Category — Mineral Resource Theory
[Editor Note: This nearly decade-old article, Are We Running Out of Oil?, is reprinted by the author for its relevance today. A likely error in the article (even Julian Simon adherents can be too pessimistic!) is conceding that M. King Hubbert correctly predicted the 1970 peak of U.S. oil production (9.6 mmb/d then vs. 5.7 mmb/d in 2011). However, domestic output has increased 13% since 2008 and is rapidly rising. A March 4th article on the failure of peak-oil predictions inspired this look-back.]
“Vainly, economists working in the fixity paradigm have looked for a ‘depletion signal’ in the empirical record—some definitive turning point at which physical scarcity overcomes human ingenuity. A new research program is in order. Applied economists should focus upon institutional change to explain and quantify changes in resource scarcity.”
“This time it’s for real,” says the cover story of the June 2004 issue of National Geographic. “We’re at the beginning of the end of cheap oil.”
Books and articles written by geologists, environmentalists, and others regularly announce a new era of increasing oil scarcity. 1 Today’s resurrected hero of the depletionists is M. King Hubbert (1903–89), a Shell geologist who a half century ago presented a bell-shaped curve depicting oil production over time.
His model correctly predicted that U.S. oil production would peak around 1970. A sister prediction, that U.S. gas production would peak in 1970, was errant, however. And his prediction that global oil production would begin an irreversible decline around 2000 is off to a poor start (Hubbert, 1956). World oil production in 2003 was about 2.5 per cent above 2000. [Read more →]
March 6, 2013 No Comments
Editor note: Milton Friedman would be 98 this Saturday July 31. (He died on November 16, 2006.) This exchange with Robert Bradley–when Dr. Friedman was 91 years old–is testament to the mental powers of one of the greatest social thinkers of modern time.
Friedman had not met Bradley but was in the habit of actively communicating with scholars until his final illness.
I had heard that the great economist and social thinker Milton Friedman (1912–2006) was a prolific communicator with those who posed worthy questions to him. So when I got interested in mineral resource theory, which would culminate with my 2007 essay, Resourceship: An Austrian Theory of Mineral Resources, I asked Dr. Friedman in August 2003 about his views on the late Julian Simon (1932–98), specifically whether Simon’s work on resources, and his conception of the ultimate resource, merited a Nobel Prize in economics.
The discussion continued from there as I tried to flesh out his views of whether “depletable” minerals such as oil were somehow different from “nondepletable” resources. I believe Friedman agreed with Simon that there is no difference from a social science/business perspective. But Friedman disagreed with Simon’s assessment of the contribution of Harold Hotelling, who mathematically proved that the cost and thus price of a fixed resource in a world of perfect knowledge was ‘good’ economics. Read on…. [Read more →]
July 30, 2010 24 Comments