Wednesday, January 2, 2008

A Misnomer About Resources

What drives an economy? Is it technology? Is it government? Many say resources. Many in China, for example, view their over-population as a drain on the economy, inspiring the one-child policy. Consider also the Simon-Ehrlich wager. Here, Dr. Ehrlich's work, "The population bomb", predicted a catastrophe of resource limitation because of population explosion. However, he was proved wrong in the wager by Dr. Simon who showed the prices of selected resources decreasing instead of increasing.

It is not technology. It is not government. It is not resources that drive the economy. People drive the economy; and not just one or few. The late Dr. Julius Simon in his work, "Ultimate Resource", argues this. Raw resources such as oil, copper, paper, etc. are never destroyed; they are transformed, albeit into unusable forms. However, humans are innovative creatures, if owning their own resources, are able to entrepreneur to discover new uses for their economy.

What are its implications? Many view the goal of economics as the distribution of scarce resources and hence adopt a view toward its equal distribution. Economics is rather the inspiration of many toward the utilization of existing inputs of production toward the creation of new value.

(This is inspired by an unpublished lecture by Professor Howard Baetjer)

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