From: kevin@nuchat.sccsi.com (Kevin Brown)
Subject: Re: Running out of oil  ->THIS DECADE<-
Organization: I can't see any in the immediate vicinity...
Date: Sun, 16 Aug 1992 17:45:27 GMT

In article <1992Aug15.150240.14375@usenet.ins.cwru.edu> bl713@cleveland.Freenet.Edu (Lev Tarasov) writes:
>In all this discussion, I have yet to see a reference to economic 
>distortions that arise from not including all the "external 
>costs" in the pricing of our resources. 

Right.  This is, of course, because such things seem to be difficult to
quantify in an objective fashion (or, to put it another way, nobody seems
to agree on the assumptions one might use to make such an assessment).

>If the costs arising 
>from climate change (due to carbon loading) were included 
>(difficult as this may be to determine), 

How can you include a cost that you can't determine?

>the price of oil would
>probably already not be competitive with some of the potential
>alternative sustainable sources. 

This depends.

>Our energy situation currently approaches that of a farmer who
>instead of "investing" his/her excess capital in making the 
>farm more sustainable ( planting windbreaks, buying conservation
>tillage equipment, developing a good crop rotation,...), wastes
>all the profits on personal consumption. Once the soil is depleted,
>the farmer then figures out that it would be wise to proceed in
>a more sustainable matter. However, now that the topsoil is gone,
>it is too late and too expensive to do so and the farmer goes
>bankrupt. What lead time is needed to convert to a sustainable
>energy economy? I have seen estimates of 20 to 100 years. When
>the price of oil shoots up to 40 or 80 dollars a barrel, will
>there still be time to convert without major social dislocations?
>The classical laws of supply and demand were deemed to yield
>the best market allocations based on the following assumptions:
>1. open access to quality information
>2. all costs included
>3. no monopolies
>4. short-term R and D. In Adam Smith's time, there was no concept
>of the long-term, capital intensive developments that we have now.
>
>Questions:
>1. Do we have common quality information about: remaining
>reserves, environmental costs, alternatives,...

That I've seen, anyway, we seem to have good information about the first
and last items, and sparse information about the second item.

>2. How does the DOE's fixation on nuclear fission and fusion
>relate to a free market in the development of alternatives.

This can actually be generalized to "how does the government affect the
development of alternatives".

The thing about the free market (and Mike Smith can correct me on this if
he wishes :-) is that one can invest for whatever time-frame one likes.
If you want to invest in something as a long-term thing, you can.  You
obviously won't make a whole lot of money on it immediately, but the
potential for making some serious money on it in the long term is there
(and this is what you're banking on).

A medium to large corporation, or a sufficiently wealthy individual,
could easily invest some money into development of alternatives.  Actually,
many alternatives already exist as off-the-shelf technology.  Either way,
a sufficiently wealthy individual could invest in such things as a long-
term thing.

That you don't see anyone doing this should tell you something about how
much need for alternative energy sources (in particular, "renewables") is
anticipated.

>3. Do we have the right to use up most of the accessible
>reserves of fossil resources, and leave little for our
>grandchildren?

Assume that the answer to this is "no".

Via induction, it immediately follows that, after some point, *nobody*
has the "right" to use up the remaining reserves of fossil resources.
The end result, of course, is that those reserves will remain unexploited
until some generation decides not to play by these rules, i.e. some
generation decides that it *does* have the right to use up those reserves.
Conclusion: nobody who subscribes to the premise will ever use the
resources.

Now assume that the answer to this is "yes".

The end result is that the remaining reserves will be used up and nobody
will use the resources after that happens (due to physical impossibility).

These are, in essence, identical conclusions: in both cases, nobody gets
to use the resources, either after they're gone or not.

Since the conclusions are essentially identical, the premise is irrelevent.

Thus, IT DOESN'T MATTER whether or not we have the "right" to use up the
reserves.  We may as well do so.

Of course, reserving the, er, reserves, for a specific purpose is a
different matter altogether.

>4. Are fossil fuels just another commodity, or a basic
>natural capital that we are wasting more than reinvesting?

Well, look at it this way: what is "capital"?  A reusable resource, right?
Take land, for example.  You can use it for lots of things, and it tends
to remain there.  The reason it's valuable at all is that you *can* use it
for things.

Now, how can you make use of a fossil fuel without using it up?  Answer:
you can't.

That makes it something other than capital.

Again, corrections welcome.



-- 
				Kevin Brown

			    kevin@nuchat.sccsi.com
			    kevin@taronga.taronga.com