Are Resources Exhaustible?
By David Henderson
If resources are not fixed but created, then the nature of the scarcity problem changes dramatically. For the technological means involved in the use of resources determines their creation and therefore the extent of their scarcity. The nature of the scarcity is not outside the process (that is natural), but a condition of it. –Tom DeGregori (1987). “Resources Are Not; They Become: An Institutional Theory.” Journal of Economic Issues.
This is one of the two lead quotes from “Resourceship: Expanding ‘Depletable’ Resources” by Robert L. Bradley. It’s the Econlib Feature Article for May.
Bradley points out that this insight did not originate with the late Julian Simon. He quotes institutional economist Erich Zimmermann laying out the insight in 1933.
The article ends as follows:
Should we dismiss the term “exhaustible” to describe mineral resources, as energy economist M. A. Adelman has suggested? Doing so would be in the tradition of Ludwig von Mises, who stopped short of assigning any special economic meaning to mineral resources.
A methodological lesson emerges from this story. Sixty years ago, Friedrich A. Hayek expressed the following thought about the advancement of good economics: “It is probably no exaggeration to say that every important advance in economic theory during the last hundred years was a further step in the consistent application of subjectivism.” This insight can be particularly appreciated in reference to mineral economics. The “fixed” character of minerals has been a siren song to economists who saw less when there was really more. The mineral economist should never forget that what resources come from the ground ultimately depend on the resources in the mind.