Robert Bradley: There Are No “Natural Resources”

Yesterday’s excerpt from Mark Mills and Peter Huber’s book The Bottomless Well showed how people consume energy to discover and create more energy through technological advances.  Today’s excerpt from Robert Bradley’s 2009 book Capitalism at Work: Business, Government, and Energy makes a similar point, that there are no such thing as “natural” resources.  As he writes, “Resources without man are not resources.”

His name is not found in economics textbooks or histories of economic thought. Where it does appear, his Germanic surname is often misspelled. His contribution is virtually unknown in the world’s vast mineral-resource industries today. Government policies owe little or nothing to him. Yet Erich Zimmermann (1888–1961) developed a new theory to explain why fixity and depletion were the wrong way to view minerals in an economic and business sense.

Zimmermann’s 1933 World Resources and Industries began a line of analysis that would explain a paradox of economic life—the growth of supposedly “depletable” supply, whether measured as current production or known reserves. …. Economists from Jevons forward focused on a conception of known resource quantities that, by definition, depleted as they were mined and consumed. Future production costs would rise as mining progressed from superior to inferior deposits. Resource prices were destined to increase in the face of continuing demand and, certainly, demand growth. The increasing scarcity of mineral resources might be gradual or rapid, but the direction was not in doubt, even allowing for improved exploration and extraction technology.

Zimmermann rejected this outside-in view that saw resources as a knowable, fixed quantity. Such a perspective was for the natural sciences, not economics. Instead, he started from the inside out: “the appraising mind of the economic decision-maker.” Resources, defined as “the environment in the service of man,” exist only from “human wants and abilities.” Resources without man are not resources. The interaction between man and environment is central.

Resources to Zimmermann are not fixed, permanent things but what technology creates for want satisfaction at any moment in time. Coal and copper were not resources once and may not be resources at some future time. Resources come in and out of existence, part of what economist Joseph Schumpeter would call creative destruction. “Creating the better,” Zimmermann stated, “we must often destroy the good.” Different resources, Zimmermann continued, are more than variety; they are potential substitutes. Substitution grows from the cumulative nature of scientific discovery where “each invention gives rise to numerous others.” This insight would be seized by later thinkers to bring Zimmermann’s functional theory of resources to a grand conclusion—recognition of the vast potential of man to overcome, even overwhelm, diminishing returns and the “fixity” of resources….

Physical to functional; objective to subjective; absolute to relative; static to dynamic—Zimmermann presented a real world theory to help intellectuals, industrialists, and policymakers solve the paradox of nondepleting depletable resources.