QotD: Resource scarcity

We make ourselves better off, then, not by increasing the amount of resources on planet earth — that is, of course, fixed — but by rearranging resources we already have available so that they provide us with more of what we want. This process of improvement has been going on ever since the first members of our species walked the earth. We have moved from heavy earthenware pots to ultrathin plastics and lightweight aluminum cans. To cook our food we have shifted from wood-intensive campfires to clean, efficient natural gas. By using constantly improving recipes, humanity has avoided the Malthusian trap while at the same time making the world safer and more comfortable for an ever larger portion of the world’s population.

In fact, increasing, rather than diminishing, returns characterize many economic activities. For example, it may cost $150 million to develop the first vial of a new vaccine to prevent Lyme disease. Yet every vial after that is essentially free. The same is true for computer programs: it may cost Microsoft $500 million for the first copy of Windows 98, but each subsequent copy is merely the cost of the disk on which it is stored. Or in the case of telecommunications, laying a fiber optic network may cost billions of dollars, but once operational it can transmit millions of messages at virtually no added cost. And the low costs of each of these inventions make it possible for the people who buy them to be even more productive in their own activities — by avoiding illness, expediting word processing, and drastically increasing the tempo of information exchanges.

What modern Malthusians who fret about the depletion of resources miss is that it is not oil that people want; they want to cool and heat their homes. It is not copper telephone lines that people want; they want to communicate quickly and easily with friends, family and businesses. They do not want paper; they want a convenient and cheap way to store written information. In short, what is important is not the physical resource but the function to be performed; and for that, ideas are the crucial input.

Ronald Bailey, "The Law of Increasing Returns", Cato Institute, 2000-03-18