Los Sangre Es en Tus Manos(The Blood Is On Your Hands) by Jay Hanson

By Jay Hanson,
Second Quarter 1999 Issue

Economists have become a plague as dangerous as rabbits, prickly pear or cane toads. Economists have become the cultural cane toads of Canberra, oozing over the landscape and endangering myriad indigenous species. Not only the economy but also mental health would be greatly improved if we could lift the fog of obfuscation on things economic. The first step is to take economists from their pedestal and to see them as the curiosities they are. The first step to reducing their power is to reduce their legitimacy. How is this to be achieved? First, economists’ outpourings should, as a matter of principle, be met with laughter, derision, benign paternalism. They should cease to be employed as media commentators. In the long term they should cease to be hired. Let them be pensioned off and die out. Extinction is a worthy end for a profession whose brief is rotten to the core.
-Dr. Evan Jones, Economics Department, University of Sydney, 1991

[The Chicago School of Economics is] a great center of contemporary scholasticism. The economists working there and produced by it are as important to the stagnation of useful thought as the Schoolmen of the University of Paris were at the height of the Middle Ages… Like that of the Paris scholastics, their mastery of highly complex rhetorical details obscures a great void at the centre of their argument… A large number of America’s economic problems could be solved by shutting down the Chicago School of Economics… The purpose of closure would be simply to disentangle a tendentious ideology from its unassailable position within contemporary power structures. The same sort of liberating shock treatment was applied to European civilization in 1723 when the Society of Jesus (Jesuits) was disbanded. The effect was to set free the ideas of the Enlightenment.
-John Ralston Saul, 1994

In 1972, the Club of Rome rocked the world with a study titled LIMITS TO GROWTH (LTG). Two main conclusions were reached by this study. The first suggests that if economic-development-as-we-know-it continues, society will run out of nonrenewable resources before the year 2072. The inevitable depletion of natural resources will result in a precipitous collapse of the economic system and massive human die-off.

The second conclusion of the study is that piecemeal approaches to solving individual problems will not be successful. For example, the authors arbitrarily double their estimates of the resource base and allow the model to project a new scenario based on this new higher level of resources. Collapse occurs in the new scenario because of pollution instead of resource depletion. In other words, traditional forms of economic development will end in less than 100 years — one way or another:

Finally investment cannot keep up with [physical] depreciation, and the industrial base collapses, taking with it the service and agricultural systems, which have become dependent upon industrial inputs (such as fertilizers, pesticides, hospital laboratories, computers, and especially energy for mechanization). For a short time the situation is especially serious because population, with the delays inherent in the age structure and the process of social adjustment, keeps rising. Finally population decreases when the death rate is driven upward by lack of food and health services. [1]

TO THE FLAMES

When we run over libraries, persuaded of these principles, what havoc must we make? If we take in our hand any volume; of divinity or school metaphysics, for instance; let us ask, Does it contain any abstract reasoning concerning quantity or number? No. Does it contain any experimental reasoning concerning matter of fact and existence? No. Commit it then to the flames: for it can contain nothing but sophistry and illusion.
-David Hume, 1748

The distinction between a judgement of fact and a judgement of value has become one of the corner stones of philosophy ever since Hume.
-Stanislav Andreski, 1972

Many economists have attempted to refute the LTG scenarios — all have failed. Economists employ two tactics against LTG. Their first tactic is to simply misrepresent the study. (Perhaps economists are too busy dispensing advice to actually read a study before criticizing it.) Their second tactic is to claim that market prices have somehow refuted LTG. But the price of a thing does not reveal its quantity or its quality. Prices simply measure states of mind. This means that economists issue opinions on opinions — mere sophistry and illusion. In other words, economists are nothing more than pollsters with an attitude. [2]

How much is $10 worth of oil? (It depends upon when and where you bought it.) How much energy was required to mine $10 worth of oil? How much energy will $10 worth of oil yield? Who knows? Prices measure human perception — not things. In principle then, economists can’t know anything about the real world by studying prices, and we are free to commit all price-based claims about the real world to the flames.

Although economists are trained — like mindless robots — to believe that capitalism is powered by money, scientists pointed out over a hundred years ago that capitalism is powered by energy:

It is, in fact, the fate of all kinds of energy of position to be ultimately converted into energy of motion. The former may be compared to money in a bank, or capital, the latter to money which we are in the act of spending … If we pursue the analogy a step further, we shall see that the great capitalist is respected because he has the disposal of a great quantity of energy; and that whether he be nobleman or sovereign, or a general in command, he is powerful only from having something which enables him to make use of the services of others. When a man of wealth pays a labouring man to work for him, he is in truth converting so much of his energy of position into actual energy…

The world of mechanism is not a manufactory, in which energy is created, but rather a mart, into which we may bring energy of one kind and change or barter it for an equivalent of another kind, that suits us better – but if we come with nothing in hand, with nothing we will most assuredly return. [Balfour Stewart, 1883, pp. 26-7; 34] [3]

Economists, please note the date and the profound shift of metaphor from production to circulation. Stewart’s book was in its sixth edition by 1883! But over one hundred years later, economists still believe that available energy is a function of money price!

Capitalism burns “net energy” to make money — there is no substitute for energy. Although economists are trained to treat energy just like any other resource, it is not like any other resource. Net energy is the pre-condition for all other resources.

Since energy is the basis of the economy (indeed, of all life on this planet), economists should know a lot about energy. Let’s take a look. Guess what? Nobel Prize Winner Paul Samuelson of MIT (who has been publishing university texts since 1948), and Professor William Nordhaus of Yale don’t seem to know any more about energy than twelve-year-old children [see the quote from their textbook below].

NET ENERGY

The key to understanding energy issues is to look at the “energy price” of energy. By definition, energy “sources” must produce more energy than they consume; otherwise they are called “sinks”. This thermodynamic law applies no matter how high the “money price” of energy goes.

We use up or “waste” energy in systems that supply energy — such as oil-fired power plants. Energy is wasted when exploring for oil, building the machinery to mine the oil, mining the oil, building and operating the power plant, building power lines to transmit the energy, decommissioning the plant, and so on. The difference between the amount of energy generated and the amount of energy wasted is known as the “net energy”.

OIL

One of the most important aspects of energy is its “quality”. Different kinds of fuel have different qualities. For example, coal contains more energy per pound than wood, which makes coal more efficient to store and transport than wood. Oil has a higher energy content per unit weight and burns at a higher temperature than coal; it is easier to transport, and can be used in internal combustion engines. A diesel locomotive uses only one-fifth the energy of a coal-powered steam engine to pull the same train. Oil’s many advantages provide 1.3 to 2.45 times more economic value per kilocalorie than coal. [4]

Oil is the most important form of energy we use, making up about 38 percent of the world energy supply. No other energy source equals oil’s intrinsic qualities of extractablility, transportability, versatility and cost. These are the qualities that enabled oil to take over from coal as the front-line energy source in the industrialized world in the middle of this century, and they are as relevant today as they were then.

Forecasts about the abundance of oil are usually warped by inconsistent definitions of “reserves.” In truth, every year for the past two decades the industry has pumped more oil than it has discovered, and production will soon be unable to keep up with rising demand.

According to a March, 1998, Scientific American article by Colin J. Campbell and Jean H. Laherrre, global oil production is expected to “peak” around 2005. [5]

NATURAL GAS

Unlike oil, natural gas is not transported cheaply. It can be piped around a continent, but must be liquefied for transport by sea. Moreover, natural gas cannot be easily stored like oil or coal.

According to Colin Campbell, global natural gas production is expected to “peak” a few years either side of 2020. [6] Franco Bernab, chief executive of the Italian oil company ENI SpA, is more pessimistic and sees the peak in global natural gas production about ten years earlier: 2010. [7]

COAL

The US Department of Energy says we have enough coal to last for 250 years: “… total coal resources of the Nation are large and that utilization at the current rate will not soon deplete them … [ DOE-EIA ] estimated that the United States has enough coal to last 250 years.” [8]

Gee, that’s a lot of coal, and they ought to know! Right? Wrong! It seems that the Department of Energy forgot to consider the energy costs of mining coal when computing the size of this energy resource.

According to Gever et al., by 2040 it will require more energy to mine domestic coal than the energy recovered. In other words, if present trends continue, domestic coal will be “depleted” (will become an energy “sink”) in 42 years — not 250 years! [9]

Indeed, nothing can replace fossil fuels. The coming “peak” in the global oil supply — in about five years — signals end of the consumer society. For a comprehensive review of our energy options, see [get_bloginfo]url[/get_bloginfo]/page143.htm

IGNORANCE

… wherein it is set forth that the doctrine attributed to Copernicus, that the Earth moves around the Sun and that the Sun is stationary in the center of the world and does not move from east to west, is contrary to the Holy Scriptures and therefore cannot be defended or held. In witness whereof we have written and subscribed these presents with our hand this twenty-sixth day of May, 1616.
-Robertro Cardinal Bellarmino

There are no…limits to the carrying capacity of the earth that are likely to bind any time in the foreseeable future. There isn’t a risk of an apocalypse due to global warming or anything else. The idea that we should put limits on growth because of some natural limit, is a profound error and one that, were it ever to prove influential, would have staggering social costs.
-World Bank chief economist, Lawrence H. Summers, Nov., 10, 1991

Of all hatreds, there is none greater than that of ignorance against knowledge.
-Galileo Galilei, June 30, 1616

On December 1997, THE ECONOMIST ran a typical piece of ignorance:

So, according to the Club of Rome, reserves should have been overdrawn by 50 billion barrels by 1990. In fact, by 1990 unexploited reserves amounted to 900 billion barrels — not counting the tar shales, of which a single deposit in Alberta contains more than 550 billion barrels.

The Club of Rome made similarly wrong predictions about natural gas, silver, tin, uranium, aluminum, copper, lead and zinc. In every case, it said finite reserves of these minerals were approaching exhaustion and prices would rise steeply. In every case except tin, known reserves have actually grown since the Club’s report; in some cases they have quadrupled. [10]

But THE ECONOMIST is just plain wrong! None of the Club of Rome’s predictions failed. The Club of Rome expected known reserves to quintuple:

Table 4 — NONRENEWABLE NATURAL RESOURCES

Table 4 lists some of the more important mineral and fuel resources, the vital raw materials for today’s major industrial processes. The number following each resource in column 3 is the static reserve index, or the number of years present known reserves of that resource (listed in column 2) will last at the current rate of usage. This static index is the measure normally used to express future resource availability. Underlying the static index are several assumptions, one of which is that the usage rate will remain constant.

But column 4 in table 4 shows that the world usage rate of every natural resource is growing exponentially. For many resources the usage rate is growing even faster than the population, indicating both that more people are consuming resources each year and also that the average consumption per person is increasing each year. In other words, the exponential growth curve of resource consumption is driven by both the positive feedback loops of population growth and of capital growth.

We have already seen in figure 10 that an exponential increase in land use can very quickly run up against the fixed amount of land available. An exponential increase in resource consumption can rapidly diminish a fixed store of resources in the same way. Figure 11, which is similar to figure 10, illustrates the effect of exponentially increasing consumption of a given initial amount of a nonrenewable resource. The example in this case is chromium ore, chosen because it has one of the longest static reserve indices of all the resources listed in table 4. We could draw a similar graph for each of the resources listed in the table. The time scales for the resources would vary, but the general shape of the curves would be the same.

The world’s known reserves of chromium are about 775 million metric tons, of which about 1.85 million metric tons are mined annually at present. Thus, at the current rate of use, the known reserves would last about 420 years. The dashed line in figure 11 illustrates the linear depletion of chromium reserves that would be expected under the assumption of constant use. The actual world consumption of chromium is increasing, however, at the rate of 2.6 percent annually. The curved solid lines in figure 11 show how that growth rate, if it continues, will deplete the resource stock, not in 420 years, as the linear assumption indicates, but in just 95 years. If we suppose that reserves yet undiscovered could increase present known reserves by a factor of five, as shown by the dotted line, this fivefold increase would extend the lifetime of the reserves only from 95 to 154 years. Even if it were possible from 1970 onward to recycle 100 percent of the chromium (the horizontal line) so that none of the initial reserves were lost, the demand would exceed the supply in 235 years.

Figure 11 shows that under conditions of exponential growth in resource consumption, the static reserve index (420 years for chromium) is a rather misleading measure of resource availability. We might define a new index, an “exponential reserve index,” which gives the probable lifetime of each resource, assuming that the current growth rate in consumption will continue. We have included this index in column 5 of table 4. We have also calculated an exponential index on the assumption that our present known reserves of each resource can be expanded fivefold by new discoveries. This index is shown in column 6. The effect of exponential growth is to reduce the probable period of availability of aluminum, for example, from 100 years to 31 years (55 years with a fivefold increase in reserves). Copper, with a 36-year lifetime at the present usage rate, would actually last only 21 years at the present rate of growth, and 48 years if reserves are multiplied by five. It is clear that the present exponentially growing usage rates greatly diminish the length of time that wide-scale economic growth can be based on these raw materials.

Of course the actual nonrenewable resource availability in the next few decades will be determined by factors much more complicated than can be expressed by either the simple static reserve index or the exponential reserve index. We have studied this problem with a detailed model that takes into account the many interrelationships among such factors as varying grades of ore, production costs, new mining technology, the elasticity of consumer demand, and substitution of other resources. [11]

You can see actual scans from the book here.

OIL SANDS

What about THE ECONOMIST’s claim for “tar shales”? More sophistry and illusion! Here are some back-of-the-napkin calculations with respect to Alberta oil sands:

It has been estimated that Alberta oil sands contain about 300 billion barrels of recoverable oil. Syncrude is presently producing over 200,000 barrels of oil a day. [12] Oily waste water is a byproduct of the process used to recover oil from the tarry sands. For every barrel of oil recovered, two and a half barrels of liquid waste are pumped into the huge ponds. The massive Syncrude pond, which measures 22 kilometers (14 miles) in circumference (25 sq. km.), has six meters (20 feet) of murky water on top of a 40-meter-thick (133 feet) pudding of sand, silt, clay and unrecovered oil. [13]

To replace conventional crude — present consumption is about 70 million barrels a day — would require about 350 such plants. If each of the 350 plants were the size of the present plant, they would require a waste pond of 8,750 sq. km — about the half the size of Lake Ontario. But oil sands are less than half as “energy efficient” as conventional oil, so perhaps one would need 700 plants and a pond 17,500 sq. km — almost as big as Lake Ontario — to replace conventional oil.

If global energy use continued to double every 30 years or so, five more doublings would put Alberta entirely under oily waste water. But even at 100% efficiency, 300 billion barrels of oil sands would only last 12 years at present consumption of 70 million barrels a day. Moreover, because of the decreasing energy efficiency of existing energy sources, and because the mining of oil sands is so environmentally destructive, it seems unlikely that all 300 billion barrels will ever be recovered:

Since opening its operation in 1978 one company, Syncrude, has excavated 1.5 billion tons of so-called overburden, the 20 meters deep layer of muskeg, gravel and shale that sit atop the actual oil sands. More soil has been excavated by Syncrude than from the construction of the Great Pyramid of Cheops, the Great Wall of China, the Suez Canal and the 10 biggest dams in the world combined. Syncrude has possibly created the largest surface mine in the world. [14]

At an optimistic average of 25% efficiency over all 300 billion barrels, Alberta could supply about 3 years of oil for today’s economy. More likely, quite a bit less.

TRAINED TO TORTURE

Pinochet “has supported a fully free-market economy as a matter of principle. Chile is an economic miracle”
-Milton Friedman,  Newsweek, Jan, 1982

“I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable…because foregone earnings from increased morbidity” are low. He adds that “the underpopulated countries in Africa are vastly underpolluted; their air quality is probably vastly inefficiently low compared to Los Angeles…. ”
-World Bank chief economist, Lawrence Summers, THE ECONOMIST, Feb. 8, 1992

Last November, a thousand protesters marched outside a Georgia military base to demand the closing of the U.S. Army School of the Americas, where opponents claim that Latin American soldiers are trained to torture. The protest outside the sprawling Fort Benning military installation, about 85 miles southwest of Atlanta, has been an annual event since 1990. It has been held each year to mark the Nov. 16, 1989, massacre of six Jesuit priests in El Salvador.

The School of the Americas trained 19 of the 26 Salvadoran officials implicated in the massacre by a United Nations investigation. The school trains more than 900 U.S. and Latin American soldiers each year. Many of the protesters held banners reading, “Close the School of the Assassins,” “Los Sangre Es en Tus Manos [sic, the blood is on your hands],” and “Stop the Oppression of Latin American Peasants.” A man wearing a skeleton costume strode through the crowd on stilts.

But the operatives trained at the Chicago School of Economics have killed and tortured far more innocent victims than the operatives trained at the School of Americas. Isn’t it time to close the Chicago School too? Does the world really need any more cultural cane toads like Mr. Friedman or Mr. Summers?

Jay

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[1] p. 125, LIMITS TO GROWTH, Meadows et al.; Universe, 1972
[2]Modern neoclassical economic theory has nothing to do with science — it’s politics in disguise:

The bulk of this text was taken up with examining the claims of neoclassical economic theory to scientific status. Given contemporary views on the nature of scientific theory, I examined neoclassical economic theory in terms of both its historical and contemporary phases. I demonstrated that the cardinal theory of utility that formed the foundation for early neoclassical theory foundered on account of its inability to measure utility in any acceptable scientific way. Its substitute, the ordinal theory of utility, was shown to be equally unacceptable. The scientific pretensions of ordinal utility theory and its correlate, revealed preference theory, were shown compromised by the normative structure of the foundational postulate of rationality. The unscientific nature of ordinal utility theory was further shown to be reinforced by the insulating role played by the ceteris paribus proviso.

This general critique was extended not only to the neoclassical theory of individual agent choice but also to general equilibrium theory and positive neoclassical welfare economic theory. Given the general dissatisfaction with neoclassical theory, a number of alternative theories have been proposed, but the problem with the latter is that, with few exceptions, they are founded on the premise that an objective science of economics is still possible despite its present failings. I pointed out the shortcomings of those theories and argued that on account of the nature of human decision making, no analysis of it could be scientific in the way in which the natural sciences are scientific. Mental states that must be invoked to explain behavior are just not subject to empirical analysis. The attempts by theorists to establish explanatory theories by appeal to heuristic concepts such as rationality were shown to be unsuccessful. The point is that “rationality” plays a normative role similar to that of “goodness” in ethical theory.

The sociologist can indeed record the behavior of individuals in terms of cultural norms of “goodness,” “badness,” “deviancy,” and so on, but he or she must recognize that theories of behavior founded on such concepts are necessarily normative. Similarly, the neoclassical theorist who embraces a particular notion of rationality and grounds his or her theories on such a notion is certainly formulating a normative theory. My analysis showed that the neoclassical theorist of economic behavior is confronted with the dilemma of restricting his or her analysis to a case-by-case taxonomy of individual agent choice, given the inaccessibility to mental states, or grounding his or her explanatory theories on the normative heuristic of rational choice. Neither alternative yields scientific results. [ pp. 150-151, SCIENCE, RATIONALITY, AND NEOCLASSICAL ECONOMICS, L.D. Keita; Delaware, 1992.

Economists constantly issue opinions concerning the state of the world, and advise others on how they should live. But economists do not study the real world, nor do they study people. Economists study money and prices.

Money is not a real-world measure like, say, BTUs. Money is power because money “empowers” people to buy and do the things they want — including buying and doing other people. Money is the ultimate “political” resource.

Prices simply reflect opinions. The more money one spends, the more one’s opinion counts: one dollar, one vote. To the economist, people who have no money just don’t “count”.

The economy “economizes” money: the rich get richer and the poor get poorer. “Economic efficiency” is correctly seen as a “political” concept designed to reinforce the existing social hierarchy.   Economic students are programmed — like mindless robots — to believe that there are no “limits to growth”. Once they graduate, economists serve as automatic broadcasting devices repeating elaborate lies designed to hide the political nature of the economy from “the people”. Their mission is simply to protect the moneyed class from public scrutiny.

[3] p. 132, MORE HEAT THAN LIGHT, Philip Mirowski; Cambridge, 1989
[4] p. 87 BEYOND OIL, Gever et al.; Univ. Pr. Colorado 1991.
[5] The End Of Cheap Oil
[6] p. 119, THE COMING OIL CRISIS, by C. J. Campbell; Multi-Science Publishing Company & Petroconsultants, 1997
[7] Dead Link
[8] USGS Fact Sheet FS-157-96, July 1996,
[9] Fossilgate: The Biggest Coverup In History
[10] Economist – Dead Link
[11] pp. 55-65, Meadows et al., 1972
[12] Syncrude – Dead Link
[13] Titanic Sinks
[14] [Dead Link]

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SELECTED IGNORANT QUOTES
BY PEOPLE WHO SHOULD KNOW BETTER

Nobel Laureate Paul Samuelson and William Nordhaus:

Should we be taking steps to limit the use of these most precious stocks of society’s capital so that they will still be available for our grandchildren?

Economists answer this question in two ways. First, they point out that fossil fuels like oil and gas are finite but not “essential.” An essential resource is one, like oxygen, for which there are no substitutes. Substitutes exist for all the energy resources. We can substitute coal for oil and gas in most uses; we can liquefy or gasify coal where liquid or gas fuels are needed; when coal runs out, we can use higher-cost solar energy, nuclear fission, and perhaps someday even nuclear fusion. These last three are superabundant in the sense that when we run out of solar energy, the earth will already be uninhabitable.

A second point concerns the relative productivity of different assets. Many environmentalists argue that energy and other natural resources like wilderness areas and old-growth forests are very special kinds of capital that need to be preserved so that we can maintain “sustainable” economic growth. Economists tend to disagree. They look at natural resources as yet another capital asset that society possesses — along with fast computers, human capital in an educated work force, and technological knowledge in its patents, scientists, and engineers. Both economists and environmentalists agree that this generation should leave an adequate stock of capital assets for future generations; but economists worry less about the exact form of capital than about its productivity. Economists ask, Would future generations benefit more from larger stocks of natural capital such as oil, gas, and coal or from more produced capital such as additional scientists, better laboratories, and libraries linked together by information superhighways?

The substitutability of natural capital and other kinds of capital is shown by the production indifference curve or “isoquant” in Figure 18-2. We show there the amounts of the two kinds of capital that would be required to attain a certain level of output in the future (Q*), holding other inputs constant. That output can be produced at point C with a conservationist policy that emphasizes reducing energy use today, leaving much oil and gas and relatively little human capital for the future. Or it might be produced with a low-energy-price and high-education strategy at B. Either of these is feasible, and the more desirable one would be the one that has a higher consumption both now and in the future.

Note as well that the isoquant hits the vertical axis at point A, indicating that we can produce future output level Q* with no oil and gas. How is this possible? With the greater scientific and technical knowledge represented by point A, society can develop and introduce substitute technologies like clean coal or solar energy to replace the exhausted oil and gas. The curve hits the axis to indicate that in the long run, oil and gas are not essential. [ p. 328, ECONOMICS, Paul Samuelson and William Nordhaus; McGraw-Hill, 1998 ]

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William Nordhaus:

It is appropriate to conclude that, as long as the sun shines brightly on our fair planet, the appropriate estimate for the drag [on the economy] from increasing entropy is zero. [ p. 34, LETHAL MODEL 2: The Limits to Growth Revisited, in ECONOMIC ACTIVITY #2; Brookings, 1992 ]

Robert N. Stavins:

If we check today to see how the Limits I predictions have turned out, we learn that (according to their estimates) gold, silver, mercury, zinc, and lead should be thoroughly exhausted, with natural gas running out within the next eight years. Of course, this has not happened. Reserves have increased, demand has changed, substitution has occurred, and recycling has been stimulated. [ p. 45, ibid.]

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Edward R. Fried and Philip H. Trezise:

The revival of raw Malthusianism exemplified in the Club of Rome’s Limits to Growth was one myth. [ p. 4, OIL SECURITY: Retrospect and Prospect,Edward R. Fried and Philip H. Trezise; Brookings, 1993 ]

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Wilfred Beckerman:

Second, one of the useful by-products of the oil crisis has been a renewed interest in finding more oil or alternative sources of energy in the medium run — i.e., before nuclear energy becomes important. For example, much more attention has been paid recently to shale and tar sands, and there is a general convergence of views among the experts to the effect that the extraction costs of shale oil would be about $7 per barrel, compared with the “posted price” of oil at the beginning of 1974 of about $11 per barrel. And it is estimated that in the western U.S.A. shale oil reserves amount to about 90 billion tons (or about as much as known world oil reserves and about twice as much as the oil reserves of the Middle East)-and possibly several times as large as this. Similar reserves of oil from tar sands exist in Alberta in Canada, and the cost at which oil could be extracted from this source is estimated at being about $5 to $6 her barrel. [ p. 208, TWO CHEERS FOR THE AFFLUENT SOCIETY: A Spirited Defense of Economic Growth, by Wilfred Beckerman; St. Martin’s Pr., 1974 ]

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Wilfred Beckerman:

A major conclusion of this [Limits to Growth] study is that, at current rates of consumption, the world would shortly run out of supplies of many key minerals. [ p. 58, THROUGH GREEN-COLORED GLASSES: Environmentalism Reconsidered, by Wilfred Beckerman; Cato, 1996 ]

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Julian Simon:

Regarding oil, the price rise since the 1970s does not stem from an increase in the cost of world supply. The production cost per barrel in the Persian Gulf still is perhaps 50 cents per barrel. Concerning energy in general, there is no reason to believe that the supply of energy is finite, or that the price of energy will not continue its long-term decrease forever. I realize that it sounds weird to say that the supply of energy is not finite or limited, but I’ll be delighted to give you a whole routine on this in the question period if you ask. [ p. 119, SCARCITY OR ABUNDANCE, by Norman Meyers and Julian Simon; Norton, 1994 ]

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Herman Kahn:

What about the energy needed for the super-industrial society? Scientists and engineers are generally agreed that a sufficient research and development effort will make available before the year 2000 several new technologies that can provide the world with nearly unlimited and economical quantities of clean energy from renewable or inexhaustible resources. The technologically advanced nations could obtain most of their energy requirements from these sources by the year 2025. Some of these sources would also be feasible for many developing nations. Furthermore, conventional and currently unconventional fossil fuels will last for centuries. Thus, if the appropriate decisions are made, our grandchildren will not be plagued by an energy crisis. In addition, if we relieve the pressure on the traditional fuel supplies by shifting rapidly to the advanced technologies, then more “natural” oil and gas would be available to less developed nations. [ p. 243, WORLD ECONOMIC DEVELOPMENT, by Herman Kahn; Westview, 1979 ]

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Julian Simon and Herman Kahn:

Electrical power from nuclear fission plants is available at costs as low or much lower than from coal, depending upon the location, and at lower costs than from oil or gas. Even in the U.S., where the price of coal is unusually low, existing nuclear plants produce power more cheaply than from coal. Nuclear energy is available in unlimited quantity beyond any conceivable meaningful human horizon. And nuclear power gives every evidence of costing fewer lives per unit of energy produced than does coal or oil. The main constraints are various political interests, public misinformation, and cost-raising counter-productive systems of safety regulation. Nuclear waste disposal with remarkably high levels of safeguards presents no scientific difficulties. [ p. 25, THE RESOURCEFUL EARTH: A response to Global 2000, by Julian Simon and Herman Kahn; Blackwell, 1984 ]

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Peter Passell and Lenard Ross:

Conventional sources of energy are confined to fossil fuels (coal, oil, natural gas) and fission fuels (uranium). While supplies of these are much larger than is generally known — Canada’s tar sands and Colorado’s shale-rock-oil deposits dwarf the great oil reserves of the Persian Gulf — expected use rates could still exhaust them within one thousand years. However, the infant technology of nuclear fusion already shows signs of freeing us from the constraints of conventional energy sources. It is possible that nuclear-fusion reactors, in essence controlled hydrogen bombs, can provide safe, cheap, virtually limitless power within decades. The fuel for nuclear fusion is hydrogen, an element as available as sea water. No one has yet been able to generate a fusion reaction in the laboratory, let alone in a commercial power plant — the technical problems of heating hydrogen to millions of degrees within a tiny fraction of a second are staggering. But the goal now appears within reach — close enough so that at least one American corporation is developing a fusion reactor without government subsidies. [ p. 33, THE RETREAT FROM RICHES: Affluence and its Enemies, by Peter Passell and Lenard Ross (forward by Paul Samuelson); Viking, 1973 ]

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Nobel Laureate Milton Friedman:

(part of an interview)

Ravaioli: But there are many other environmental problems …

Nobel Laureate Friedman: Of course. Take oil, for example. Everyone says it’s a limited resource: physically it may be, but economically we don’t know. Economically there is more oil today than there was a hundred years ago. When it was still under the ground and no one knew it was there, it wasn’t economically available. When resources are really limited prices go up, but the price of oil has gone down and down. Suppose oil became scarce: the price would go up, and people would start using other energy sources. In a proper price system the market can take care of the problem.

Ravaioli: But we know that it takes millions of years to create an oil well, and we can’t reproduce it. Relying on oil means living on our capital and not on the interest, which would be the sensible course. Don’t you agree?

Nobel Laureate Friedman: If we were living on the capital, the market price would go up. The price of truly limited resources will rise over time. The price of oil has not been rising, so we’re not living on the capital. When that is no longer true, the price system will give a signal and the price of oil will go up. As always happens with a truly limited resource.

Ravaioli: Of course the discovery of new oil wells has given the illusion of unlimited oil …

Nobel Laureate Friedman: Why an illusion?

Ravaioli: Because we know it’s a limited resource.

Nobel Laureate Friedman: Excuse me, it’s not limited from an economic point of view. You have to separate the economic from the physical point of view. Many of the mistakes people make come from this. Like the stupid projections of the Club of Rome: they used a purely physical approach, without taking prices into account. There are many different sources of energy, some of which are too expensive to be exploited now. But if oil becomes scarce they will be exploited. But the market, which is fortunately capable of registering and using widely scattered knowledge and information from people all over the world, will take account of those changes. [ p. 33, ECONOMISTS AND THE ENVIRONMENT, Carla Ravaioli; Zed, 1995 ]

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The world renown Professor Adelman, who made energy his lifelong work:

Oil is a renewable resource, with no intrinsic value over and above its marginal cost… There is no original stock or store of wealth to be doled out on any special criterion… Capital markets are equipped to handle [oil depletion]. [ p. 34, 328, THE GENIE OUT OF THE BOTTLE: World Oil Since 1970, M. A. Adelman; MIT, 1995 ]

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Treasury Deputy Secretary Lawrence H. Summers:

The laws of economics are like the laws of engineering. There’s only one set of laws and they work everywhere. One of the things I’ve learned in my time at the World Bank is that whenever anybody says “But economics works differently here”, they’re about to say something dumb. [ p. 106 ]

There are no…limits to the carrying capacity of the earth that are likely to bind any time in the foreseeable future. There isn’t a risk of an apocalypse due to global warming or anything else. The idea that we should put limits on growth because of some natural limit, is a profound error and one that, were it ever to prove influential, would have staggering social costs. [ p. 109, FAITH AND CREDIT: The World Bank’s Secular Empire, by Susan George and Fabrizio Sabelli; Westview, 1994 ]

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Nobel Laureate Robert Solow:

… the world can, in effect, get along without natural resources … at some finite cost, production can be freed of dependence on exhaustible resources altogether… [ 1974 lecture to the American Economic Association cited in p. 117, STEADY-STATE ECONOMICS, Herman E. Daly; Island Press, 1991 ]

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MODELS OF DOOM is a serious work — the only critique worth reading. But it’s still wrong because it failed to consider “net energy”:

Tar sands occur in such concentrations and sufficiently near the surface that in some cases they could be mined by opencast methods with 80% to 90% recovery of the oil in place. The biggest single deposit is at Athabasca (in Alberta), estimated to contain 635 × 10^9 barrels. If only half this amount can eventually be recovered it would represent a major addition to proven world oil resources. At present, however, only about one-tenth of Athabascan reserves could be recovered by opencast methods, and in situ methods would be less efficient. Smail-scale production from Athabasca tar sands has been achieved for several years and large-scale production within the next decade is expected if North American oil prices rise as predicted. Large tar sand deposits also exist in the Venezuelan Orinoco Tar Belt, but they cannot be mined and would require in situ methods of recovery (e.g., thermal drive).

Long before the development of the international oil industry based upon crude oil, oil was produced in Scotland, France and Germany from oil shale deposits. China and the USSR still have oil shale industries, although the Russians are phasing theirs out owing to their discoveries of more economic crude oil and natural gas in Siberia. The USA oil shale deposits in Colorado have been estimated to contain 1,800 × 10^9 barrels of oil, and those in Brazil are thought to contain 800 × 10^9 barrels. Taking the 1965 estimate by the US Geological Survey of world oil shale deposits, and assuming a 50% recovery factor and a yield of 10 gallons of oil per ton of shale, world recoverable reserves from oil shales would be 6,850 × 10^9 barrels. This figure is three to six times larger than King Hubbert’s estimated range for total crude oil reserves, and more than 10 times proven crude oil reserves.

In North America research and development is being actively pursued on tar sands and oil shales technology, and there is also lively interest in the conversion of coal into synthetic oil and gas. At present prices none of the processes being tested are economic, but coal conversion is generally expected to become economic over the next decade with further development work. Coal conversion is expected to yield about 4.5 barrels of oil per ton of coal. If this factor is applied to Averitt’s estimate of world coal reserves (16,800 × 10^9 short tons) one can get some idea of the huge addition to long-term oil supplies potentially obtainable from coal conversion. As we have seen, world coal reserves are so large that the large-scale development of coal conversion would be possible even if there were also a large expansion of traditional forms of coal consumption.

It is worth emphasising that the economic use of oil shales, tar sands and coal conversion requires a moderate rather than a dramatic rise in prices, and further development work rather than a fundamental technical breakthrough. [ p. 104, MODELS OF DOOM: A Critique of the Limits to Growth, by H. S. D. Cole, Christopher Freeman, Marie Jahoda, and K. L. R. Pavitt; Universe, 1973 ]

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LIMITS TO BRAINS
by Jay Hanson

I have been working on a twelve step program to introduce the laws of thermodynamics to economists, here are the first few steps:

# 1. The candidate economist must go to a library. There he or she will notice spheres sitting on wooden stands. These represent the planet we live on: Earth. Spheres like Earth are by definition finite — they only hold just so much stuff. Economists are required to memorize this key point and say it over and over, “The Earth only holds just so much stuff because it’s a sphere. The Earth only holds just so much stuff because it’s a sphere. The Earth only holds just so much stuff because it’s a sphere. …” Economists are required to say it over and over until he or she can remember it without peeking at notes.

Next, the economist is ready for his or her very first BIG scientific experiment! The economist is advised to stay calm, and be sure to get a good night’s sleep before attempting the experiment.

# 2. Put a piece of cake on a plate.
# 3. Eat the cake.
# 4. See if you still have the cake.

Economists aren’t used to empirical science and will have to do the experiment (#2 through #4) a few times before the implications finally sink in.

Well kids, that’s the First Law (the Conservation Law). Isn’t science fun!!! Can any economist tell the rest of the class what he or she has learned? … Anyone? … Nobel Laureate Friedman? … Professor Nordhaus? … Nobel Laureate Solow? … Nobe Laureate Samuelson? … Anyone? …

Well perhaps we should just move on to the Second Law (the Entropy Law). Gee kids, guess what happened to that cake…

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MAXIMIZIN UTILITY
by Jay Hanson

For purposes of defense, reality can be distorted not only in memory but in the very act of taking place. Throughout the year of my imprisonment in Auschwitz I had Alberto D. as a fraternal friend: he was a robust, courageous young man, more clearsighted than the average and therefore very critical of the many who fabricated for themselves, and reciprocally administered to each other, consolatory illusions (“The war will be over in two weeks”, “There will be no more selections”, “The English have landed in Greece”, “The Polish Partisans are about to liberate the camp,” and so on, rumors heard nearly every day and punctually given the lie by reality). Alberto had been deported together with his forty-five year old father. In the imminence of the great selection of October 1944, Alberto and I had commented on this event with fright, impotent rage, rebellion, resignation, but without seeking refuge in comforting truths. The selection came, Alberto’s “old” father was chosen for the gas, and in the space of a few hours, Alberto changed.
— Levi, Drowned, pp. 33-34 The Spectacle

Once upon a time, Daddy Economist, Mommy Economist, and a litter of little Economists were in a mountain cabin, sitting in front of a small coal-burning stove to keep warm. Although most people know that when coal burns, it’s gone forever, Daddy Economist isn’t worried because he was trained — like a mindless robot — to believe that when the coal is gone, a substitute will magically appear. So when the coal is gone, he looks around, and his furniture pops into view — just like magic! So Daddy Economist decides to maximize his utility by breaking up his furniture and burning it in the small stove.

Now the Economists must sit on the floor, but heck, it’s better than the alternative: dying. Then one day, SURPRISE!!! All the furniture is nearly gone. But Daddy Economist isn’t worried because he believes a substitute will magically appear. So when the furniture is gone, he maximizes his utility by ripping the boards off the walls of his cabin and burning them in the stove to keep warm.

Now the Economists must sit on the floor very close to the stove, but heck, it’s better than the alternative: dying. Then one day, SURPRISE!!! The Economists’ cabin is completely burnt up. But Daddy Economist was trained not to worry. He decides to maximize his utility by pulling the clothes off his family and burning them in the stove to keep warm.

Now the Economists are forced to stand right next to the stove and constantly turn, but heck, it’s better than the alternative: dying. Then in a few hours, SURPRISE!!! All the Economists’ clothes have been burnt in the stove. But Daddy Economist isn’t worried because he is going to maximize his utility by…

The Hope That Kills

Despite the madness of war, we lived for a world that would be different. For a better world to come when all this is over. And perhaps even our being here is a step towards that world. Do you really think that, without the hope that such a world is possible, that the rights of man will be restored again, we could stand the concentration camp even for one day? It is that very hope that makes people go without a murmur to the gas chambers, keeps them from risking a revolt, paralyses them into numb inactivity. It is hope that breaks down family ties, makes mothers renounce their children, or wives sell their bodies for bread, or husbands kill. It is hope that compels man to hold on to one more day of life, because that day may be the day of liberation. Ah, and not even the hope for a different, better world, but simply for life, a life of peace and rest. Never before in the history of mankind has hope been stronger than man, but never also has it done so much harm as it has in this war, in this concentration camp. We were never taught how to give up hope, and this is why today we perish in gas chambers.
— Borowski, pp. 121-122 The Spectacle