Are we running out of resources?

“In his 1968 book The Population Bomb, Stanford University biologist Paul Erlich warned that overpopulation and overconsumption would result in the exhaustion of resources and global catastrophe.  To understand whether that is likely to happen it is important to recognize that resources are not finite like a slice of pizza is finite.  That’s because the totality of our resources is neither known nor fixed.

In a competitive economy, humanity’s knowledge about the value and availability of something tends to be reflected in its price.  If prices fall, resources can be deemed to have become more abundant relative to demand.  Higher prices also create incentives for innovation, including discoveries of new deposits, greater efficiency of use, and the development of substitutes.

Recently we looked at prices for 50 foundational commodities covering energy, food, materials, and metals.  The data were collected by the World Bank and the International Monetary Fund between 1980 and 2017.  The paper found that the nominal prices of 9 commodities fell, whereas the nominal prices of 41 commodities increased. The average price of 50 commodities increased 62.7 percent.  Adjusted for inflation, however, 43 of 50 commodities declined in price.  On average the real price of commodities fell by 36.3%.

Between 1980 and 2017, the inflation-adjusted global hourly income grew by 80.1%.  Therefore for the amount of work a person had to do to buy commodities became 64.7 percent less.  Put differently, commodities that 60 minutes of work to buy in 1980 took only 21 minutes of work to buy in 2017.  All in all, resources were not being depleted in the way that Erlich feared they would – as witnessed by the fact that humanity has not yet run out of a single supposedly non-renewable resource.  In fact, resources tend to become more abundant over time relative to the demand for them.”