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(In)exhaustible resources

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Martin Vlachynsky

on 26 January 2017

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Transcript of (In)exhaustible resources

Physical world represents a definite frame for economic growth
Thomas Robert Malthus
- An Essay on the Principle of Population (1798)

Soil is limited. Population grows geometrically, (doubles every 25 years), while resources (food) grows only arithmetically. World is balanced by positive and preventive checks.
England 1801: 8 300 000 inhabitants
England 1901: 30 500 000 inhabitants
Stanley Jevons
- The Coal Question (1865)
Problem of the day: Coal
Henry David Thoreau and other transcendentalists, preservacionists and

Unspoilt nature is value on its own.

60's to NOW
The real fun...
Kenneth Boulding
- The Economics of the Coming Spaceship Earth (1966)

Laws of thermodynamics applied:

1. Amount of energy in an enclosed system (Earth) is stable.
2. While the amount is not decreasing, structural quality deteriorates.

M.King Hubbert
– Peak Oil

The Limits To Growth (1972)
– The Club of Rome Report
Computer model of the world demonstrating the way system reaches limits

The Global 2000 Report to the President (1980)
Main arguments of pessimists:

Limited human ability to plan for the future (we need to conserve resources)
Price mechanism malfunctions (market cannot set price on resources)
Missing intergenerational solidarity (we need to save resources for grandkids of our grandkids)
An Essay on the Principle of Population as it Affects the Future Improvement of Society with
Remarks on the Speculations of Mr. Godwin, Mr. Condorcet

and Other Writers
Technooptimism - Scientific progress is not limited.
That the
powers of Labour, and of the other instruments
which produce wealth,
may be indefinitely increased
by using their Products as the means of further Production.

Problem of natural resources is
only a problem of social order
Austrian school of economics
- entrepreneur makes subjective decisions based on his knowledge of prices, costs, institutional frame...
Market price contains information about the future value of a resource,
therefore we do not have to explore future value separately

do not know future level of technology
development so there is
no meaning to conserve
resource for it

Natural resources are consumed, but they are
replaced by product
resources and the overall
wealth of society remains preserved

Our oil deposits are infinitely bigger than those previous generations had

Bjorn Lomborg
– things are getting better
Simon-Ehrlich wager (1980-1990)
was partly replaced by aluminum
sources were discovered
is less used in kitchenware
was partly replaced by silicone (optical fibers) and by plastic (piping)
Less waste due to new
application technologies

Open system
counters closed system

Adaptable activity patterns
counter deterioration
Earth receives 173 000 TW energy from Sun
Human consumption is around 16 TW (<0.01%)
Intergenerational solidarity
discounting the future
Consumption today is
more valuable
then consumption tomorrow.
Future generations
will be richer
- products we have today will be less valuable for them tomorrow
Advancing technology
makes saved resources for the future less important - important resource of today may by completely valueless in the future
We are
creating capital
- our resources consumption doesn't mean we leave nothing behind. The resources are used to create physical and knowledge capital, which can be more valuable for the future generations than raw resources.
Dynamic supplies
Extraction technologies are advancing; new deposits are being discovered on supply/demand basis
And the reality...
How comes?

1885, U.S. Geological Survey: Little or no chance for oil in California
1891, U.S. Geological Survey: Same prophecy by USGS for Kansas and Texas as in 1885 for California.
1914, U.S. Bureau of Mines: Total future production limit of 5.7 billion barrels of oil, at most a 10-year supply remaining.
1939, Department of the Interior: Oil reserves in the United States to be exhausted in 13 years.
1951, Department of the Interior, Oil and Gas Division: Oil reserves in the United States to be exhausted in 13 years.

2014: „The U.S. will remain the world’s biggest oil producer this year after overtaking Saudi Arabia and Russia“
Oil today:

New conventional deposits discoveries
Extraction technology improvements
Oil sands
Oil shale
Biomass based

Deep-sea sources?
Methane in ice (Methane clathrate)?
Bacterial synthesis?
Food (remember Malthus?)
Quantity increasing
Quality increasing
Hydroponics – 2kg of food per day (human consumption) can be produced on 8 square meters - already commercially used.
56 000 km2 (the size of Croatia) is enough to feed the entire current population of Earth
Nuclear sources:
Reactors using less enriched uranium (using more U238 less U235)
MOX reactors (Mixed oxide fuel - waste plutonium)
Sea water uranium separation
Breeder reactors
Thorium reactors
Family of 4; 70 years = 2kg of waste
19 commodities futures basket
Problem of the day - overpopulation
Problem of the day – Problems all around...
Problem of the day – when will the oil (iron, aluminum, uranium...) run out?
Open system?
The worries....
Known global oil reserves in 1970: 580 billion barrels
1997: 1068 billion barrels
2008: 1258 billion barrels
2013: 1688 billion barrels
Martin Vlachynsky
Institute of Economic and Social Studies

(In)exhaustible resources and human action
Thank you for your attention!
Erich Zimmerman
- The resources at the disposal of man evolve out of the working combination of natural, human, and cultural aspects.
Physical (natural science) vs. Economic point of view (functional approach)
Julian Simon
– Man is the ultimate resource,
all other resources are infinite
People want certain
, that natural resources provide (durability, strenght....),
not the resources themselves
Adaptable activity patterns?
For example,
Can natural resources run out? (External, or internal part of economy?)
J.S. Mill and "optimistic stagnation"

Economic climax results in focus on morality and society improvements
Shift of focus from the relations between classes to the actions of individuals on the market

Interests of an individual and a society over extraction of exhaustible resource (maximization of its value) are in conflict -> conservationism

L. C. Gray

H. Hotelling



Growth models (1930' - 1950') - natural resources are just subpart of "capital"

"Cowboy economy"

John "Of the Mountains" Muir (Yosemite National Park, Sierra Club)
Paul R. Ehrlich
Robert Solow
William Nordhaus
Julian Simon
Full transcript