What most of these doomsday scenarios have gotten wrong is the fundamental idea of economics: people respond to incentives. If the price of a good goes up, people demand less of it, the companies that make it figure out how to make more of it, and everyone tries to figure out how to produce substitutes for it. Add to that the march of technological innovation (like the green revolution, birth control, etc.). The end result: markets figure out how to deal with problems of supply and demand.Which is exactly the situation with oil right now. I don'tMy sister loves to point out that economists sometimes lose sight of the fact that their fundamental ideas are not as strongly tied to reality as they'd like to believe. "Slow and gradual" is a matter of comparison. If demand is growing much, much faster than supply, then change to society is not really slow. Previously Saurabh--another Rhinocrat--blogged about a documentary Heinberg was in:
know much about world oil reserves. I'm not even necessarily arguing with their facts about how much the output from existing oil fields is going to decline, or that world demand for oil is increasing. But these changes in supply and demand are slow and gradual -- a few percent each year. (emphases mine.)
I asked why we wouldn't expect the same sort of thing we saw in 1973 to happen again - economic contraction, extreme conservation and a resulting drop in consumption. Of course, this time the drop in consumption comes first, but the dependence should be the same. The film doesn't have a satisfactory answer to this, and I think in general this is why Heinberg and hisWhat Heinberg the documentary-star didn't do such a good job of answering Heinberg the patient lecturer better addressed. Certain kinds of demand--demands which are not substitutable and based on slow-moving technology--are sticky. We don't just burn fuel, we burn a particular few kinds of fuel, in particularly important ways. My friendly neighborhood scientists and engineers tell me that the things like biodiesel and tar oil sands of Canada might more than do the trick. Heinberg presented some numbers on why those won't come online fast enough, but I'm willing to accept that peak oil might not be a problem soon after I've seen all the evidence, but I'm not willing to accept that the reason it can't possibly be a problem is that the market will magically take care of everything. It would be a shame to have to wait for a second Keynes to discover that demand and usage is as sticky as prices were during the great depression. The question is how big the spill, and that's a question we're going to have to ask as much of geophysicists, petroleum-engineers, and operations scientists as of economists.
ilk have such a hard time being taken seriously. Okay, oil prices will go up. The economy will take a spill. Does it REALLY mean the end of life as we know it?
Spring 2006: Guest Bloggers!
Rishi | Scott | Emily
Echan | Robert | ToastyKen