yazadjal.com

One of the most interesting challenges to the doctrine of free market economics comes from environmentalists who postulate that resources on earth are limited and we are exhausting them rapidly. Normally, they mention that classic liberal economics was created in a more abundant time where the finiteness of our natural resources was not visible. The base of their arguments goes as forth – The laws of thermo dynamics prevent any perpetual motion machines from existing. The evenly rotating economy as a model is ultimately wrong because it is a classic perpetual motion machine. On earth, there is a finite amount of resources and that will eventually hit us back. They point out to all the environmental problems as an example. They are also advocates of the “peak oil” theory that states that very soon we’ll be putting in more energy to extract oil than the energy in the oil itself.

Generally, these are followed by suggestions for alternate organization of the earth’s resources, with some variant of socialism being proposed i.e. amongst other beliefs, they believe that the free market is inadequately equipped to signal danger before catastrophe strikes. For the most extreme view, one could check dieoff

Typically, free market advocates reply that humans in a free market, eventually figure their way around any problem: resources are substituted, GDP/material stock & GDP/energy consumed ratios are increasing, new energy sources are found, after reaching certain levels of prosperity family sizes reduce, etc. Some resources that were seen to be close to being exhausted turned out to become obsolete before they ever got completely over.

Personally, I believe that material progress can continue for a certain amount of time, without serious disruptions of lifestyle, bringing everyone who is alive then, to a decent level of consumption. For this level of consumption, let us assume that the present G-7 consumption of energy becomes the norm for everyone in the world, though there is evidence in happiness surveys that even lesser than this might be enough. The reason I use energy as the basis is because energy is the number one bugaboo of the enviros and also because energy consumption is the surest indication of development while other things (houses, cars, food, medicine, alcohol, vacations, entertainment) may vary with cultural differences.

So, what makes me confident that the world, while continuing to adhere to free market policies, can survive a decline in rich energy sources?

1-Europe and India have high fuel taxes. This has not resulted in them “collapsing” in any way. Growth has been slower, but not greatly. When fuel prices double, all India has to do is to remove taxes.

2-The development of futures markets as a signaling mechanism. – When a sufficiently large number of investors believe in the peak oil theory, one doesn’t have to wait till the actual oil peak for the effects to be felt. Prices will rise, incentive structures will be established and a new energy race will begin.

3-The possibility of extraction of bio-diesel from algae – The sun bathes the earth with much more energy than civilization uses. [6.2781 x 10^20 kilowatt-hours/day] Ultimately a sustainable system of energy on earth has to rely on the sun, this solar energy has to be extracted and concentrated sufficiently for usage in industrial civilization. Extraction of bio-diesel from algae can do all that. Also, it does not rely on the presence of fertile land. These bio-diesel units can be setup even in deserts. Bio-D from algae

4-The possibility of clean nuclear energy with pebble-bed reactors.

5-Computerisation and communication advances reduce the need for materials as information substitutes inventory and quicker spread of optimal practices occur. Spread of trust networks and linguistic interfaces will make the internet even more conducive to increase of economic efficiency.
6-Improvements in material sciences will continue to reduce our energy consumption as stuff gets sleeker. Spread of more efficient building practices will continue.

7-The most relevant milestone here is the worldwide population peak around 2070. One just has to chart a sustainable path till then. After that, we may actually be looking at reduction of total energy consumption. Of this time, for a minimum of 30 years, crude oil will last, for a minimum of 70 years, natural gas will last. Nuclear and bio-diesel will last way beyond this.

8-The institution of the x-prize is a victory for free marketers everywhere as it indicates one good path for most such developments. Maybe entrepreneurs in the future (esp. those whose business greatly relies on the usage of energy and the maintenance of the present global supply system) can sponsor such a prize for the first team to demonstrate a scaleable model to tap zero-point energy or some such exotic source.

So, here are my reasons for optimism regarding our industrial civilization. This is just to start out a debate. Anyone who wants to follow up, comment, criticize, etc. is welcome.