I recently blogged on one of the most durable of myths surrounding resource depletion. It can be encapsulated in the rhetorical question: “Didn’t the Club of Rome predict back in the 1970s that we would already have run out of oil?”
Being a rhetorical question, the speaker is using the question for effect—safe in the knowledge that the audience knows the answer is “yes”. Except, of course, the answer is “no”, the Club of Rome never said that. I have posted the relevant pages from “The Limits to Growth: A Report for Club of Rome’s Project on the Predicament of Mankind” showing what was actually said back in 1972 here. Better still, read the original book which can be bought here.
Nonetheless, the Club of Rome is still a source of mild ridicule. So then imagine my surprise when I discovered the most unlikely supporter of the Club of Rome’s “Limits to Growth” report: the U.K. Institute and Faculty of Actuaries (IFA). Actuaries are professionals who specialise in the financial impacts of risk and uncertainty. The professional exams required to join the institute have a fearsome reputation with respect to their difficulty. Further, my image of an actuary is of a stolid quant who would dismiss the idea of resource depletion out of hand.
However, in a report entitled “Resource Constraints: Sharing a Finite World“, we see this statement:
The Limits to Growth report attracted significant controversy and rejection of its scenarios, however the data available to the present day agrees worryingly well with the projections, as figure 1 below illustrates.
And this chart (click for larger image):
At the heart of economics is the idea of scarcity—or rather scarcity in the face of infinite wants. Yet scarcity is an issue that touches upon us all, and thus draws the interest of different scientific disciplines. So if we take the idea of scarce oil (let’s call it Peak Oil), we should not be surprised that chemists, physicists, engineers and geologists would want to take a view.
Nonetheless, many economists appear to believe that they have a unique and superior understanding of how scarcity evolves through time (using the tools of supply, demand and price); and they often also behave as if no non-economist could ever hope to gain such insights. As such, we may criticize them for being arrogant—but not as necessarily wrong (and at this point I have to declare that I am an economist by training). But wait a minute, if the arguments of mainstream economists are so evidently correct, why do many of them appear to have a pathological need to misconstrue the arguments of their opponents?
Probably the most enduring urban legend (or urban myth if you prefer the term) of them all in the study of resources is the common interpretation of The Limits to Growth report to the Club of Rome published in 1972. Surely, everyone knows that the report’s forecast of resource exhaustion by the year 2000 turned out to be nothing but a huge joke. And if we don’t know this directly ourselves (having not read through the report because frankly who has the time, and where would we find a copy anyway these days), we know because high profile journalists and media pundits have told us of the report’s spectacular failure on TV, in newspapers or over the internet (or someone in a pub or bar said that is what the report said). Continue reading