Thoughts on economics and liberty

Tag: Julian Simon

Oil is “infinite” and here’s why (because soon no one will want it).

There is continuing misapprehension among the improperly educated (which is most of the "educated") that resources are "finite".

Giving examples doesn't seem to help such improperly educated people, so how about a bit of trivial algebra:

Let annual demand for resources = D and total "remaining" global supply of resources = S.

"Remaining" number of years of supply = S/D.

Now assume that D=0

The remaining number of years of supply = S/0 =  [i.e. at least till the solar system blows up]


Does that make sense to the world's millions of improperly educated people?

In brief, EVERYONE needs to understand TWO basic things about resources:

1. Resources are ONLY things that humans use (demand). Things we don't use are NOT resources. A pile of mud is not a resource until someone wants to use it to fill the foundation of his home. When there is NO demand for a  "resource" its supply effectively becomes INFINITE. It might instead become a nuisance.

2. When resources become "scarce" (because these are being used for a particular purpose)  then humans will BOTH recycle the resource (e.g. the mud from below one's house will be used after 40 years for a second house) or substitute it (use stilts instead of mud). The price system and technology both influence and react to the "scarcity" to ensure both these options. HUMANS are adaptive animals. They are not stupid.

Indeed, when technology changes sufficiently, things considered to be "resources" at one time can suddenly no longer be needed. They can quickly become a nuisance. 

What about oil?

When we use oil, we want ENERGY. We can replace it with a million other things. Anything that produces energy is fine. And there are at least 1000000 alternatives.

As a result of alternative technologies and more efficient ways to use oil, the oil DEMAND is now dropping on a per capita basis. In the next 10 years the GLOBAL demand for oil could very well peak. 

No matter how much human population grows thereafter (and human population is GUARANTEED to fall dramatically as the level of freedom increases), oil consumption will keep falling incrementally till finally oil will only be used for a few minor things.

Oil SUPPLY is virtually infinite (at least 100 times more than currently known "reserves"), and demand is already starting to fall.

What then? 

S/D (for oil) will increase sharply and tend towards INFINITY.

It will have the same fate as coal and the steam engine. Basically junk. 

Don't believe me? Even now!!

Well read this.

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Julian Simon on the firing line! MUST see

A few weeks ago I ordered the full video of Simon on the firing line from Amazon. A short snippet is available on Youtube (below).

I STRONGLY recommend that you order and watch the full video. The brilliance of this man Simon will amaze you. I promise!

Don't forget to read my other posts on Simon, including:


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Nuclear Power: Tomorrow’s Greatest Energy Opportunity

Here’s an entire chapter from Julian Simon’s The Ultimate Resource II (Word version here -3MB). Even today, with data on the safety and viability of nuclear energy widely available, widespread aversions to nuclear energy exist across the world. It is time to understand the facts.

==CHAPTER 13: Nuclear Power: Tomorrow’s Greatest Energy Opportunity==

Nuclear power is fundamental to a discussion of energy because it establishes the long-run ceiling to energy costs. No matter how much any other source of energy costs us, we can turn to nuclear power at any time to supply virtually all our energy needs for a very long time. Therefore, to put all other energy issues into a proper long-run perspective, we must discuss the height of that cost ceiling and the practicality of nuclear power – including its dangers.
By now there is sufficient experience – several decades’ operation in several countries – to prove that nuclear plants can generate electricity at costs that are of the same order as, or lower than, the present costs with fossil fuels. Whether nuclear power is considerably cheaper (say 80 percent of the cost of fossil fuels), or about the same cost, or somewhat more expensive (say 120 percent of the cost of power from fossil fuels), matters greatly to producer-sellers of electricity. But to the consumer it does not much matter. What does matter is that the calculations do not matter. It will not affect our future lives greatly whether electricity is, say, 20 percent more or less expensive than now. Of course, an electricity bill 20 percent higher than now would not be pleasant. But it would not lower the standard of living noticeably. Nor would an electricity bill 20 percent lower than now make appreciably richer the inhabitants of developed countries. And the longer one looks into the future, the smaller will be the percentage of the total budget devoted to electricity, as our total incomes grow, and the less important to the consumer will be the production cost of in-the-home electricity with nuclear power.
Fission is the source of nuclear power at present. But in the longer run, much “cleaner” nuclear fusion may well be practicable, though physicists cannot yet predict with certainty when – or even whether – fusion will be available.
If fusion becomes practicable, the possibilities are immense. By Hans Bethe’s estimate, even if we assume energy consumption a hundred times greater than at present, “the heavy hydrogen supply of the world will be sufficient to give us power for one billion years,” at a price perhaps equivalent to that at present for fission power.
The Dangers of Nuclear Power.
Because we (luckily) do not have experience with many nuclear mishaps the way a life insurance company has available data on millions of lives, estimating the dangers from a nuclear mishap must derive from scientific and engineering judgment. Hence laypersons such as you and I can do no better than consult the experts. And there is necessarily some controversy among the experts because of the absence of mishaps which would provide solid statistical evidence.
A section later in this chapter discusses some of the problems that arise in responding sensibly to risks of various kinds.
When evaluating the safety of nuclear power, it is crucial to keep in mind the risks to life and limb that arise in producing energy from other sources – such as drilling accidents at oil wells, mine disasters, and the pulmonary diseases of coal miners.
All would agree that nuclear power’s past record has been remarkably good compared with the best alternatives, along with its economic advantages. The extraordinary safety record in nuclear submarines over several decades – no evidence of any damage to human life from radiation despite the very close proximity of Navy personnel to the nuclear power plants – is compelling evidence that nuclear power can be remarkably safe. Furthermore, the safety of nuclear plants has been improving rapidly, as figure 13-1 shows – progress which would not be possible if opponents of nuclear power were able to prevent reactors from operating. Nevertheless, evaluating the risks of nuclear disaster is subject to argument. The contradictory conclusions of the authoritative report from the National Academy of Sciences, and of anti-nuclear critics, were cited in chapter 12.
(Figure 13-1 from INP 1991 Report)
Though it is not possible to establish their validity without entering into extensive technical analysis, these two assertions can safely be made: First, a nuclear plant cannot explode any more than can a jar of pickles, as physicist Fred Hoyle (with Geoffrey Hoyle) put it. (Chernobyl is no exception: it was not a nuclear explosion.) Second, the problem of safeguarding the processed waste from year to year is much less difficult than is safeguarding the national gold supply at Fort Knox, and much less risky than safeguarding against terrorist explosions of nuclear weapons. More about nuclear waste below.
Best guesses about the dangers from various energy sources are shown in Table 13-1. There is general agreement, too, that nuclear reactors in the future will utilize now-existing designs that are safer and easier to operate than earlier designs.
The accident at Three Mile Island in 1979 gave many people the impression that nuclear power is more dangerous than previously thought. But that accident would seem to demonstrate quite the opposite: Despite almost every possible error being made, no one suffered any harm. And the Chernobyl accident throws no light on safety in the U.S. because the reactor design was so different from plants in the West, and the protections provided in the West were not provided there. (More about Chernobyl below.)
The likelihood of injury from radiation continues to be crucial in attitudes toward nuclear power. Of course people can be killed and maimed by nuclear bombs, and children in the womb can be harmed. But the greatest fear – especially in peacetime – is long-run damage, somatically and genetically, from radiation. “When the atomic bombs fell…The tragedy was only beginning, scientists thought.” But amazingly, the delayed damage from even the Japanese bomb blasts is either very little in quantity, or non-existent. In a study of 100,000 people’s cancer rate until the late 1980s, about 100 more have developed leukemia than would be otherwise expected, and about 300 more than expected have developed solid cancers – a total of 400, to be compared to a total of 20,000 who would have died of cancer anyway. And there does not seem to be any damage to children not yet conceived at the time of the blast.
New research at the time of writing suggests that “a given dose of radiation is less dangerous than currently believed”, because the Japanese survivors at Hiroshima received “considerably more radiation than generally believed.”
(Of course an atomic bomb explosion has nothing in common with a nuclear plant accident except that both involve the release of radiation. And of course I am not suggesting that the atomic bomb “is not so bad after all.” The reason why the study of the Japanese children was made – and the reason it is mentioned here – is that vastly more radiation was received by the pregnant mothers in Japan than would be received by people in a peacetime accident under almost any conceivable conditions. Yet there was no excess incidence of cancer in the children. Tragedies though Hiroshima and Nagasaki were, we ought not to close our eyes to this useful lesson that they can teach us.)
An “official” report from the American Medical Association gives nuclear power an excellent bill of health, saying it is “acceptably safe.” Coal-supplied energy is assessed to cause eighteen times more deaths per unit of electricity than nuclear power, because of both mining and transportation deaths. And solar energy is “less safe” than nuclear power due to construction and maintenance costs. These estimates are consistent with the data in Table 13-1 above.
Perhaps the most surprising finding by that AMA report concerns Chernobyl: “[N]o member of the general public received a dose capable of producing radiation sickness”, though plant and rescue workers were killed. As to long-run effects, even using rules of thumb, the cancer rate in the surrounding population would increase “by less than 2%, and this effect would be difficult to detect.”
An even later report reaches an even stronger conclusion. “Reports that the Chernobyl nuclear accident caused widespread illness are false…The [United Nations multinational research] teams [of 200 experts from 25 countries] did not find any health disorders that could be directly attributed to radiation exposure”. And as to long-run dangers, “Radioactivity in drinking water and food was well below levels hazardous to health – in many cases, even below detection limits.” I confess that even with my experience of many, many initial scary reports of environmental events later being revealed to be minimal or zero risks, I was shocked to read that Chernobyl was found not to have caused observable damage to the general public. This was not widely reported to the public, however.
A large and solid body of research – culminating in a 1990 National Cancer Institute study – has found “no increased risk of death from cancer for people living in proximity to nuclear installations in the United States…Cancer cluster studies performed in Europe, Canada, and the U.S. over the last ten years have uniformly failed to establish a link between reports of apparent increased cancer incidence and local discharges of radiation.” Wing may have found higher-than-expected cancer rates among Oak Ridge workers, contradicting earlier studies on workers in nuclear plants. But even if this turns out to be supported by later studies, the very fact that the increased mortality is so difficult to identify statistically implies that it is small relative to other hazards to life.
Furthermore, it is possible to have too little exposure to radiation. There is now a well-established phenomenon called hormesis, which causes people exposed to relatively heavy natural levels of radiation to have increased longevity rather than shorter lives. This is apparently connected with the fact that “low-level radiations make the cells less susceptible to subsequent high doses of radiation.”
Here I interject an editorial remark of the sort that prudent scientists avoid lest readers think that they are less than “objective” and that personal feelings bias their presentations: If the nuclear power industry in the United States had even a touch of courage, it would publicize to the heavens the advantage of nuclear power in saving lives. Instead, they try to sway the public to favor nuclear power by talking about reducing dependence on imported oil – an argument which is bad economics at best, and phony at worst.
Nuclear Power and Risk Aversion
Yet there still remains much public aversion to risk. Let’s see the issue from the layman’s point of view. Perhaps nuclear energy really is cheap enough to be a viable alternative to fossil fuels in generating electricity. And maybe it has been safer than other sources. But what about the chance of a big catastrophe? Would it not be prudent to stay away from nuclear power to avoid that risk?
This question embodies what economists call “risk aversion” – a reasonable and normal attitude. Risk aversion is evidenced when a person prefers to keep a dollar in hand rather than bet it double or nothing, even when the chance of winning is greater than 50-50. That is, if one were not risk averse, one would accept all gambles when the “expected value” – the probability of winning multiplied by the payoff if you do win – is greater than the amount you must put up to make the gamble. But a risk-averse person would prefer, for example, a one-in-a-hundred chance of winning $10 to a one-in-a-million chance of winning $100,000, even though the “expected value” is the same.
A risk-averse society might well prefer to take many one-in-a- hundred chances of 10 persons dying rather than take a single one-in-a-million chance of 100,000 or even 10,000 people dying. That is, the risk of a lot of small likely tragedies might be more acceptable than the risk of a very infrequent and much less probable major catastrophe. If so, that society would eschew nuclear energy. This is the implicit argument against nuclear energy.
It is important, however, that the implicit risk aversion must be enormous if one is to oppose nuclear power. There is practically zero chance of a nuclear-plant catastrophe that would cost tens of thousands of lives. The very outside possibility envisioned by the official committees of experts is a catastrophe causing 5,000 deaths. While indeed tragic, that number of deaths is not of a different order from the number of deaths in a dam break, and it is smaller than the number of coal miners that we know for sure will die early from black lung disease.
So even risk aversion does not make nuclear energy unattractive. The size of the worst possible catastrophe is of the same order as other social risks that are accepted routinely, and hence we can judge nuclear energy according to the “expected value” of the mortalities it may generate. And according to expected-value calculations, it is considerably safer than other energy alternatives.
The Hoyles illustrate the waste-disposal problem from a personal point of view, and they are worth quoting at length.
Suppose we are required individually to be responsible for the long term storage of all the waste that we ourselves, our families and our forebears, have generated in an all-nuclear energy economy.
It will be useful to think of waste in terms of the categories of [the table below].
Lifetime (years)
High-level 10
Medium-level 300
Low-level 100,000
Very low-level 10 million
High-level waste is carefully stored over its 10- year lifetime by the nuclear industry. This is done above- ground in sealed tanks. It is not proposed to bury nuclear waste underground until activity has fallen to the medium- level category. Instead of underground burial, however, we now consider that medium-level waste is delivered for safekeeping to individual households.
We take the amount of the waste so delivered to be that which has been generated over the 70 years from 1990 to 2060….
… Over this period a typical family of four would accumulate 4 x 70 = 280 person years of vitrified nuclear waste, which for an all-nuclear energy economy would weigh about 2 kilograms. Supplied inside a thick metal case, capable of withstanding a house fire or a flood, the waste would form an object of about the size of a small orange, which it could be made to resemble in colour and surface texture – this would ensure that any superficial damage to the object could easily be noticed and immediately rectified by the nuclear industry.
The radioactive materials inside the orange would be in no danger of getting smeared around the house, not like jam or honey. The radioactive materials would stay put inside the metal orange- skin. Indeed the orange would be safe to handle freely but for the [Greek letter gamma]- rays emerging from it all the time. The effect on a person of the [Greek letter gamma]-rays would be like the X- rays used by the medical profession. If one were to stand for a minute at a distance of about 5 yards from the newly acquired orange, the radiation dose received would be comparable to a medical X-ray.
Unlike particles of matter, [Greek letter gamma]- rays do not stay around. Once emitted [Greek letter gamma]-rays exist only for a fleeting moment, during which brief time they are absorbed and destroyed by the material through which they pass. Some readers will be familiar with the massive stone walls of old houses and barns in the north of England. If a [Greek letter gamma]-ray emitting orange were placed behind a well-made stone wall 2 feet thick, one could lounge in safety for days on the shielded side, and for a wall 3 feet thick one would be safe for a lifetime.
Our family of four would therefore build a small thick- walled cubicle inside the home to ensure safe storage of the family orange.
After several generations, the waste inside the orange would have declined to the low-level category when the orange could be taken out of its cubicle and safely admired for an hour or two as a family heirloom….
Such individual tedium would of course be avoided if the waste were stored communally. For 100 000 families making up a town of 400 000 people there would be 100 000 eggs to store. Or since it would surely be inconvenient to maintain a watch on so many objects the town would have the eggs reprocessed into a few hundred larger objects of the size of pumpkins or vegetable marrows. The whole lot could be fitted into a garden-produce shed, except that instead of a wooden wall, the shed would need to have thick walls of stone or metal.
This then is the full extent of the nuclear-waste problem that our own generation is called on to face. If by the mid-21st century it has become clear that nuclear fission is the only effective long-term source of energy, society will then have to consider the problem of accumulating waste on a longer time-scale. For the town of 400,000 people, a shed of pumpkins would accumulate for each 70 years, until the oldest waste fell at last into the very low-level category …, when it could be discarded. After 7000 years, there would be a hundred sheds, which could be put together to make a moderate-sized warehouse. In 100 000 years there would be about 15 medium warehouses, which could be accumulated into two or three large warehouses. Thereafter, the problem would remain always the same, with the oldest waste falling into the very low- level category as fast as new waste was generated. Of course, the `warehouses’ would be deep underground…, and there would be no contact between them and the population of the town….
… The risk that each of us would incur, even if called upon to store our own waste, would be insignificant compared with the risks we routinely incur in other aspects of our daily lives.
A shorter and less whimsical description of the nuclear waste problem comes from Petr Beckmann:
The ease and safety of its waste disposal is one of nuclear power’s great advantages. Nuclear wastes are 3.5 million times smaller in volume than fossil wastes producing the same electric energy. High-level wastes which contain 99% of the radioactivity, but only 1% of the volume, are the first type of industrial waste in history that can be completely removed from the biosphere. Their volume per person per year equals that of 1-2 aspirin tablets. What is put back into the ground has less radioactive energy than what was taken out. After 100 years, the wastes are less toxic than many ores found in nature. After 500 years they are less toxic than the coal ash produced from the same electricity supply. The artificial and irrational arguments against disposal in stable geological formations (“Prove that they won’t…) help to perpetuate the present way of disposing of fossil-powered electricity wastes – some of them in people’s lungs.
There is complete agreement among scientists about every one of the statements in Beckmann’s brief summary above, and those in the Hoyles’ analysis.
Still another practical disposal method was suggested by the Nobel-winning physicist, Luis Alvarez, and tested by British engineers: Place the waste in projectile-shaped rust-resistant tubes, and release them from the surface of the ocean where the water is deep. The projectiles will embed themselves 100 feet deep in the bottom, and will dependably remain there safely for a long time. (1987, p. 65).
Most important in thinking about waste disposal: We do not need to think of a very long period such as the next 10,000 years when we consider storing nuclear waste; we only need to worry about a few decades or centuries. Scientists and engineers will be producing a stream of ideas about how to handle the waste even better, and indeed, will probably soon find ways to put the waste to such use that it becomes a commodity of high value. As I am writing this chapter, a biologist has found a way to use jimson weed to reduce the volume of plutonium waste by a factor of 10,000, by stimulating the weed to separate the plutonium from the rest of the sludge in which it is embedded. This makes the waste (or storage) problem immeasurably easier. The best ways to increase future safety are to increase wealth and increase population now, both of which lead to a greater rate of scientific discoveries.

Energy from nuclear fission is at least as cheap as other forms of energy, and is available in inexhaustible quantities at constant or declining prices. Its safety record in the West shows it to produce energy at a lower cost in lives than any other form of energy, on average. The opposition to it is mainly ideological and political, as indicated by the headnote to this chapter by Paul Ehrlich, and by this statement by the noted activist, Amory Lovins: “[I]f nuclear power were clean, safe, economic, assured of ample fuel, and social benign per se, it would still be unattractive because of the political implications of the kind of energy economy it would lock us into.” The aim of such writers as Lovins is not increasing the availability of energy and consumer benefits, but decreasing the use of energy for supposed environmental gains and beliefs about the morality of simple living. This may be seen in the headline, “Improved Fuel Efficiency Negated by Glut of Cars, Trucks.”

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The pitfalls of forecasting

Unless one takes a truly long-term view, and thoroughly understands the entire range of impacts, including  stabilisers, adjustments, substitutions, interactions, and the lot, it is best to avoid forecasts on complex matters. We can talk about trends, and tendencies, but not precise estimates of what is going to happen.

The number of constantly changing forecasts by the IMF during the past three years should have led it to shut down its delusional macro-economic forecasting branch, but forecasters always manage to  avoid taking responsibility (much like climate change "scientists" who manage to receive public funding even after making the most absurd forecasts!). 

Here's Julian Simon on the pitfalls of forecasting

This is what Julian Simon had to say about forecasting (source).

Despite those reservations about technical forecasting, I shall briefly survey the results of some of the forecasters, mostly in their own words. My aim is to show that even with relatively “conservative” guesses about future extraction developments, many of the best-qualified forecasters report enormous resource availabilities – in contrast to the scare stories that dominate the daily newspapers. The central difficulty again is: Which expert will you choose to believe? If you wish, you can certainly find someone with all the proper academic qualifications who will give you as good a scare for your money as a horror movie. For example, geologist Preston Cloud has written that “food and raw materials place ultimate limits on the size of populations … such limits will be reached within the next thirty to one hundred years”, and, of course, not too many years ago the best-selling book by Paul and William Paddock, Famine–1975!, told it all in the title.

We begin with the assessment of the raw-materials situation by Herman Kahn and associates. Examining the evidence on the twelve principal metals that account for 99.9 percent of world and U.S. metal consumption, they classify them into only two categories, “clearly inexhaustible” and “probably inexhaustible,” finding none that are likely to be exhausted in any foreseeable future that is relevant to contemporary decisions. They conclude that “95 percent of the world demand is for five metals which are not considered exhaustible.”
Many decades ago, the great geologist Kirtley Mather made a similar prescient forecast:
Summing it all up, for nearly all of the important nonrenewable resources, the known or confidently expected world stores are thousands of times as great as the annual world consumption. For the few which like petroleum are available in relatively small quantities, substitutes are known or potential sources of alternative supply are at hand in quantities adequate to meet our current needs for many thousands of years. There is no prospect of the imminent exhaustion of any of the truly essential raw materials, as far as the world as a whole is concerned. Mother Earth’s storehouse is far more richly stocked with goods than is ordinarily inferred.
In a comprehensive 1963 survey of natural and technological resources for the next 100 years, Harrison Brown – a well-known geochemist who would not be described as a congenital optimist by anyone who knows Brown’s work – nevertheless looked forward to a time when natural resources will become so plentiful that “mineral resources will cease to play a main role in world economy and politics.” (I think that that time has already arrived.) In an article sufficiently well-regarded that it was the first article from the physical sciences ever republished in the American Economic Review, H. E. Goeller and A. M. Weinberg explored the implications of possible substitution in the use of raw materials that are essential to our civilization, with this result:
We now state the principle of ‘infinite’ substitutability: With three notable exceptions – phosphorus, a few trace elements for agriculture, and energy-producing fossil fuels (CH2) – society can subsist on inexhaustible or near-inexhaustible minerals with relatively little loss of living standard. Society would then be based largely on glass, plastic, wood, cement, iron, aluminum, and magnesium.
As a result of that analysis of “infinite” substitutability, they arrive at an optimistic conclusion.
Our technical message is clear: dwindling mineral resources in the aggregate, with the exception of reduced carbon and hydrogen, are per se unlikely to cause Malthusian catastrophe….In the Age of Substitutability energy is the ultimate raw material. The living standard will almost surely depend primarily on the cost of prime energy.
Are those quotations from far-out voices? Hardly. Vincent McKelvey, then-director of the U.S. Geological Survey, said in an official Summary of United States Mineral Resources: “Personally, I am confident that for millennia to come we can continue to develop the mineral supplies needed to maintain a high level of living for those who now enjoy it and raise it for the impoverished people of our own country and the world.”
You may be startled by the discrepancies between these assessments and those that you read in the daily newspapers. The best-known doomsday forecast in the last few decades was The Limits to Growth. It sold an astounding 9 million copies in 29 languages. But that book has been so thoroughly and universally criticized as neither valid nor scientific that it is not worthwhile to devote time or space to refuting its every detail. Even more damning, just four years after publication it was disavowed by its sponsors, the Club of Rome.The Club said that the conclusions of that first report are not correct and that they pu rposely misled the public in order to “awaken” public concern.

With respect to minerals, Dennis Meadows (of Limits to Growth) predictably went wrong by using the known-reserves concept. For example, he estimated the world supply of aluminum to be exhausted in a maximum of 49 years. But aluminum is the most abundant metal in the earth’s crust, and the chance of its supply becoming an economic problem is nil. (Meadows also made the error of counting only high-grade bauxite, while lower grades are found in much greater abundance). The price history of aluminum in Figure 2-2 shows how aluminum has become vastly more available rather than more scarce since its early development in the 19th century. And in the two decades since Meadows wrote, the price has continued to fall, a sure sign that the trend is toward lesser rather than greater scarcity. Figure 2-3 [Prices of aluminum, and early ones from Madigan booklet]
The complete failure of the prophecies of Limits to Growth, and even the repudiation by its sponsor, have had little visible effect on the thinking of those who made the false prophecies. In 1990 Meadows was still saying, “We showed that physical growth will stop within the lifetime of those being born today…The underlying problem has not changed one iota: It is the impossibility of sustaining physical growth in a finite world.” (The next chapter discusses why finiteness is a destructive bogeyman, without scientific foundation.) And in 1992 they published Beyond the Limits which says the same old things while attempting to wiggle out of the failures of past predictions by saying that they just had the dates of the forecasts wrong.
Forecasts made by government agencies attract much attention, and many naive persons put special credence in them. But the inability of government agencies to predict resource trends, and the ill effects of such “official” but badly made forecasts, would be amusing if not so sad. Consider this episode:
After a sharp price rise in the late 1970s, timber prices in 1983 fell about three- quarters, causing agony for lumber companies that had contracted to cut government timber at the high prices. Industry trade groups then argued that the government owed the industry help because its forecasts had led to the bidding disaster. In the late 1970s [an industry spokesman] says, government economists predicted timber shortages and helped to fan the bidding.
Even economists can be influenced by physical considerations into focusing on too-short-run price series, and making wrong forecasts thereby. For example, in 1982 Margaret Slade published an influential analysis of trends in commodity prices based on a theoretical model including grades of ores. Her series ran from 1870 or later through 1978. She fitted quadratic concave-upwards curves to the data and concluded that “if scarcity is measured by relative prices, the evidence indicates that nonrenewable natural-resource commodities are becoming scarce.” If she were to conduct the same analysis with data running to 1993, and using data before 1870 where available, she would arrive at quite the opposite conclusion. 
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