Environmental Conservation, Time Preference, and The Ultimate Resource

Though the concept of Time Preference has its origins  and the bulk of its applications in issues to do with economics and finance, time preference is a phenomenon which can be used to describe all human actions and interactions and a lot of social phenomena we see going on around us ranging from the action of individuals to that of whole societies. Defined simply, time preference is the ratio of consumption to savings or the ratio of present to future valuations. For example, I have a bundle of 7 apples and I would like to eat 5 right now and save 2 for consumption at another time.  In that case I have a high time preference because I place more value on consuming now than consuming at some point in the future  and saving during that interlude. But if I decide to change that ratio to 4 apples now and 3 applies in future, my time preference drops and begins moving in a direction which places more value on consumption in the future and saving in the present.The lower my time preference, the more value I place on a good or goods being forwarded for future consumption and the more I accumulate goods in the present, which allow me to survive during the interlude between the present and future set time.

For every resource (e.g. oil, coal, natural gas, or forestry resources) which society consumes, it has its time preference and rate at which it consumes such resources. Every now and then alarms bells are rang about the dangers of the rate at which certain resources are being consumed and the dangers of such deposits running out. Thus, the government intervenes to alter the natural rate of time preference which comes about through free interplay. Such measures assume a couple of things: it assumes the individuals are “shortsighted” in their use of scarce resources and their preferences have to be overridden by a more“farsighted” time preference of resource consumption, it also assumes that future generations would use resources in a less efficient manner and privileges must be conferred on future generations, and it fundamentally sees the world as static and unchanging.

Thought no entrepreneur or businessman can know with all certainty future or even current trends, businessmen and entrepreneurs are in a better position to forecast this than government bureaucrats or planners for a number of reasons. People in the business community work within the setting of the market economy in which market generated price signals and the action and inaction’s of consumers guide their actions and allow them to best gauge how to put scarce resources to use. Furthermore, business people work within a profit/loss environment in which their goal is to avoid losses as much as possible by putting scarce resources to their best use in the most efficient manner possible so that the future value of the resources which they control increases rather than decreases. For all resources which might be under private control, the goal is to increase its future capital value and entrepreneurs will be guided as much as possible to use such resources in a way which makes sure that their future value always increases. But many times, when resources are under public control or privately controlled resources are constrained in their usage by  rules aimed at supposedly decreasing their usage due to some harm, many of these incentives are removed.

Through time, successive generations are always better off and wealthier than previous ones. Even in some of the less well of nations of the world, people who have been long around enough to see how things have changed through the decades say that on the net such societies are better off in one form or the other(even if my a small and marginal amount!). With increased levels of wealth comes better standards of living and better knowledge on how to use the worlds scarce resources and extract them. Constantly, research is always going on in regards to how to better extract resources. For example, take the shale oil revolution in the United States in the past decade or so, it came from people working within a profit/loss environment in which they were looking for greater efficiency gains by getting at shale rock which people once wrote off as impossible to extract from. But in a system in which bans are put on further extraction of such resources or such resources are brought under public control, in many instance such incentives don’t exist and such resources are turned into purely consumption goods. As the late economist Julian Simon argued in The Ultimate Resource, people are the ultimate resource. As Simon showed in his book, contrary to previous scares about the ability of the world to sustain increasing numbers and scares about natural resources and minerals being depleted, humans have proven to be the ultimate resource as they have shown an unparalleled ability to adapt and use such resources even better. Using basic econ 101, argued that if resources are truly being depleted, it means their supply is dropping and not keeping up with demand which would lead to increasing prices for such resources. But as Simon showed, adjusted for inflation, the price of many basic minerals such as copper and zinc dropped over time.

Fundamentally, many doomsday warnings about certain resources being totally depleted stem from seeing the world in static terms rather than dynamic terms. At any one point or period in time, the world has a certain pool of technical ability and know how along with knowledge on what resources exist. But as time goes by the state of things change; certain resources might be used up while new ones are discovered, even new and innovative methods for reaching previously unreachable resources might be deviced, new and better substitutes for certain resources might be discovered which makes the use of certain resources not worthwhile, and previously worthless matter might become highly prized resources. For example, take a look at the rise of crude oil. Crude oil was once a nuisance which farmers always had to deal with in their farms and no saw any value in the black viscous substance but towards the end of the 19th century that all began changing with the rise of the petrochemical industry which would power modern industrial society and nations would go to wards and conflict over. At the same time, whale fat, which was the main fuel for heating and lighting before crude oil began falling out of wide spread use which helped in reducing the hunting of whale which at the time had sent whales into near extinction.

At the end of the day, humans are the ultimate resource and are able to control events which unfold around them and adapt as things change. As has been argued, rather than entrepreneurs and businessmen being unscrupulous and not being farsighted the use of resources under the exclusive control, they have have every incentive not to negligently misuse resources under their control because if they do so it looses its future value. But more fundamentally, with time society always gets wealthier and is better off. As society gets better off, society has better knowledge and technical know how on how to use and extract resources. If we truly want to preserve the worlds resources and leave a better environment for prosperity, discussions needed to focus more on the interplay better private control of the extraction and processing of resources and how over time knowledge on how to better extract and conserve these resources usually increases.