post

Are we running out of resources?

by Pete Geddes

Steve Horwitz addresses this modern economic myth:

Comments

  1. Anonymous says:

    This notion of perfect markets solving our resource issues is misleading and dangerous. Yes, the marginal cost of the last drop of oil will be so expensive that we’ll have found a substitute by that time… but does this mean we haven’t run out of oil b/c we’ve still got 1 drop left? Like physics, economic theory really only works in a vacuum, and Mr. Horwitz’ argument is, to me, like a literal interpretation of the Bible.

    Furthermore, markets (particularly for natural resources) are rife w/market failures such as few buyers/sellers, undefinable property rights and physical barriers to trade; in addition to externalities that saddle tomorrow’s taxpayers w/the debts of today’s private sector profits – all in the name of “markets”. Mr. Horwitz is technically correct I suppose… we’ll always have that last drop that was too expensive… but claiming tht means we’ll never run out is just dangerous. His glib notions of abundance and market perfection are a bit myopic when removed from the vacuum of economic theory.

  2. Pete Geddes says:

    O.K, in the real world, not a “vacumm” please give one example that runs counter to the professors “theoretical” argument…..

    P.S. No serious economist claims markets are perfect. Markets coordinate wonderfully as they drive toward narrow efficiency, but they ignore much that is intangible and often destroy that which has no price and no owner.

  3. Anonymous says:

    I understand and respect your view of markets destroying that w/no price & no owner; and the philisophical drive towards de-regulation and property rights this view engenders.

    Take water rights: Western American rivers were over-appropriated (i.e. more water rights than water) within a 10-20 yr period back in the 1800’s. As you might point out, lack of price signals (i.e. free water) was partially at fault; but understanding how/why a perfect market would allocate resources efficiently doesn’t change the reality that such a market never existed… and resources were allocated very inefficiently to the detriment of future generations.

    Also, markets rarely act on behalf of the public good. For example, drying and polluting our rivers seemed like the highest & best use of water… it allowed us to extract maximum profit in the short term, yet will end up costing future generations far more. This is where the phrase “highest & best use” becomes a thinly vieled “best use generating short term (monetary) profit at someone else’s expense”. In a perfect market, such externalities would be baked into price signals, but face it… that is not the case in real life.

    I respect Mr. Horwitz’ stance, but given the endemic market failures I mentioned earlier, I cannot prescribe to the notion that natural resource markets function in ways that produce true efficiency. And claiming that the invisible hand will save us from ourselves is an irresponsible position in that light.