No, We Haven’t Drained the Earth’s Resources

Capitalism makes the planet greener and cleaner, while socialism destroys it
By Jonathan Newman, MisesInstitute
August 1, 2018 Updated: August 1, 2018

According to the Global Footprint Network, humans have already used all of Earth’s replenishable resources for this year as of August. The so-called “Earth Overshoot Day” has crept up the calendar from December 29th in 1970 to August 1st in 2018.

The more we consume beyond their estimate of Earth’s ability to regenerate resources, the earlier the date: “The date of Earth Overshoot Day is calculated by comparing humanity’s total yearly consumption (Ecological Footprint) with Earth’s capacity to regenerate renewable natural resources in that year (biocapacity),” the organization states on their website.

Their dates mean that we have consumed about 60 percent of Earth’s annual resource production capacity in 48 years since 1970. This sounds like a gigantic debt, payable by riding a bike to work, going vegan, enforcing strict population limits, and returning to pre-industrial living conditions wherever possible.

Commenters at various sites where the Earth Overshoot Day was published overwhelmingly blame capitalism and overpopulation as root causes of our resource “overconsumption.” Private businesses have no incentive to maintain resources—greed leads them to exploit the earth for profits today with no regard for tomorrow. The lack of government-provided birth control and sex education because of misogynistic politicians have allowed birth rates in some parts of the world to remain high, putting undue strain on our scarce resources the saying goes.

The problem with this assumption is that neither economic theory nor global indicators of human well-being bear this out.

What Economic Theory Says About Resource Use

First off, economic theory states entrepreneurs care about the future availability of productive resources. Entrepreneurs are not in the business of making money today; they are interested in earning profits across time and they will use their resources accordingly. In fact, one of the most often forgotten paradigms of profit is that an entrepreneur can only beat the competition and make more profit is if he uses fewer resources to produce more, whether it be through technological innovation or capital accumulation.

And even if some resource is exhausted, all it means is that entrepreneurs satisfied consumer demands when consumers wanted them satisfied. It is wrong to blame the producers for resource exhaustion because they are subject to the consumers. They will supply the product wanted and the consumer ultimately decides which balance of goods they want to enjoy. Preserving and enjoying nature is also a “good” that many consumers today value very highly.

So consumers are also interested in the maintenance of resources. The way we balance the use of resources today and tomorrow depends on everybody’s rate of time preference, the premium we place on present consumption over future consumption.

We are more likely to save and maintain resources when we expect the future consumption to be greater or better. This is why we don’t eat all of the grapes today but use some to make wine for future consumption. It’s also why farmers are careful to rotate crops and not overwork their land so that it will be as productive as possible for as long as possible.

Therefore, the best policies for the maintenance of resources are private property and allowing entrepreneurs to utilize and experiment with new technologies that might decrease costs (using fewer resources) and increase production (making the future payoff greater). Productivity is not a drain on the Earth’s resources, but a great incentive to entrepreneurs and consumers to save and invest for the future.

In fact, the powerful incentive of private ownership is demonstrated in the “tragedy of the commons.” Like the farmer, private owners of land and productive resources have the skin in the game to take responsibility for the maintenance of their resources. “Owners” of publicly owned land and resources do not, which is why publicly managed property or resources nobody owns (like the ocean) are often overused.

And let’s not forget government interference in the market.  The most important yet seldom cited government interference that encourages profligacy is expansionary monetary policy. Inflationary environments lead everyone to consume more than they would normally because holding on to cash while prices are rising is a losing position.

Credit expansion also causes entrepreneurs to waste productive resources by pursuing the wrong lines of production—consider the empty mansions in the wake of the Fed-fueled housing bubble that popped in 2007–2008. Of course, there are countless other examples and isn’t it interesting that the most wasteful societies who depleted the most resources and causes irreparable damage to the environment were communist or socialist state-controlled economies. Yet we do look to the government to solve our environmental problems.

Economic theory is pretty clear on what actually leads to overconsumption and malinvestment of present resources. But what about the data? Should we be afraid of overpopulation or dwindling natural resources?

In short, no. Every conceivable indicator of human well-being shows that the world is much better off with 7.6 billion people in 2018 than we were with half that in the early 1970s. Earth’s population has doubled, but the share of the population in extreme poverty has been slashed from about 60 percent in 1970 to less than 10 percent today.

The illiteracy rate has shrunk from 44 percent to 14 percent since 1970. The number of people without access to improved water sources has halved just since 1990. The global average life expectancy has increased by over 12 years since 1973, according to the website OurWorldInData.Org.

So, humans are better off, but what about the Earth? Have we prospered at the expense of our planet?

Is the Earth Turning Into a Desert Planet?

No, the Earth got 14 percent greener from 1986 to 2016, according to a study by Boston University. Aquaculture fish production is significantly outpacing wild-caught fishing, which has flatlined since the 1980s. Cereal production has more than tripled since the 1960s, far outpacing population increases, even though land used for cereal production has stayed about the same.

In 2017, energy company BP estimated that we had 1696.6 billion barrels of proved oil reserves. They project that it is enough for 50 years, but this estimate is based on maintaining 2017 production levels, when it is more than reasonable to expect demand to fall and production to become more efficient. Also, we can expect new technologies to make previously unproven, inaccessible oil reserves accessible. Speaking of energy, net electricity production from nuclear sources has increased 3473 percent from 1970 to 2013, based on data from the Earth Policy Institute.

To illustrate, the late free-market economist Julian Simon once challenged one proponent of “the resources are running out” school of thought, the biologist Paul Ehrlich to a bet in 1980. Ehrlich had predicted that copper, chromium, nickel, tin, and tungsten would all run out by 1990, leading to significant increases in their price as demand would remain stable. Simon said that their prices would decline adjusted for inflation since supply would keep up. As we know, all of these metals are still around 28 years later and needless to say, Simon won the bet.

Conclusion

We are wealthier and more productive than ever and we seem to be maintaining and even expanding Earth’s capacity to meet our needs.

Perhaps the only cause for alarm is that so many people are pessimistic about the world population and our natural resources despite the astounding progress we’ve made just in the last 50 years. Pessimists ask for governments to intervene, but the interventions are either unnecessary or harmful to the progress made possible by the market economy to create a greener and cleaner society.

Jonathan Newman is an assistant professor of economics and finance at Bryan College. He earned his doctorate at Auburn University and is a Mises Institute Fellow. This article was first published by Mises.org

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

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