Celebrate Resourceful Earth Day
IPN Opinion article
Wall Street Journal Europe
Twenty eight years ago today, the first 'Earth Day' was held in America and the modern environmental movement was officially born. Since then, college professors and activists have used April 22 (and most every other opportunity, for that matter) to rant and rave about the malignant effects of capitalism on the environment. Audiences are routinely told that the air and water is becoming ever more polluted; that oil and coal reserves will soon be used up; that the birds, bees and fish are all going to die; and that mankind will soon follow. None of these dire prophesies have been born out, of course, but expect to hear the same gloomy mantra at this year's Earth Day.
Fortunately, it is still possible to find some voices of reason. For example, a study that will be published in Britain today by the Institute of Economic Affairs finds that air and water quality have improved significantly in the UK, United States and Canada since the mid-70s. The study's authors, Steve Hayward of the Pacific Research Institute in San Francisco and Laura Jones of the Fraser Institute in Vancouver, show that ambient concentrations of sulfur dioxide and carbon monoxide have fallen by over 60 per cent, and that ambient concentrations of nitrogen oxides have fallen by over 35 per cent. Ambient levels of particulates have fallen by about 50 per cent over the same period. Meanwhile, the levels of metals such as chromium and copper in UK rivers have been dropping precipitously.
Numerous other findings also suggest that the world is far from coming to an end. Three ornithologists--David Gibbons, Mark Avery and Andrew Brown--recently published a study in the journal British Birds noting that the number of breeding bird species in the UK has actually increased, from 194 to 230, over the past 200 years. In other words, industrialization has boosted, not threatened, bird populations.
This is not surprising given the established relationship between economic growth and environmental quality. Many studies have suggested that while atmospheric and water pollution might increase during the early stages of a nation's transition to an industrial society, pollution levels begin to decline again once per capita income reaches a certain level (around $8,000 on average). In part, this is because the demand for environmental quality increases with income: Poor people are more willing to accept a lower level of environmental quality in return for an increase in income, while richer people are willing to spend more on conserving wildlife, suing polluters, or funding environmental organizations which lobby for stricter regulations. Perhaps more important, however, pollution levels decline in wealthier societies because they are generally home to profit-driven corporations that seek to improve their efficiencies. Pollution is waste and more efficient systems inevitably produce less of it.
The perennial environmentalist claim that we are running out of resources has a long history. In 1798, Thomas Malthus argued that human populations would inevitably increase at a rate faster than the rate at which the means of supporting them could grow. His gloomy conclusion was that population size must eventually be limited by such things as war, pestilence and famine. Aside from ignoring the role of contraception (in a later edition he did take into account 'abstinence' and 'vice' as checks on population), the fundamental flaw in Malthus's theory was that it failed to account for technological change. He assumed that the ability to increase the productivity of land would gradually diminish and eventually cease. He was wrong, of course. All manner of new technologies have been invented, making it now possible to grow more food on less land.
A similar error was made by the famous 19th century economist William Stanley Jevons, who claimed that the use of coal was increasing exponentially while stocks remained fixed. He predicted that coal reserves would soon run out, leading to a decline in productivity. Estimates of global coal stocks today suggest that we should have enough to supply our energy needs for about another 1000 years. Moreover, other resources, including oil and gas, have become important sources of energy and have in many cases replaced coal.
The 1970s brought concerns that oil reserves would soon be depleted. Reports circulated that proven oil reserves would last for only another 30 years. When OPEC imposed limits on output, driving up the world price more than threefold, panic set in and the U.S. government imposed rationing. To the average consumer, the 'oil crisis' vindicated the environmentalists' claims that oil reserves were running out. However, the price increase had the opposite effect: it stimulated discovery of new reserves. The price hike made it commercially viable to extract oil from more obscure places, such as the North Sea, and non-OPEC producers (notably those in Norway and the UK) were eventually able to undercut OPEC, leading once more to a decline in prices. Today there are still only around thirty years worth of proven oil reserves for the very good reason that it is not financially worthwhile for oil companies to invest in the discovery of more reserves. No doubt in thirty years time there will also be thirty years worth of proven reserves.
Ironically, some environmental organizations are now attempting to prevent the exploitation of new oil and gas reserves, such as those to the west of the Shetland Isles in the UK. If successful, these campaigns might help fulfill the environmentalists own alarmist prophecies. And the beneficiaries of any reduction of output in the West would clearly be the major oil producing nations, such as Saudi Arabia, which are unlikely to pay any heed to environmentalists.
The reason that environmentalists believe that reserves of oil, coal and other natural resources are running out is that their understanding of the nature of resources is fundamentally flawed. One of the greatest insights of one of the century's greatest economists, Julian Simon, was that the only resource that really matters is human knowledge. Simon observed that our ability to discover new ways of doing things is virtually unbounded. This led him to the conclusion that over time resources tend to become more abundant, and hence cheaper, as people discover new and better ways to extract them. Moreover, he argued that as population increases, resources will also increase due to the effect of having more people competing and collaborating on resource discovery projects.
Simon was particularly irked by the claims of neo-Malthusians such as Paul Ehrlich, who asserted in 'Eco-Catastrophe', a paper given on the original Earth Day, that increasing population and concomitant increasing use of pesticides and fertiliser, combined with excessive harvesting of resources would cause total ecological collapse by the early 1980s. This obviously did not happen.
Today, as a result of technological progress, stimulated in part by population growth, a smaller percentage of the world's people are malnourished than at any other time this century. By 2020 there will probably be another several billion people on the planet and there will be fewer deaths from starvation. Furthermore, continuing economic growth will result in continuing improvement of the environment.
None of this will happen, however, if the world's environmentalists manage to stifle economic growth and technological development with silly regulations. Far better that the Earth Day celebrators take a minute to reflect on the fact that world is not on the verge of an environmental catastrophe. In fact, it is better off today than it has been in some time. Recognizing this, a group of Julian Simon's followers, including myself, have decided to rename April 22 'Resourceful Earth Day.'