The Time Essay Research Paper CHAPTER 1

The Time Essay, Research Paper

CHAPTER 1

THE AMAZING THEORY OF RAW-MATERIAL SCARCITY

The Great Toy Shortage

Forget it, Virginia. Santa won’t be leaving a “Star

Wars” R2-D2 doll under the tree this year – just

an I.O.U. promising you one at some vague time

between February and June. Don’t count on a Mego

Micronaut kit for building your own robot either, or

a Milky the Marvelous Milking Cow, which drinks

water when its tail is pumped, moos plaintively and

squirts a tiny pailful of cloudy white “milk” from a

detachable pink udder….

Not since the Grinch stole Christmas has there been

such an unseasonable shortage.

Newsweek, December 19, 1977, p. 58

CHAPTER 1 – TABLE OF CONTENTS

The Great Toy Shortage

Between Pig Copper and Dentistry

What Do We Mean by “Scarcity”?

What is the Best Way to Forecast Scarcity and Costs?

Will the Future Break With the Past?

A Challenge to the Doomsdayers to Put Their Money Where Their

Mouths Are

Summary

Afternote 1

The “True” Cost (Price) of Natural Resources

Afternote 2: The Ultimate Shortage

The “Great Toy Shortage” of 1977 clearly was a freak event. We don’t worry that a

scarcity of Hula-Hoops, pencils, dental care, radios, or new musical compositions will

last. And we don’t fear that a larger population will reduce the supply of these

goods; manufacturers will make more. Yet people do worry about an impending scarcity

of copper, iron, aluminum, oil, food, and other natural resources.

According to a typical pronouncement by Paul Ehrlich, the best-known contemporary

doomster, “In the early 1970s, the leading edge of the age of scarcity arrived. With

it came a clearer look at the future, revealing more of the nature of the dark age to

come”. That we are entering an age of scarcity in which our finite natural resources

are running out, that our environment is becoming more polluted, and that population

growth threatens our civilization and our very lives – such propositions are

continually repeated with no more evidence than that “everyone knows” they are true.

Is there a fundamental economic difference between extractive natural resources and

Hula-Hoops or dental care? Why do people expect that the supply of wheat will decline

but the supplies of toys and drugs will increase? These are the questions that this

chapter explores. The chapter draws examples from the metallic raw materials, which

are relatively unencumbered by government regulations or international cartels and

which are neither “burned up” like oil nor grown anew like agricultural products.

Energy, food, and land will be given special treatment in later chapters.

BETWEEN PIG COPPER AND DENTISTRY

There is an intuitive difference between how we get Hula-Hoops and copper. Copper

comes from the earth, whereas a Hula-Hoop does not seem to be a “natural” resource.

Copper miners go after the richest, most accessible lodes first. Therefore, they dig

into lodes bearing successively lower grades of ore. If all else were equal, this

trend would imply that the cost of extracting copper from the ground must continually

rise as poorer and less accessible lodes are mined.

Hula-Hoops and dental care and radios seem different from copper because most of

the cost of a radio, a Hula-Hoop, or dental care arises from human labor and skill,

and only a small part arises from the raw material – the petroleum in the plastic hoop

or the silver in the tooth filling. For good reason we do not worry that human labor

and skill comes from progressively less accessible reservoirs.

But all this neat theorizing about the increasing scarcity of minerals contradicts

a most peculiar fact: Over the course of history, up to this very moment, copper and

other minerals have been getting less scarce, rather than more scarce as the depletion

theory implies they should. In this respect copper follows the same historical trend

as radios, undershirts, and other consumer goods (figures 1-1a and 1-1b). It is this

fact that forces us to go beyond the simple theory and to think more deeply about the

matter.

FIGURE 1-1a. The Scarcity of Copper as Measured by Its Price Relative to Wages

FIGURE 1-1b. The Scarcity of Copper as Measured by Its Price Relative to the

Consumer Price Index

At the end of this confrontation between theory and fact, we shall be compelled to

reject the simple Malthusian depletion theory, and to offer a new theory. The revised

theory will suggest that natural resources are not finite in any meaningful economic

sense, mind-boggling though this assertion may be. That is, there is no solid reason

to believe that there will ever be a greater scarcity of these extractive resources in

the long-run future than now. Rather, we can confidently expect copper and other

minerals to get progressively less scarce.

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