I intend this post to be the first in a series of short blurbs explaining how a misunderstanding of economics leads to faulty reasoning. I don't know how long I shall continue the series, but hopefully it will become a regular feature, provided I can remain disciplined enough to keep it up.

Today I want to discuss depletion of natural resources. As my regular readers know, I love to meander around the internet taking in strange sites. And in my wanderings I came upon several sites arguing we are "overpopulated". By this they usually mean we have somehow exceeded the "carrying capacity", either of an individual region or the world as a whole. This is often defined in fuzzy terms, without much specificity, but most mean what one site explained with rare clarity. Basically, they believe that we are using up resources faster than they can be replenished.

That all sounds fine, except for one thing, prices.

If we were using up resources faster than they can be replenished, or if we were exhausting supplies, prices would rise. That is how economics works. If an item is becoming more scarce, the prices rise, as it takes more effort to find a replacement. However, outside of a brief spike in oil prices (unrelated to scarcity), we have seen no general rise in the price of goods. Which means, in practical terms, goods are no harder to produce and raw materials are no harder to find now than in the past.

Some will argue that this is a bad measure, either because prices are artificially low as we use up "old" stocks, or that businessmen are ignorant of the remaining natural resources, and so are pricing goods too low.

The first is absurd on its face. Whether we are using up old stock or not, prices are not based on purchase cost (despite FASB rules), but upon replacement cost. Businessmen do not price their goods on what they paid, but what they will have to pay to replace it. This is why prices rise instantly when there is a shortage, and why news broadcasts can become indignant about rising oil prices "while the tanks are still full." And because people wisely base prices on replacement cost, no amount of prior wealth would serve to reduce prices one iota, at least so long as a continual demand is expected.

The second sounds plausible to some, but that is mainly because people are inclined to think others are ignorant ("Cognitive Dissonance Part 2 ", "In A Nutshell "). In truth, it is unlikely that businesses would uniformly undervalue their existing stocks, and underestimate future difficulty in extracting goods. But, even if they did so, the market will ensure that at least the present price reflects the current difficulty of extracting raw materials. That being the case, even without incorporating future expectations, prices provide a good measure of current scarcity. And so, unless all businesses are pricing themselves into bankruptcy, current prices reflect current supply.

And that is why all these arguments for "conservation" are so foolish. We already have a perfect conservation tool, but the one tool the eco-hipsters will not allow to work. The free market. The free market ensures prices reflect current scarcity, rising as goods become more difficult to obtain. In that way, the free market ensures we will economize in our use of goods which become scarce, and will put money into finding substitutes, means of recycling and other methods to reduce sue. The free market alone will ensure that we will be good stewards, as if we aren't, we will be forced to bear the costs. Just look at the environmental record of the government run USSR (or its even more polluted former satellites)and the largely free market USA if you doubt the truth of that statement.

Oddly enough, the one solution which has show itself to work over and over, the free market, is the one mechanism being thwarted by environmentalists. And so, rather than adopt a self-adjusting system, which encourages sensible use and good stewardship of resources, they try to impose many, many layers of less efficient government regulation, requiring endless judgment calls and constant adjustment, all to produce results less satisfactory than the free market, while simultaneously impoverishing everyone by impeding business.

Then again, as I said before ("The Lie of Environmentalism", "Varieties of Environmentalists", "Anti-Man Intellectuals ") I doubt that environmentalism has much to do with improving the environment.

POSTSCRIPT

The following articles cover most of my writing on environmental topics (as well as several on the general misuse of numbers and bad science in general, even if not explicitly applied to environmentalism, as environmental arguments often rely on such misuse of numbers):

If They Were Serious
A Thought on Oil Reserves
The Lie of Environmentalism
Knowing Our Limits
Funding
The Ends Justify the Means II
Transfats?
Very Quick and Simple Logic
Statistical Artifacts
Varieties of Environmentalists
Chaos Theory and Athropogenic Global Warming
 A Thought on Nuclear Waste
Endangered Species
The World's Most Stupid Bureaucrat
Fire Up the SUV
A Brief Comment on Oil
G-d Save Us From Simple Solutions
Why I Doubt Peak Oil Predicitons
A New Fairy Tale
Some Global Warming Links
A Thought On Solar Energy
Several Convenient Untruths
Rejecting "Peak Oil"
Safe Nuclear Power
Organic Absurdities
A Question For Those Worried About Climate Change
Honest Environmentalists?
Passing Thought on Green Energy
Sampling Changes and Fictional Trends
Pet Peeve
Once Again, Confused by Our Own Data
Running an Economy on Compost, Saw Grass and Solar Cells
Twice in a Row
Historic Myopia
More About the Hockey Stick Graph
The Failure of Peer Review
The High Cost of Cap and Trade
Allergies
A Dearth of Common Sense
How to "Grow the Economy"
Subsidizing Irresponsibility and Poor Planning
Again Improving Science Misleads
The Perfect Model
How Green is Green Energy?
Debunking "Debunking Global Cooling"
More On Biodeisel
Interesting Evidence
Already Sick of Hearing "Pandemic"
Confirmation
Something to Bear in Mind
Interesting Science
Bad Science and Environmentalism
Still More Interesting Evidence
An Interesting Article
Upcoming Post
Mathematical Deception
Skeptics? Really? I Beg to Differ
Another Example
Anti-Man Intellectuals
A Question for Eco-Doomsayers
Best of the Web Imitates Me XIX
Yet Another Needless Scare
Utopianism and Disaster
Misusing Numbers
Insufficient Skepticism
Failure of Modeling?
There is a Word for That
Cost-Benefit Analysis and Environmentalism
A Thought on Electric Cars
The Wrong Way to Look at Issues
Flu Panic
Why Peak Oil is Laughable
Beware Alternate Explanations

Doubtless I missed one or two, but I will come back and edit this list as I discover my omissions.