The ultimate resource

  • 9 February 2018
  • NormanL
He is missed

A Bloomberg article notes that the world of oil producers was recently turned upside down with the arrival in the United Arab Emirates of an American tanker filled with oil. It's a result of the shale oil boom that has taken hold in this country, and the long term effects could be enormous:

With rising crude exports and already booming overseas sales of refined petroleum products such as gasoline, the U.S. net oil imports have plunged to below 3 million barrels a day, the lowest since data available starting 45 years ago, compared with more than 12 million barrels a day in 2006. The U.S. could become a net petroleum exporter by 2029, the EIA said this week.

So much for the fantasies of "peak oil" and the left's determined efforts to thwart this economic and strategic turn of events.

But underneath this story is something even more profound. Yes, oil is flowing from the U.S. to the corners of the globe. But none of it would have been possible without the determination and innovation of American oil producers. In other words, people made this happen. And it brings to mind the 20th anniversary of the death of one man who understood the central role human innovation and imagination. 

The man was Julian Simon, an economist, a humanist, who didn't get the wide acclaim he deserved in his lifetime, but who knew and preached that people living in freedom under the rule of law would make life better. George Mason University professor Don Boudreaux wrote this in remembrance of Simon and his contagious, and correct, optimism:

Simon's most important contribution was to crystallize and explain an insight that even the best economists before him only glimpsed -- namely, that human beings in free societies are "the ultimate resource." Nothing -- not oil, not land, not gold, not microchips, nothing -- is as valuable to the material well-being of people as is human creativity and effort.

Indeed, there are no resources without human creativity to figure out how to use them and human effort actually to do so. Recognizing the truth of this insight renders silly the familiar term "natural resources."

No resources are "natural."

Take petroleum. What makes it a "resource"• It's certainly not a resource naturally. If it were, American Indians would long ago have put it to good use. But they didn't. I suspect that for Pennsylvania's native population in, say, the year 1300, the dark, thick, smelly stuff that bubbled up in watering holes was regarded as a nuisance.

Petroleum didn't become a resource until human beings creatively figured out how to use it to satisfy some human desires and other human beings figured out how to extract it cost-effectively from the ground.

Or take land. For at least 80 percent of Homo sapiens' time on earth, land was merely something to trod and hunt upon. Land had no special value as a resource until about 10,000 years ago when someone figured out how to cultivate soil and to plant, tend and harvest crops. Only then did land achieve the kind of status and value that we associate with a resource.

The same, of course, is true for magnesium, iron ore, bauxite, feldspar, trees, New York harbor -- you name the "natural resource" and you'll realize that it is a resource only because human beings creatively determined how to use it productively.

An important implication of this realization that humans are "the ultimate resource" is that high and growing population -- in societies with sufficient freedom to allow individuals to experiment and create -- is desirable. If human creativity and effort are not only resources, but also the ultimate resource, surely it's foolish to lament large and growing supplies of it.

Simon famously won a bet with doom-and-gloomer Paul Erlich about population growth and what seemed to be finite natural resources:

Convinced that higher population is a curse, Ehrlich accepted the $1,000 bet. He chose (for Simon gave Ehrlich the choice of which resources to bet on) a bundle of copper, chromium, nickel, tin and tungsten and bet Simon that the real price of this bundle of resources would be higher in 1990 than in 1980.

In 1990 the prices in September of that year were compared to the prices of these resources in September 1980. Simon won convincingly. The real price of each of these five resources had fallen over the course of that decade, indicating that their supplies had grown even though human population had also grown by more than 800 million during that same time.

There has always been a willing, eager audience for doom. There are too many people, too many things, too much this, that, or the other. Eventually, it must end in catastrophe. But the genius of human beings is the ability to overcome, to adapt, and to thrive. Julian Simon knew this, and spoke and wrote about it (in books such as The Ultimate Resource 2) throughout his too short life. 

We could use a strong dose of Simon's optimism today. We're doing pretty well as a species despite the obstacles in our path. And where freedom exists, men and women will make life even better.


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Image of The Ultimate Resource 2
Manufacturer: Princeton University Press
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Price: $75.00