Trade and the Use of Renewable and Nonrenewable Resources

(revision two)

 

            Incredible amounts of mass are shifted or traded around the world each year, backed up by over three and a half trillion dollars.  Whether it be manufactured products (clothing, shoes, etc.), renewable products (such as food and timber), or nonrenewable goods (such as oil) the fact is that as a global community, the greater portion of what we consume is nonrenewable, and often gets used up by people and production processes far from their point of origin.  The scale on which human activity is shaping the earth is insurmountable—or is it?  Is it really a problem?  If so, how big, and on what scale?

 

            Environmental concern has come about fairly recently, in the grand scheme of things.  In 1972, the Club of Rome published a report entitled The Limits to Growth—a path-breaking piece due to its novelty at the time.  This to, came as its shortfall, as it contained a number of methodological limitations, most notably of which was its tendency to extrapolate current trends without taking into account the effects of price changes on patterns of consumption.

 

Given Present resource consumption rates and the projected increase in these rates, the great majority of the currently important nonrenewable resources will be extremely costly one hundred years from now.

 

            Inflation-adjusted arguments soon followed, correcting for the steady increase in the price of any good on a given market over time.  Some then took the stance that resource prices would drop over time, less economists.  The then displayed a common tendency for economists—they contradict themselves; meeting reviews of ultimate natural resource depletion with skepticism, citing economic theory.[1]  If prices get out of hand, what is more likely to happen is economic substitution: resource A (Twinkies) is so depleted or so scarce that its price has skyrocketed, and some users of resource A (Twinkies) may find it economically attractive to substitute resource A (Twinkies) with a resource B (Zingers), and so on and so forth.  This does, however, necessitate a great deal of technological optimism, on the presumption that as the price of any one resource rises there will be alternative resources available that are close technological substitutes for it. 

            Still, the some may argue that such resources are, indeed in fixed and finite supply on the planed Earth—yes, this is indeed a geological fact, all be it a closed, narrow minded one.  Looking ‘outside the box’ will surely yield the means for eternal human expansion; with the exception of raining meteorite debris from outer space, we have for the time being only what is at hand—this large spherical object we lovingly call earth. 

Some people have been excessively optimistic about the resources we have at hand.  Ronald Bailey:

“There is no permanent resource shortages—future food supplies are ample, world population will level off before overcrowding becomes a problem and pollution can be controlled at modest cost.”

 

Others with less optimistic views about long-term shortages of natural resources are quick to shake a finger at this, insisting that the impact of humanity on the resource base is approaching.  Herman Daly[2] insists that we are now living in a full world, quite unlike the empty world of the past in which natural resources were considered ‘free goods[3].’  Daly urges economists and many others that they have overlooked the paired relationship between Human capital and Natural capital—productivity of Human capital depends on the presence of Natural capital. 

 

If we are to truly correct the economists’ graphs/calculations in the name of righting the exuberant use of nonrenewable natural resources, it is clear that it is necessary to end the subsidization of the production and consumption of them:  Indirect tax subsidies are given to oil companies for depletion allowances and lower prices for consumers in certain parts of the world (i.e.—North America).  Dairy production moved to semi-arid regions in search of dirt-cheap water, subsidized by the government. 

Why must we make such unsustainable acts of trauma on the environment so attractive to the consumer?  It is truly foolish to do so; the practice of making eye-catching, unsound acts such as these is no more or less attractive than shooting ourselves in the foot.  Take the Colorado River for example—with the exception of years of abnormally high precipitation, it is simply used up; it has met its demise long before it spills into the sea. 

In other regions of the world, irrigation projects are depleting irreplenishable aquifers: the water table in the Apunjas in India fell almost a meter during the 1980’s—a result of government subsidies that had reduced the cost of irrigation to the farmer. 

The trouble comes when both irrigation and logging become important to the economic development of the third world, yet projects involving the subsidization of natural resources are almost guaranteed to become counterproductive and shortsighted.  Third world or not, nonrenewable resource subsidization gives both producers and consumers false signals, implying that resources are plentiful, and cost less than is both economically and morally/ethically true. 

 

Now what of renewable resources?  One of the few commodities that have seen a price increase since The Limits of Growth was published in 1972 is timber.  Consumer demand presents a serious environmental threat to the sustainability of forests in many parts of the world.  Most of the damage is done in the developing world, primarily in tropical and subtropical forests.  It seems as though poor public policy and venial private interests are to blame in the world’s current irresponsible and unsustainable use of its forests, but the most powerful answer is often overlooked by environmentalists and may be closer to home than many would think. 

In parts of the world where forests are most severely threatened and abused—Asia, South America, and Africa—most of harvested wood becomes fuel, usually for domestic use.  About half of the earth’s population use wood, charcoal, or biomass substitute to cook all or some of their meals.  Traditional stoves are efficiency hogs, burning through six or seven times more fuel than modern stoves using commercial fuels (natural gas, electricity, etc.).  Not only do modern stoves add a world of convenience to our lives, but they also reduce the amount of indoor smoke. 

 

The two most fundamental charges against trade are, in effect, charges against economic growth: that leadds to the depletion of the earth’s storehouse of resources and simultaneously overwhelms the earth’s capacity to absorb wastes.  In an economy based primarily on markets, the individual decisions of a multitude of economic factors, particularily the highly influential decidions of the most powerful consumers, Americans, will tend to ignore the long-term environmental costs of their actions.  Only a community decision through governmentally imposed actions can channel those forces toward less environmentally destructive outcomes.  Ultimately, of course, international agreements on pollution standards and other environmental concerns represent the best hope for an ecologically responsible economy worldwide. 



[1] Economic theory predicts that resource depletion will never occur completely, simply because their graph of the scenario goes off the charts, to infinity, meaning that there will always be a smaller last unit, and it will always be too expensive to extract (thank you, Prof. Huchendorf, Economics 121).  Now, as a physicist, I meet this argument with skepticism, as I see them all the time—they are called singularities, and they occur because we have no better way to describe the situation at hand.  What is needed is some sort of quantum economic theory that has yet to be discovered to rectify the situation. 

[2] www.somethingcrazy.com

[3] i.e. The California Gold Rush.