“The world can, in effect, get along without natural resources”

As almost every societal movement, the sustainability movement has its personalized evils, its specific foes. One of them is Robert M. Solow, the famous creator of the growth model that supposedly is the source of all evils in this world. Moreover, a quote of his can often be encountered (including in the German Wikipedia article about him) that comes from a lecture he gave in 1974, where he said:

The world can, in effect, get along without natural resources, so exhaustion is just an event, not a catastrophe.

Well, for myself, too, Solow was one of the personalized evils. There once was an initiative called “Kick It Over!”, which I found very convincing, because it criticized mainstream economics as taught at economics departments all over the world. Among other things, the initiative provided one with print-ready posters and asked one to pin them somewhere at one’s university. Among those posters (I cannot find them on the internet any more, unfortunately), one in particular attracted my attention, on which pictures of three laureates of the Sveriges Riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne (also colloquially called the Nobel Prize in Economics): Milton Friedman, Friedrich Hayek and, yes, Robert Solow were depicted. The poster called upon the Prize Committee to take away the awards from those three economists. In the case of Solow, who had been awarded in 1987 “for his contributions to the theory of economic growth”, the call was rationalized by blaming his model, which omitted natural capital from the production function, for causing all the environmental problems we have to deal with today. Whether this particular model is to be blamed, may be debatable, but this is not my topic today.

Rather, I would like to focus on the widely quoted dismissal of the importance of natural capital that is allegedly hidden behind the statement that “The world can, in effect, get along without natural resources, so exhaustion is just an event, not a catastrophe.” I have become slightly sceptical of Solow’s demonization when I started encountering his name in debates on the economics of climate change (he was among the supporters of the controversial Stern Review) and the economic valuation of ecosystems (he was one of the authors of the influential “Blue Ribbon panel” report to the NOAA on contingent valuation). Recently, I decided to finally find the paper from which the quote originates and check whether it was not taken out of context. As you might already suspect–otherwise I wouldn’t be writing this post–it was.

The paper where the quote comes from is titled The Economics of Resources or the Resources of Economics. It is the script of a lecture given by Solow during at the 86th Annual Meeting of the American Economic Association and was published in 1974 in the prestigious American Economic Review. The paper starts by mentioning the Limits to Growth report to the Club of Rome, but it is mainly concerned with a classic of resource economics, namely The Economics of Exhaustible Resources by Harold Hotelling from 1931. It is quite interesting a paper, in which Solow makes many statements that would likely be embraced by most people sceptical of the infinite growth idea: he mentions thermodynamic limits to recycling (likely inspired by Nicholas Georgescu-Roegen’s seminal book The Entropy Law and the Economic Process, published in 1971); he reflects on the problem of the difference between the social and the private discount rates (which has been a crucial point in the debates of the Stern Review some 30 years later); mentions his own research on the modelling of sustainable consumption paths; and appears to be aware of the problem of Bertrand Russell’s turkey. Indeed, the paper might be interesting for anyone dealing with resource and/or environmental economics, but also for non-economists (there are no abstract mathematical formulas in it). Of course, some ideas invoked by Solow appear somewhat naive–for example his hope for nuclear fusion to become applicable soon or his general trust in the idea of backstop technology–but you have to take into account that the text is from 1974. Hardly anyone then were aware of of the huge looming problems of climate change or massive biodiversity loss, for instance.

But let us come back to the often-demonized quote. Yes, it appears on page 11 in exactly the same form as I quoted it above. But–and this is a large “but”–the context is what is missing. Let me quote the critical passage at length:

As you would expect, the degree of substitutability is also a key factor. If it is easy to substitute other factors for natural resources, then there is in principle no “problem”. The world can, in effect, get along without natural resources, so exhaustion is just an event, not a catastrophe. […] If, on the other hand, real output per unit of resources is effectively bounded–cannot exceed some upper limit of productivity which is in turn not too far from where we are now–then catastrophe is unavoidable. In-between there is a wide range of cases in which the problem is real, interesting, and not foreclosed. Fortunately, what little evidence there is suggests that there is quite a lot of substitutability between exhaustible resources and renewable or reproducible resources, though it is an empirical question that could absorb a lot of more work then it has so far.

I guess, it is obvious what my point is. While the last sentence indicates that Solow was quite technology-optimistic at that time, he certainly did not make the assertion that we don’t need natural resources at all! It is beyond the scope of this post (and possibly impossible) to trace back the quotation and find out who made such demagogic use of Solow’s words first. But the message should be clear–the demonization of Robert Solow by many, many growth critics has been based on a false premise. And a second, more trivial but perhaps more important lesson is: double-checking of sources is crucial. Tabloid newspapers all around the world prove every day that you can change the meaning of one’s words entirely just by taking them out of context.

Literature:

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8 thoughts on ““The world can, in effect, get along without natural resources”

  1. Nice post. It was probably unavoidable to turn out this way bc no one and especially not Solow would make that dumb a remark (unless to provoke us into reading a much more sophisticated argumentation, which would have left not very much of the original statement). This should remind us that quite often when our first impression tells us “omg is this guy/girl stupid” that probably s/he isn’t but rather we are mistaken in understanding the real point.*

    By the way, this reminds me of the famous “homo homini lupus” quote by Hobbes – which is a similar fragment actually reading

    “To speak impartially, both sayings are very true; That Man to Man is a kind of God; and that Man to Man is an errant Wolfe. The first is true, if we compare Citizens amongst themselves; and the second, if we compare Cities”.

    *: this may not hold true for certain parts of online communication

    • I do not think this particular example is so much about interests or agendas. I rather suspect that one day someone quoted Solow without completely misrepresenting his stance, which started a snowball effect of other people interpreting the Solow quote on the basis of secondary literature, without looking into the original source. Indeed, it may well be that the “someone” who started the process was Herman Daly–I found an article by him being a critique of Solow’s and Stiglitz’s approach to growth (reprinted in Ecological Economics and the Ecology of Economics, which seems to be an allusion to Solow’s paper), in which he used that quote in a form that might have been misinterpreted by others.

      However, it should nonetheless teach us not to accept second-hand presentations of arguments on controversial issues.

    • Thank you. The sad thing is that you cannot hunt every quote back–there are too many and tracking their sources is often too bothersome. And, in the end, as someone once wrote (I believe it was Nassim Nicholas Taleb in his ‘The Black Swan’, but I’m not sure as I could not find the quote): if you want to have a fitting quotation from a person considered an intellectual authority, you’ll find one somewhere (if everyone else fails you, Wittgenstein will do). It’s somehow natural to misquote because mostly you first have a position and then you start looking for a quote supporting it.

      • Well said, and I love the Taleb quote (I might have to check that…) But at least the internet makes sourcing original quotes easier for us than it can ever have been before.

  2. To be fair, his writing is a little confused (maybe for a speech effect); he moves from substitution of natural resources by non-natural ones, to substitution of non-renewable natural resources by renewable ones, which is a very different question: specifically, is solar -wind energy a complete substitute to fossil energy sources?

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