Peak Everything, Backstop Technology and Economic Growth

And interesting, though also frightening characteristic of today’s world is that it seems to be peaking all the time. Peak Oil, Peak Metals, Peak Soil, Peak Uranium, Peak Rare Earths. Peak Everything, to put it bluntly. Some of these slogans may be exaggerated, at least if taken literally. On the other hand, given high and rising demand for oil, coal, uranium, rare earths, metals, agricultural land and other essential resources – demand that is going to be increasing for decades to come, as China, India and especially Africa will become both richer and more populous -, there is a strong case for taking seriously concerns regarding the diminishing resource base, even if there is still much left.

Peak Everything?

Furthermore, even if we are not running out of oil, metals and soil, it is becoming ever “dirtier” to get them. Tar sands, land grabbing, China’s restrictions of rare earths exports (and their extremely dirty extraction), shale gas fracking… Resources are becoming more expensive in terms of their social and, at least in some cases, also market costs, so the fact that some of them may not literally be peaking should not lull us.

Still, all too often those who dare to point out these resource-related problems are being called doom-sayers, Luddites or Neo-Malthusians and accused of underestimating human ingenuity, the potential of technological progress and economic growth. The simpler version of this argument goes like “We have managed to overcome bottlenecks in the past, thanks to new technologies, so we are going to accomplish this in the future, too.” This “point of view” is a very naive extrapolation of past trends and goes by the name of Cornucopianism. Bertrand Russell once told a story about a well-fed turkey who extrapolated the trend of being well-treated by its owner, until Thanksgiving Day came and the turkey’s life ended abruptly and, above all, unexpectedly. Every statistician, especially those knowledgeable of chaos theory, knows that the extrapolation of a trend is dangerous if it has no theoretical underpinning. There is no logical reason why technological progress should always “provide” and “save” us. It seems to have done just that in the past, but this may well have been just luck. And luck has the unpleasant habit of failing us when we most need it.

A more sophisticated, but equally naive standpoint is represented by many economists. When commenting on problems such as Peak Everything, they all too often invoke the concept of “backstop technology”. The idea behind it is simple, as most influential economic ideas are (which may be the reason why so many of them are wrong): when a resource becomes more scarce, its extraction cost increases (since the most “pure” and easy-to-extract reserves are not available any more), which creates the incentive for economic actors to seek and develop alternative technologies – backstop technologies -, which either lower the cost of extraction or substitute the expensive resource. All we need for this to happen are competitive, undistorted markets. No government strategies, no cap-and-trade schemes, no public investments in R&D are needed – just the market’s invisible hand. But there are at least three severe flaws in the concept of backstop technology.

First, even in theory it cannot work if the rising costs of resource extraction are not (fully) reflected in prices – i.e., if they have been externalized. The environmental cost of tar sand exploitation, of fracking, of the extraction of rare earths, or the social cost of land grabbing are vast and largely unreflected in market prices. Therefore, even if there are some signals that a backstop technology should be developed, they are far weaker than they should be. Even more – the backstop technologies themselves may have high external costs, even though they mostly seem to be a step forward when looked upon shallowly. Consider, e.g., the cost of increased need for land that is the result of replacing fossil energy with renewables – land we need for other purposes like feeding the growing world population. If these externalities could, however, be internalized by means of environmental taxation for instance, the concept of backstop technology would still work in theory.

Meanwhile, the second flaw is that the idea of backstop technology is cornucopian. It reflects blind faith in human ingenuity. Even if the market does send the right signals, some people have to notice them and respond to them. Historically, someone mostly did – but, again, there is no logical reason to believe that this will always happen. We are not God, our ingenuity has limits. Especially when it has to work under time pressure.

The last reason why I believe backstop technology is nothing more than a naive concept which should be abandoned it the fact that we never were so dependent on the resources we are in danger of losing today. Consider soil – there is only a limited land area on Earth that cannot be “stretched” so as to absorb ever more agriculture, agrofuel production, windmills, hydropower plants, settlements, roads etc. Unless the backstop technology is going to enable us to fly to some other habitable planets, we have a large problem here. Or consider petroleum – other than food, water and oxygen, there is nothing else there we were dependent on so deeply. Fuel, pharmaceuticals, materials, packaging, cosmetics, roads, agriculture… Everywhere, there is oil involved. There is a need for a whole number of backstop technologies here. Or consider rare earths – in our increasingly digitalized and renewable-energy run world, it is hard to imagine how we would function without all the devices needing rare earth elements. How many far-reaching backstop technologies human ingenuity can provide?

What I have written here has far-reaching consequences for economic growth. As I pointed out recently, the possibility to decouple growth from resource use is a myth. So, more growth means more resource needs. But then we may soon run out of some of the most essential of them, as emphasized in today’s post. And if decoupling is not feasible and continued un-decoupled growth is clearly not sustainable, the logical consequence is that we have to stop growing or even de-grow. We have to learn and appreciate sufficiency. We have to face the reality that some of the things and practices we are used to are not sustainable and should thus be limited – for example, it is terrible wastage to burn such a precious resource as petroleum is in our cars’ engines. Let us not be turkeys, but intelligent humans who are able to foresee the consequences of our actions.

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One thought on “Peak Everything, Backstop Technology and Economic Growth

  1. Peak Oil derives from the Hubbert peak theory , which theorizes that production of any finite resource over time will have roughly inverse curves before and after the peak of the resource’s production ( creating an approximately bell shaped curve ). Hubbert’s theory is used to predict when a resource will reach its peak of production by studying past resource discovery and production trends. Peak Oil advocates often show only crude oil production which may have set a global peak in 2005.

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