Economics 101

[Maj]

A few questions:

Is there a limit to the size of the global economy? Given that non-renewable resources are obviously finite (and renewable are being consumed so quickly you can pretty much slap the 'non' prefix onto most of them) how is it possible that economies based largely on the trade of material goods will sustain themselves, let alone grow once the raw materials are (close to) depleted? I understand that most Western nations are now beginning to shift over to a services and information economy, but aren't those entirely reliant upon a foundation of primary and secondary industries that have been intentionally located in other nations?

The idea of sustainable development is promising, however, I cannot see how that would be possible if our economy is based upon mass and frequent consumption. The second we stop spending, we start sliding. How much longer can we keep spending before there's nothing left for us to buy? What then? Or is this just another one of those problems we hope our kids (or theirs) will be able to solve? Or maybe I'm just missing something here ...

- Maj

 

[amadeus]

By the time that the mineral resources of the world are close to being depleted, we'd already have developed something to replace it. It's capitalism at it's best.

What do you think the oil production companies (in the U.S. and other G-7 equivilant nations) are going to do when we start finding out that we won't have an unlimited supply of oil?

They'll develop something to make it obsolete.

 

[Maj]

By the time that the mineral resources of the world are close to being depleted, we'd already have developed something to replace it. It's capitalism at it's best.

So we claim to have solved the problem by claiming we will be able to solve the problem once the time comes to make it a big problem? I wish I shared your confidence in our society and its capabilities.

What do you think the oil production companies (in the U.S. and other G-7 equivilant nations) are going to do when we start finding out that we won't have an unlimited supply of oil?

They already know and are desperately rushing to develop alternate energy sources. The hydrogen fuel cell appears to be the most promising, however, in order to producethe hydrogen you need to split water molecules which takes electricity which has to be generated. Still a tricky situation but I have more confidence in that than I do in most other things related with "delayed" major global issues.

- Maj

 

[VoodooAce]

Originally posted by rmsharpe
By the time that the mineral resources of the world are close to being depleted, we'd already have developed something to replace it. It's capitalism at it's best.

What do you think the oil production companies (in the U.S. and other G-7 equivilant nations) are going to do when we start finding out that we won't have an unlimited supply of oil?

They'll develop something to make it obsolete.

Well, I hope you're right, RM, but it sounds an awful lot like wishful thinking.

And the oil companies will just dust off those plans they buried in the 70's to make a viable fuel out of hydrogen.

 

[amadeus]

Remember asbestos? Well, one day it was there...and poof! We found out that people were dying from it. People stopped making it, and made something else...

Maybe that's a simplistic view of things, but...eh, let the eggheads figure it out.

 

[Greadius]

Originally posted by Maj
Is there a limit to the size of the global economy? Given that non-renewable resources are obviously finite (and renewable are being consumed so quickly you can pretty much slap the 'non' prefix onto most of them) how is it possible that economies based largely on the trade of material goods will sustain themselves, let alone grow once the raw materials are (close to) depleted? I understand that most Western nations are now beginning to shift over to a services and information economy, but aren't those entirely reliant upon a foundation of primary and secondary industries that have been intentionally located in other nations?

There were many well respected economic thinkers who spoke about the 'limit' of economic growth, much in the same way Malthus wrote about the 'limit' of human population. However, just like Malthus, they grossly underestimated humanities ability to adapt to a changing situation.
Economic growth isn't created purely from the exchange of raw goods, it is created from the value of services rendered as well as the value of the final products of goods.
For example, think of huge impact home computers, just as a product, have had on the economy. Many of the resources required to create them are in abundance and were close to worthless two decades ago, many more are artificially manafactured. To go along with that, the amount of service jobs that came with computers was staggering.
The nature of capitalism forces quick adaption to whatever is economically efficient. Capitalist economies that learn how to adapt to whatever is working, regardless of the resources required, thrive.
There is NO real limit to the size of wealth in the world pie... use the United States as a microcosm. Our poverty stricken population today lives better than the upper-middle class 100 years ago.

 

[jkharvey]

Remember asbestos? Well, one day it was there...and poof! We found out that people were dying from it. People stopped making it, and made something else...

I had an internship @ Conoco when I was a petroleum engineering student @ UWyo. I was basically a gopher in a small R & D group, but while I was there I was able to see some interesting research reports.

The first one was about untapped oil reserves in the U.S. Do you know there is over 300 bil. barrels (think Saudi Arabia) of oil in NW Colorado. It is trapped in shale so the extraction costs are 60-80 dollars per barrel though, but there is a lot of work being done to make it more economical.

The second one I remember was the feasablility of a switch to a hydrogen based economy. The one I saw was a wind based power system to produce H2 gas. The total cost of the system was 6-10 trillion dollars!! It also required the electrical capacity of the U.S. to triple! It was pretty interesting stuff anyway.

 

[knowltok2]

Originally posted by jkharvey

The first one was about untapped oil reserves in the U.S. Do you know there is over 300 bil. barrels (think Saudi Arabia) of oil in NW Colorado. It is trapped in shale so the extraction costs are 60-80 dollars per barrel though, but there is a lot of work being done to make it more economical.

The second one I remember was the feasablility of a switch to a hydrogen based economy. The one I saw was a wind based power system to produce H2 gas. The total cost of the system was 6-10 trillion dollars!! It also required the electrical capacity of the U.S. to triple! It was pretty interesting stuff anyway.

The first paragraph highlights the lie that many statistics are. We have been constantly bombarded with stats that the world's oil reserve will last for 50, years, 100 years, 20 years, whatever they happen to say at the time. The fact is that those statistics are based off of current extraction costs, and don't take into account the shale oil, and or oil in old places. The oil industry started in western Pennslyvania. There is still oil there, it just isn't as cheap to get as what we can get out of Saudi Arabia.

As for the second paragraph, a trippling of US electrical capacity by the time we 'run out' of oil doesn't seem like that much of a stretch.

To the original question, that is a good justification for a space program. Near limitless energy is being pumped out of the Sun daily, and there is plenty of mass throughout the solar system.

I share RM's optimism as it relates to science finding a way around a problem of diminishing resources. That is a problem many many generations in our future. We are far more likely to suffer from excess population, increased proliferation of destructive technology, and the byproducts of our consumption than we are actually running out of resources. If we can get past these problems, we will have no problem ensuring that we don't run out of resources in several hundred or thousand years.

 

[Hurricane]

The idea that we would run out of resources was taken very seriously during the 1970´s (with the Rome club as the leading pessimists), but new economic research has showed that this was not true. For example, oil has been considered to "run out in 20 years" the last 30 years. Of course, the reserves are not unlimited, but when oil sometime in the future becomes so rare that is is too expensive to drill up, we have already discovered alternative energies. The theories for these energies are already here, but they can not at this time compete with oil in price.

So, speaking entirely in terms of economics, there is nothing to worry about. However, the population boom and environmental damage can, in the worst case, be disastrous. This is where government regulations are needed. Just to name one example: why are there still no other viable alternatives to combustion-driven cars (like electric cars)? Because the oil companies buy all the patents made in this direction and promptly hide them deep down in the basement, claiming that "we are working on it". They make sure the oil industry will lead the development of alternative energies, and this development will not happen until oil is becoming alarmingly expensive.