Ideas Have Consequences: energy, environment, and natural resources

“Ideas have consequences.” – Richard M. Weaver (1964)

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” – John Maynard Keynes (1936)

The policies of the present are the result of the ideas from the past. And that past was sometimes “a long time coming.” This is as true in energy, environment, and natural resources, as it is more broadly in philosophy, economics and politics.

Ideas tend to start with society’s elites, before these permeate the culture. The process tends to be purposely guided, rather than grown organically. These guides, more often than not, have been academic thinkers and scribblers, rather than activist doers and organisers.

Economic ideas, in particular, have been especially influential over the past few centuries. And that certainly has included policy influence in energy, environment, and natural resources. Nine crucial ideas, by economists from the left, center and right, follow next.

Ideas from the Left

ENERGY

“This gargantuan and growing appetite has become the point of departure for all discussions of the resource problem.  In face of this vast use, what is happening to our domestic reserves or ores, to our energy sources, to our renewable resources? … But what of the appetite itself? Surely this is the ultimate source of the problem.   If it continues its geometric course, will it not one day have to be restrained?” – John Kenneth Galbraith (1958)

Galbraith’s view, that Americans use too much energy, is increasingly the stated reason in the 21st century that is driving energy policy, even more so than anthropogenic climate change.

ENVIRONMENT

“Just as the investment of an increment of resources sometimes yields an indirect product, not taken account of by the investor, through its effect on the productive efficiency of other people’s resources, so also it sometimes yields an indirect product by affecting the amount of satisfaction which other people derive from the consumption of a given quantity of commodity. This form of indirect product may be either positive or negative. … In every industry, the desire for whose products is enhanced if they become less common, it is possible to conceive some uniform rate of tax, the levy of which on the industry would increase economic welfare; and in every industry the desire for whose products is enhanced if they become more common, it is possible to conceive some uniform rate of bounty, the imposition of which would produce a like effect.” – Arthur Pigou (1920)

Pigou’s theory of social costs and benefits, as well as his solution of imposing taxes and subsidies, has been the foundation for environmental economics and policy since the 1960s.

NATURAL RESOURCES

“Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. A slight acquaintance with numbers will shew the immensity of the first power in comparison of the second. … We should facilitate, instead of foolishly and vainly endeavouring to impede, the operations of nature in producing this mortality.” – Thomas Malthus (1798)

The thesis by Malthus, of human overpopulation, is the core belief of the environmental movement. Rarely is that even hinted at, along with the depopulation called for by Malthus.

Ideas from the Center

ENERGY

“It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth. As a rule, new modes of economy will lead to an increase of consumption[.] … Civilization…is the economy of power…and the more we render it efficient and economical, the more will our industry thrive, and our works of civilization grow.“ – William Stanley Jevons (1865)

This is called the Jevons Paradox i.e. greater energy efficiency leads to more not less energy use. He thought that a good thing, but not sustainable, as affordable energy would deplete.

ENVIRONMENT

“Analysis in terms of divergencies between private and social products concentrates attention on particular deficiencies in the system and tends to nourish the belief that any measure which will remove the deficiency is necessarily desirable. It diverts attention from those other changes in the system which are inevitably associated with the corrective measure, changes which may well produce more harm than the original deficiency.“ – Ronald Coase (1960)

This birthed the Coase Theorem i.e that private property rights, including pollution related ones, could be allocated, by say a court, so that social benefits exceeded social costs.

NATURAL RESOURCES

“Natural resources are made available by mother, or father, nature. These resources have value, so humans have an incentive to maintain them. … In natural resource economics we use the term rent to refer to the ‘in situ’ (in their natural location) value of a resource. And we use the term rent seeking to refer to the efforts that people make to gain property rights or control over valuable resources and thus to gain access to the rents these resources generate.“ – Barry Field (2024)

Field largely takes a cost benefit analysis view of natural resources, where private property and public interests need to be balanced, subject to public choice theory related dynamics.

Ideas from the Right

ENERGY

“[N]atural resources are one and the same with the supply of matter and energy that exists in the world and, indeed, in the universe. Technically, this supply may be described as finite, but for all practical purposes it is infinite. It does not constitute the slightest obstacle to economic activity—there is nothing we are prevented from doing because the earth (let alone the universe) is in danger of running out of some chemical element or other, or of energy. The problem of natural resources is strictly one of useability, accessibility, and economy.” – George Reisman (1990)

Reisman challenges the classic statement of the economic problem, i.e. infinite human wants versus finite natural resources especially energy, since the latter is infinite as well.

ENVIRONMENT

“The ‘social cost’ approach to environmental economics has led to the ‘dehumanization’ of issues related to the environment. … Costs are associated with ‘restoration to the environment’ not compensating victims. … Pollution is…not about harming the environment but about human conflict over the use of physical resources. … Humans cannot harm the environment. Instead, they can change the environment in such a way that it harms others who might be planning to use it for conflicting purposes.” – Roy Cordato (2004)

Cordato takes an Austrian School approach to environmental economics and policy that puts people and their property at the center of what pollution really is and how to best address it.

NATURAL RESOURCES

“Sound appraisal of the impact of additional people upon the ‘scarcity’ (cost) of a natural resource must take into account the feedback from increased demand to the discovery of new deposits, new ways of extracting the resource, and new substitutes for the resource. … And the more people there are, the more minds that are working to discover new sources and increase productivity[.]” – Julian Simon (1981)

Simon described energy as the “master resource” and people as the “ultimate resource.” He demonstrated that a pro population policy is pro energy, environment and natural resources.

Consequences of Ideas

“Ideas have consequences and bad ideas can have lethal consequences.” – George Weigel (2015)

Ideas from the left are the animating force behind Minnesota’s 21st century policies on energy, environment and natural resources. These include: Galbraith’s discouraging energy use; Pigou’s encouraging renewables growth; and Malthus’s favoring nature over humanity. The consequences include: higher prices; increased scarcity; and more pollution.

Better policies for Minnesotans in energy, environment and natural resources starts with better ideas. These include: Reisman’s encouraging energy growth; Cordato’s discouraging anti-human environmentalism; and Simon’s favoring more population over depopulation. The consequences include: enhanced affordability; greater abundance; and less pollution.

In conclusion, and to paraphrase center-left economist John Maynard Keynes:

“The difficulty lies, not in the new [right] ideas, but in escaping from the old [left] ones, which ramify, for those brought up as most of us have been, into every corner of our minds [and policies].” – John Maynard Keynes (1936)