New School Politics

Scarcity, Shmarcity

Ryan | 26 06 2008

If you're a first time visitor, you may want to subscribe to our RSS feed, which will keep you up to date with all the latest New School Politics posts. Thanks for visiting!

Naturally, trends in rising commodity prices causes increased concern about resource scarcity. As I’ve discussed, despite such concerns (which dates back since well before the time of Jesus) the real dilemma for man is not a matter of resources but of how to transform resources into wealth. While natural resources are technically limited, and those such as oil will eventually diminish in quantity, the earth is itself a giant ball of “natural resources,” so its hardly like we are running on empty.

In fact what the real difficulty our world economy has is the scarcity of productivity–in terms of capital–and the limits of our technology. As technology improves, not only can we do more with the resources we have but we can also extract a greater quantity of these resources.

Two articles confirm this. The first includes The Economist’s index of commodity prices from 1862 to 1999 and found that real prices decreased at an average of 1% every year over that entire period of time–indicating a steady rise in supply.

The second mentions a different index of real commodity prices from 1900 to 2003, which fell by .8% every year over that time.

The lesson: as long as we continue to increase our productive capacity, resources will not be a grave problem and the goods that are important will be pleantiful.

HT: Bryan Caplan