People, the Ultimate Resource

oil rigsQuite often I enjoy the pleasure of shocking people with my contrarian viewpoints. For some people, the shock is replaced with the pleasure of understanding something that goes against plain common sense. When that happens, I am very gratified but when it doesn’t, I feel sad.

One of the many contrarian ideas I have is that there are no “natural” resources and that all resources are creations of the human mind. As economist and professor of business administration Julian Simon (1932 – 1998) argued that “the most important of all resources is human beings.” (The Ultimate Resource 2. Page 581). The more humans, he insisted, means more abundance and less scarcity.

We are all concerned about facing scarcity. Not all of us face the same scarcity, though. The good news is that scarcity is going down. To understand why that is so requires we define scarcity in some broad sense. We intuitively understand that prices have something to do with scarcity.

If the price of something is going up, it means that (1) the quantity available is decreasing, or (2) the quantity demanded is increasing, or (3) a combination of both. If the price is trending up, it is likely that scarcity is increasing, and vice versa. The price trend is a proxy measure of scarcity. If the trend is falling prices, then we conclude that scarcity is decreasing. Continue reading