Have We Reached "Peak Economics" Yet?
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I received a bizarre email today:
When people like me say, "the world will never run out of X," we are not saying that there is an unlimited supply of X. We are not disregarding the pesky fact that the earth has a finite volume. Or that, at any one point in time, there can only be so much of X available. Or that — in a static, closed system — if we consume some X then there will, by definition, be less X available.
We are, in short, not being metaphysically insolent.
What we are saying is that supply and demand always (in the absence of government interference) interact to produce a market-clearing price. In an unfettered market, there will always be some X to buy — if you can pay for it.
Stated differently, there is a fundamental distinction between "the world will never run out of X" and "the world will never run out of cheap X." I have certainly never said the latter, and no one I take seriously has ever said it either.
I do think it important, however, to acknowledge the frivolity of the "static, closed system" constraint. People like me who say, for example, that "the world will never run out of oil" do not say it because we blindly believe there will always be more oil to find. But neither do we blindly believe that we will never find, e.g., oil-excreting bacteria. A core Economics 101 bullet point is, recall, that higher prices catalyze the development of substitutes. This, too, is a reason why we will "never run out of X."
Rebuttals encouraged.
Interesting comments on your blog re the future of copper and that we will not run short of the material.I couldn't quite tell whether this was intended as sarcasm, or was due to a language barrier, but apparently a review of the thesis is in order.
Can you tell me what material (hopefully affordable) is able to transmit electrical energy and if that can be done with glass fibre optic?
Just wondering; so far I haven't found a suitable alternative.
When people like me say, "the world will never run out of X," we are not saying that there is an unlimited supply of X. We are not disregarding the pesky fact that the earth has a finite volume. Or that, at any one point in time, there can only be so much of X available. Or that — in a static, closed system — if we consume some X then there will, by definition, be less X available.
We are, in short, not being metaphysically insolent.
What we are saying is that supply and demand always (in the absence of government interference) interact to produce a market-clearing price. In an unfettered market, there will always be some X to buy — if you can pay for it.
Stated differently, there is a fundamental distinction between "the world will never run out of X" and "the world will never run out of cheap X." I have certainly never said the latter, and no one I take seriously has ever said it either.
I do think it important, however, to acknowledge the frivolity of the "static, closed system" constraint. People like me who say, for example, that "the world will never run out of oil" do not say it because we blindly believe there will always be more oil to find. But neither do we blindly believe that we will never find, e.g., oil-excreting bacteria. A core Economics 101 bullet point is, recall, that higher prices catalyze the development of substitutes. This, too, is a reason why we will "never run out of X."
Rebuttals encouraged.
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Posted by Kip on
13 March 2008
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