The Dogma of Sustainable Resources

Everyday we hear political geniuses in Washington, D.C., proclaim that the government must promote sustainable resource allocation. Evidently, they fear that we are going to run out of resources like coal and oil in the future, so we must prepare now to stop this inevitable disaster. Most depressing, however, is that Republicans are often the great sponsors of these subsidized energy programs, led by the irrational notion that government rationing is prudent or necessary.

Economics is the study of scarce resources with alternative uses. The relative supply and demand of each of these resources determines the price. As resources become more scarce, prices increase, causing individuals to self-ration without any fiat by the government. This simple fact is misunderstood, or even outright ignored, by the elite politicians who try to scare the public.

No government fiat caused people to recognize that whale oil was getting more scarce, causing people to move to Kerosene, or from Kerosene to crude or from crude to gasoline. Prices did that. When one resource became more scarce, it signaled the market to correct itself in the development of newer resources that were relatively less expensive and more efficient. Imagine that.

The insanity of the government choosing “sustainable” resources is that it forces the public to utilize more costly and less efficient energy. If the government-preferred resources, like wind, solar and biofuel were cheaper and more efficient than oil, nothing could stop the public from using them. In fact, if we really were running out of oil, the price of oil would be so high that people would start to move naturally to wind and solar, or whatever new technology arrived on the scene.

But, forcing people prematurely to move to certain resources by fiat does nothing other than spread the high costs to consumers, hurting the poor. It is amazing that this basic fact is absent from these absurd discussions about energy planning. If we just let the free market work, we would not need to speculate as to when we are going to run out of oil; prices will simply let us know when it is time to switch to energy that is cheaper.

However, one also needs to consider that political elections are rarely won by telling the public that the problem will fix itself.

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