures from the James Webb space telescope were to reveal evidence that large quantities of petroleum exist on Venus. Would this discovery of petroleum on Venus change the quantity of petroleum that is relevant for stating the limits to us humans of petroleum’s exhaustibility?
The tempting answer is ‘no’ because we today have nothing close to economically available techniques for tapping into Venus’s petroleum. But surely we in 2022, who can look back on a few centuries of truly stunning innovation, ought not rule out the possibility that such techniques will one day become available. And if and when the day comes that it does pay humans to extract petroleum from the surface of Venus, then everyone – including even the champion doomsayer Paul Ehrlich – would have to agree that what was thought of in 2022 as the physical limit that defined the supply of petroleum would no longer define that limit.
Obviously, the petroleum-on-Venus example is extreme. But this extremeness is a feature not a bug. At some point not too terribly long ago (let me say, to be safe, 1922) the idea of extracting oil from solid rock would likely have appeared to be as pie-in-the-sky as is the idea of extracting petroleum – or, importantly, some other source of energy – from another heavenly orb. Yet today we economically extract oil from solid rock.
In short, I believe that if we take Julian Simon seriously, Harold Hotelling’s (and other economists’) model of exhaustible resources has only very limited applicability to reality.
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Two other points. First, Julian Simon is sometimes interpreted as saying that human ingenuity overcomes scarcity in the sense of allowing humans to escape its grip. But this interpretation is mistaken. “Overcomes scarcity” is an ambiguous term. Simon argued that human ingenuity reduces scarcity’s bite – that it makes many scarce goods less scarce. Simon did not argue – and would never have argued – that human ingenuity does, or will eventually, eliminate scarcity.
Second small point: Arnold mentions that the work-time price of the most expensive ticket to a St. Louis Cardinals’ baseball game is today far higher than was the work-time price of the most-expensive ticket to a St. Louis Cardinals’ baseball game in 1966. My guess as to the reason for this reality is that the difference in the quality separating the best seats from the lowliest bleachers is today far greater than it was in the mid-1960s. If my guess is correct, what counts today as top accommodations for spectators in sports stadia is a high-quality good that simply didn’t exist in the mid-1960s. But, as I say, I here only guess.
