Scarcity

The appropriate measures of scarcity - the costs of natural resources in human labor, and their prices relative to wages and to other goods - all suggest that natural resources have been becoming less scarce over the long run, right up to the present.

The real population problem, then, is not that there are too many people or that too many babies are being born. The problem is that others must support each additional person before that person contributes in turn to the well-being of others.

A baby is a durable good in which someone must invest heavily long before the grown adult begins to provide returns on the investment.

There is an intuitive difference between how we get Hula-Hoops and copper. Copper comes from the earth, whereas a Hula-Hoop does not seem to be a "natural" resource.

Hula-Hoops and dental care and radios seem different from copper because most of the cost of a radio, a Hula-Hoop, or dental care arises from human labor and skill, and only a small part arises from the raw material.

Over the course of history, up to this very moment, copper and other minerals havebeen getting less scarce, rather than more scarce as the depletion theory implies they should.

At the end of this confrontation between theory and fact, we shall be compelled to reject the simple Malthusian depletion theory, and to offer a new theory.The revised theory will suggest that natural resources are not finite in any meaningful economic sense.

Price, together with related measures such as cost of production and share of income, is the appropriate operational test of scarcity at any given moment.

Some people believe that we are now at a long-run turning point, and the past is not a guide to the future. Therefore we ask: How should one judge whether a historical trend is a sound basis for a forecast? Specifically, how can we judge whether the data from the many decades in the past showing declines in raw-material costs are a good basis for prediction? Prediction is always a leap of faith; there is no scientific guarantee that the sun will come up tomorrow. The correctness of an assumption that what happened in the past will similarly happen in the future rests on your wise judgment and knowledge of your subject matter.

A prediction based on past data is sound if it is sensible to assume that the past and the future belong to the same statistical universe, that is, if you can expect conditions that held in the past to remain the same in the future.

The most important elements in raw-material price trends have been (1) the rate of movement from richer to poorer ores and mining locations - that is, the phenomenon of "exhaustion", and (2) the continued development of technology, which has more than made up for exhaustion. Hence if the past differs from the future, the bias islikely to be in the direction of understating the rate at which technology will develop, and therefore underestimating the rate at which costs will fall.