Tuesday, January 19, 2010

Paradise Lost


tivoli
Originally uploaded by paynehollow
I'm posting a comment I made once a long time ago. I just happened across it and thought my analogy is worthy of consideration.

There once was a dirt poor fella who won a lottery. He won $1 million!

He promptly quit his job at McDonald's and purchased a $5 million home (placing a $500,000 deposit on it and paying $25,000/month on house payments.) He also purchased a Hummer Limosine (for special occasions) and a Jaguar (or some insanely expensive car, sorry I don't know their names). These cost another $200,000, which he paid in cash.

He hired a butler and a maid to care for his house and a chauffeur to drive him around.

"But wait!" I said to this fella, "At this rate, you'll go through your $1 million THIS year. Then you won't have enough to support this lifestyle. You'll never be able to make the house payments after this first year, nor pay for your staff or even the gas for your cars!"

"Phhht!" he said confidently. "I still have plenty of money! I'll just keep playing the lottery and I'll probably win again. Don't be such a negative thinker. My ingenuity and determination have gotten me this far, haven't they?"

"Well," I sputtered, "PERHAPS you'll win another lottery, but wouldn't it be more prudent to take advantage of this opportunity WISELY? To use the resources to ensure your children and their children might have a better life?"

"Are you kidding me?!" He shouts. "Look at the life I'm providing them! How could it get any better than this???"

======

Now, surely, I would think that most would agree with me that this fella was a bit fortunate in getting that windfall but he is foolishly and quickly pissing it away and he'll be worse off in the end. This is conservatism in the good, practical sense.

We have resources now, we have wealth now, but what assurance is there that we will continue indefinitely to enjoy access to "our" cheap oil in the amount to which we've become accustomed? And if we aren't assured an unending supply of cheap oil (and we most assuredly are not) or even coal or natural gas, then how wise is it for us to base an economy upon it, acting as this fella did, as if it would always be there and easily available?

Not wise at all, seems to me.

In this bleak midwinter, let us give prudence our due diligence.

15 comments:

John said...

We have resources now, we have wealth now, but what assurance is there that we will continue indefinitely to enjoy access to "our" cheap oil in the amount to which we've become accustomed? And if we aren't assured an unending supply of cheap oil (and we most assuredly are not) or even coal or natural gas, then how wise is it for us to base an economy upon it, acting as this fella did, as if it would always be there and easily available?

If this is true, then why did Julian Simon win his bet?

Dan Trabue said...

So, I assume in my story, the problem is that the fella is just going through his resources too quickly, but your opinion is that in the real world, we aren't going through our resources that quickly?

Would that be your position?

I would assume you'd agree that we do live in a finite world with finite resources, though, right?

Alan said...

Simon's work is interesting, but unfortunately he oversimplifies.

For example, he would argue, "Global food production is up! Therefore the world isn't going to die."

Well, unfortunately population increases faster than food production. And, *production* isn't the only issue, transportation and storage are also big issues.

He'd argue, "Raw materials are more available than ever! Therefore we're not going to run out!"

Well, unfortunately that's just because our technology for extracting them has gotten better...and I'm guessing it will continue to do so for a while. But that doesn't mean that we won't still run out.

You can't beat entropy, no matter how how much the oblivious would like to try.

Alan said...

In other words, I think his work should be used to temper the eco-hysteria, but I think most reasonable people find arguments based on hysteria unpersuasive on their face anyway.

Unfortunately, at least 50% of all people are stupider and/or crazier than the average person, so the number of actually reasonable & sane people in the world is a limited resource. ;)

John said...

Dan wrote:

So, I assume in my story, the problem is that the fella is just going through his resources too quickly, but your opinion is that in the real world, we aren't going through our resources that quickly?

The problem with your story is that it presents a faulty analogy.

Would that be your position?

I would assume you'd agree that we do live in a finite world with finite resources, though, right?


Although the earth is finite in the sense that it is a sphere of constant volume, to say that our resources are finite is an effectively meaningless conclusion because it assumes that "resources" are fixed quantity, as the man's money was a fixed quantity. They are not.

Example: two centuries ago, petroleum was a nuisance and had no value. It was not considered a resource. So if people said "our planet's resources consist of x,y, and z", petroleum would not have been among them.

But we found uses for petroleum, and then found ways of extracting that resource. People said "our petroleum is limited to quantity x" because their calculations only accounted for the then-current discoveries of petroleum and only those that they thought were extractable with extant and profitable technologies. As technology and demand rose, so did the extraction of this allegedly finite resource.

Now if petroleum was finite, why did it increase?

I would appreciate a direct answer. And also, a direct answer to the question I left in the first comment.

John said...

Alan wrote:

Well, unfortunately population increases faster than food production. And, *production* isn't the only issue, transportation and storage are also big issues.

When has it done so?

Well, unfortunately that's just because our technology for extracting them has gotten better...and I'm guessing it will continue to do so for a while. But that doesn't mean that we won't still run out.

No worries -- we'll use other materials. As it gradually ceases to become profitable to use coal, we'll move to uranium (nuclear power) -- or even wind and solar.

Resources don't simply "run out" like a water tap turned off. They gradually become less profitable as time moves on. This gives humanity plenty of time to expand other energy sectors.

I offer this challenge: if natural resources simply "run out", please name a specific natural resource that has done so.

Alan said...

"I offer this challenge: if natural resources simply "run out", please name a specific natural resource that has done so."

Any number of species that are now extinct through over-hunting, clearing of forests, etc. Yeah, I know, who cares about biodiversity and cute fuzzy animals? But since your argument appears to be entirely utilitarian, I'd point out that many synthetic drugs are designed from examining natural products from plants and animals which are shown to be useful in fighting various diseases ... well, as long as those plants and animals still exist to examine in the first place.

"As it gradually ceases to become profitable to use coal, we'll move to uranium (nuclear power) -- or even wind and solar."

This is a nice story and would be nicer if it were true. Yes, we moved from wood to coal and oil. So we have one data point that shows we can change our energy sources in the past. One point now makes a trend? But if this nice story were true then yes, by all means let's invest in yet another power source dependent on a mineral that we have only about 6% of the world's supply and which produces extremely hazardous waste. None of those things have never gone badly for us in the past. ;) (And yes, by all means, let's switch to a power source that is so high-tech and expensive that it is completely unavailable to most of the developing world and which, if they *did* get it may not use the technology in the manner originally intended.)

Anyway, honestly it's a bit boring to try to discuss the notion of finite resources when someone apparently doesn't actually believe in entropy. Apparently resources are "not a fixed quantity", presumably because they magically keep being made? Neato! :)

While eco-hysteria isn't a profitable way to discuss our use of resources, I don't think emulating ostriches is of much help either. The true problems and thus the true solutions are probably somewhere in between the two extremes.

John said...

Any number of species that are now extinct through over-hunting, clearing of forests, etc. Yeah, I know, who cares about biodiversity and cute fuzzy animals? But since your argument appears to be entirely utilitarian, I'd point out that many synthetic drugs are designed from examining natural products from plants and animals which are shown to be useful in fighting various diseases ... well, as long as those plants and animals still exist to examine in the first place.

Animals are not used to generate energy, which I take to be Dan's concern.

But let's say that you're concerned about endangered species. Here's how you protect them: eat them.

This is a nice story and would be nicer if it were true. Yes, we moved from wood to coal and oil. So we have one data point that shows we can change our energy sources in the past. One point now makes a trend? But if this nice story were true then yes, by all means let's invest in yet another power source dependent on a mineral that we have only about 6% of the world's supply and which produces extremely hazardous waste. None of those things have never gone badly for us in the past. ;) (And yes, by all means, let's switch to a power source that is so high-tech and expensive that it is completely unavailable to most of the developing world and which, if they *did* get it may not use the technology in the manner originally intended.)

It is true. Or else point to a time in which the world's energy supply as decreased.

Anyway, honestly it's a bit boring to try to discuss the notion of finite resources when someone apparently doesn't actually believe in entropy. Apparently resources are "not a fixed quantity", presumably because they magically keep being made? Neato! :)

Bauxite is a finite concept. But "resource" is an abstraction. If this is not true, then explain how petroleum was not considered a resource at one time, but now is. If "resource" is a fixed concept, this would be impossible.

Right?

While eco-hysteria isn't a profitable way to discuss our use of resources, I don't think emulating ostriches is of much help either. The true problems and thus the true solutions are probably somewhere in between the two extremes.

I appreciate your moderate stance, and I agree that change must take place. I also have confidence in the free market's ability to carry out that change. A few suggestions:

1. Where there is oil, drill. There's no point not using an available resource.

2. Where it's profitable, do anything else to generate electricity -- wind, solar, geothermal.

3. More nuclear power plants. This seems to be working splendidly in Western Europe. We should do likewise.

John said...

Oh, for the record, I do believe in entropy. I just don't think that it's relevant in this issue. Heat death will get us in the end, but that will happen no matter what we do or don't do, and isn't for a very long time.

Dan Trabue said...

Thanks for the comments, fellas. Been busy, but thanks for continuing the discussion without me.

I tend to think that I'm speaking of the finite resources of coal and oil and natural gas, that they are currently being used to generate X amount of energy - an amount on which we are dependent for our economy and "lifestyle" - and as those finite resources go away (and, being finite and being consumed in massive quantities, they will), we'll have nothing to replace them because neither wood, nor nuclear (which I don't see as a good idea) or solar or wind can generate as much energy as we are currently consuming.

My point is that those who have no problem with rapidly expending a finite resource because they are sure "something" will replace them are hoping for magic and asking us to place our bets on an unknown quantity and that's what I think makes my analogy apt.

John said...

My point is that those who have no problem with rapidly expending a finite resource because they are sure "something" will replace them are hoping for magic and asking us to place our bets on an unknown quantity and that's what I think makes my analogy apt.

My point is that it won't be rapid. It's not like a water faucet turning off; it's not like a gas tank emptying. The resource will get increasingly difficult to extract, and so increasingly expensive, gradually making other markets more profitable.

"Rapidly expending" is a term inappropriate for geology.

Dan Trabue said...

I'm unsure of your point, John. If we have gone through roughly half of the world's most easily accessed oil in roughly 100 years, that IS an exceptionally fast consumption rate, geologically speaking. That's what I'm saying.

Are you disagreeing with that?

John said...

"easily accessed" is a sliding scale. That's why our oil supply has expanded over the years. And if oil as a resouce is, as you say finite, that should be impossible.

Besides, if that seems rapid, keep in mind that in that 100 years, we have invented the following electricity-generating methods: nuclear, geothermal, solar, wind, hydroelectic.

So our capacity to solve energy demand is quite strong. In fact, at no point in human history has the world energy supply decreased.

Right?

Now, back to my original question: why did Julian Simon win his bet?

Dan Trabue said...

I don't have enough information to address the question.

You say...

"easily accessed" is a sliding scale. That's why our oil supply has expanded over the years. And if oil as a resouce is, as you say finite, that should be impossible.

I don't follow your point at all, John. Oil IS finite, right? You're not suggesting that there is an infinite supply of oil (or anything) somewhere, are you? I'm sure you're not. So what is your point here?

I believe that part of the reason that Ehrlich lost the bet was that he failed to take into sufficient account how technology could expand what's potentially available. No argument there. But that expansion is not infinite. There IS a limit to any resource AND there is a limit to what technology can do.

Or at the least, it is a poor idea to place societal and global scale bets that technology will "somehow" save the day, when that solution is not in hand.

I'm talking about prudence. If a solution is not visible and at hand, then making policy based on an unknown and non-existent solution is not logical.

Do you disagree with this?

John said...

I don't have enough information to address the question.

I'm going to press this point. I suggest that you find the necessary information, as the experiment provides evidence directly at odds with your argument.