Better technologies have allowed the world economy to continue to grow despite tough resource constraints in the past. But simplistic free-market optimism is misplaced for at least four reasons.Resource pessimists have given those same four reasons for many years, and reality has always proven them wrong. Of course now the world is different. It always is. So what?
First, history has already shown how resource constraints can hinder global economic growth. After the upward jump in energy prices in 1973, annual global growth fell from roughly 5% between 1960 and 1973 to around 3% between 1973 and 1989.
Second, the world economy is vastly larger than in the past, so that demand for key commodities and energy inputs is also vastly larger.
Third, we have already used up many of the low-cost options that were once available. Low-cost oil is rapidly being depleted. The same is true for ground water. Land is also increasingly scarce.
Finally, our past technological triumphs did not actually conserve natural resources, but instead enabled humanity to mine and use these resources at a lower overall cost, thereby hastening their depletion.
July 13, 2008
Running out of resources - this time is different
Jeffrey Sachs writes: