Coyote Blog

From hedge fund manager Reagan Silber, via South Bend Seven:

If you are long oil, you are short ingenuity.

My post on the 19th century Peak Whale crisis is here.

In case you weren't sure what progressives were after:

The outgoing leader of Greenpeace has issued a call for the suppression of economic growth in the U.S. and Western nations. Under questioning by BBC reporter Stephen Sackur on the August 5, 2009 "Hardtalk" program, Gerd Leipold, the retiring leader of Greenpeace, said "the lifestyle of the rich in the world is not a sustainable model.

Excerpt from NotEvilJustWrong.com: "Leipold told the BBC that there is an urgent need for the suppression of economic growth in the United States and around the world. He said annual growth rates of 3 percent to 8 percent cannot continue without serious consequences for the climate."

"We will definitely have to move to a different concept of growth. ... The lifestyle of the rich in the world is not a sustainable model," Leipold told the BBC.

"If you take the lifestyle, its cost on the environment, and you multiply it with the billions of people and an increasing world population, you come up with numbers which are truly scary," Leipold explained.

Left unexplained by Leipold is how environmental conditions in the US have improved substantially over the last 100 years, not just coincident with but because of economic growth and growing wealth.   Our country looked like China 100 years ago, but growing wealth gave us the ability not only to produce, but to produce much more cleanly.   On virtually every metric you can name, the US is cleaner than it was even 30 years ago.  On many key metrics, like water quality and sulfur dioxide production, we are cleaner even than Europe and certainly cleaner than most Third World nations.

By the way, if you really want to tick someone off at Greenpeace, you should observe that the person most responsible for saving the whales was not anyone at Greenpeace, but was John D. Rockefeller.  Greenpeace may have saved a few by jumping their boat in front of some Japanese or Russian harpoons, but Rockefeller made whaling unprofitable.

Which brings us full circle to the "growth killing the planet" issue.  I made fun of this static view of man and technology here when  I wrote a hypothetical 1870 post on the Peak Whale Theory

As the US Population reaches toward the astronomical total of 40 million persons, we are reaching the limits of the number of people this earth can support.    If one were to extrapolate current population growth rates, this country in a hundred years could have over 250 million people in it!  Now of course, that figure is impossible - the farmland of this country couldn't possibly support even half this number.  But it is interesting to consider the environmental consequences.

Take the issue of transportation.  Currently there are over 11 million horses in this country, the feeding and care of which constitute a significant part of our economy.  A population of 250 million would imply the need for nearly 70 million horses in this country, and this is even before one considers the fact that "horse intensity", or the average number of horses per family, has been increasing steadily over the last several decades.  It is not unreasonable, therefore, to assume that so many people might need 100 million horses to fulfill all their transportation needs.  There is just no way this admittedly bountiful nation could support 100 million horses.  The disposal of their manure alone would create an environmental problem of unprecedented magnitude.

Or, take the case of illuminant.  As the population grows, the demand for illuminant should grow at least as quickly.  However, whale catches and therefore whale oil supply has leveled off of late, such that many are talking about the "peak whale" phenomena, which refers to the theory that whale oil production may have already passed its peak.  250 million people would use up the entire supply of the world's whales four or five times over, leaving none for poorer nations of the world.

Post title from here (lyrics here)

Katherine Mangu-Ward makes a point I have also made on occasion:

take a moment to thank the man who really saved the whales: John D. Rockefeller.

In
1846, Americans dominated the whaling industry with 735 ships. John D.
Rockefeller gets into the oil refining business in 1865. By 1876,
kerosene is routing whale oil, and the whaling fleet was down to 39 ships, because kerosene was just so darn cheap:

The
price of sperm oil reached its high of $1.77 per gallon in 1856; by
1896 it sold for 40 cents per gallon. Yet it could not keep pace with
the price of refined petroleum, which dropped from 59 cents per gallon
in 1865 to a fraction over seven cents per gallon in 1895.

This dynamic is also instructive for those fretting that we're going to run out of oil,
just as many undoubtedly worried that we were going to run out of
whales. (Note to self: Check historical record for instances of the
phrase "Peak Whale.")

I don't want to be overly self-referential here, but I actually "found" this reference to peak whale theory over two years ago when digging through the archives of this blog's 19th century predecessor, the Coyote Broadsheet:

As the US Population reaches toward the astronomical
total of 40 million persons, we are reaching the limits of the number
of people this earth can support.    If one were to extrapolate current
population growth rates, this country in a hundred years could have
over 250 million people in it!  Now of course, that figure is
impossible - the farmland of this country couldn't possibly support
even half this number.  But it is interesting to consider the
environmental consequences.

Take the issue of transportation.  Currently there are over 11
million horses in this country, the feeding and care of which
constitute a significant part of our economy.  A population of 250
million would imply the need for nearly 70 million horses in this
country, and this is even before one considers the fact that "horse
intensity", or the average number of horses per family, has been
increasing steadily over the last several decades.  It is not
unreasonable, therefore, to assume that so many people might need 100
million horses to fulfill all their transportation needs.  There is
just no way this admittedly bountiful nation could support 100 million
horses.  The disposal of their manure alone would create an
environmental problem of unprecedented magnitude.

Or, take the case of illuminant.  As the population grows, the
demand for illuminant should grow at least as quickly.  However, whale
catches and therefore whale oil supply has leveled off of late, such
that many are talking about the "peak whale" phenomena, which refers to
the theory that whale oil production may have already passed its peak.
250 million people would use up the entire supply of the world's whales
four or five times over, leaving none for poorer nations of the world.

I wrote more about John D. Rockefeller (including his role in saving the whales) in my praise of Robber Barrons several years ago.  In addition to Rockefeller, the article also discussed Cornelius Vanderbilt as the 19th century precursor to Southwest Airlines.  From the Harper's Magazine in 1859:

...the results in every case of the establishment of opposition lines
by Vanderbilt has been the permanent reduction of fares.  Wherever he
'laid on' an opposition line, the fares were instantly reduced, and
however the contest terminated, whether he bought out his opponents, as
he often did, or they bought him out, the fares were never again raise
to the old standard.  This great boon -- cheap travel-- this community
owes mainly to Cornelius Vanderbilt".

I really want to thank Michael Tobis at environmentalist hang-out Grist.   For years people have accused me of over-reading  the intentions of climate catastrophists, so I am thankful that Tobis has finally stated what climate catastrophists are after (emphasis in the original, but it is the exact phrase I would have highlighted as well)

Is infinite growth of some meaningful
  quantity possible in a finite space? No scientist is inclined to think
  so, but economists habitually make this
  claim without bothering to defend it with anything but, "I'm, an
  economist and I say so", or perhaps more thoughtfully, "hey, it's
  worked until now".

Such ideas were good approximations in the past. Once the finite
  nature of our world comes into play they become very bad approximations. You know, the gods of Easter Island
smiled on its people "until now" for a long time, until they didn't.
The presumption of growth is so pervasive that great swaths of economic
theory simply fail to make any sense if a negative growth rate occurs.
What, for instance, does a negative discount rate portend? ...

The
  whole growth thing becomes a toxic addiction. The only path to a soft
  landing is down; we in the overheated economies need to learn not just
  to cope with decline but to celebrate it. We need not just an ideology
  but a formal theory that can not only cope with reduced per capita
  impact but can target it.

Decline isn't bad news in an airplane. Decline is about reaching
your destination. Perhaps there is some level of economic activity
beyond which life gets worse? Perhaps in some countries we have already
passed that point? Could the time where we'd all be better off with a
gradual decline have arrived? How much attention should we pay to the
folks who say we should keep climbing, that there's no way we can run
out of fuel, that we'll think of something?

So there it is, in the third paragraph, with no danger of misinterpretation.  These folks want economic decline.  That's a fancy way of saying "We want you poorer."

I could spend weeks writing about the fallacies and anti-human philosophy embedded in these four paragraphs, but here are just a few reactions.

The Zero Sum Fallacy

Every generation has people, like Mr. Tobis, who scream that we are all living in a petri dish and this is the generation we run out of Agar.  Of course they are always wrong.  Why? 

Well, first, the prime driver of economic growth is not resources but the human mind.  And the world of ideas has no capacity limits.   This is an  issue that Julian Simon wrote about so clearly.   Tobis is trying to apply physical models to wealth creation, and they just don't apply.  (and by the way, ask the passengers of TWA flight 800 if decline isn't bad news in an airplane).

Further, if we talk about the world of resources, we currently use a trivial fraction of the world's resources.  By a conservative estimate, we have employed at most (including the soil we till for agriculture, extracted minerals, etc) less than 0.0001% of the earth's mass.  In terms of energy, all energy (except nuclear) comes ultimately from the sun  (fossil fuels, hydropower reservoirs, etc are just convenient storage repositories of the sun's energy).  We currently use an infinitesimal percentage of the sun's energy. I wrote much more on the zero-sum wealth fallacy here.  And here is my ancestor blogger in Coyote Broadsheet making the same fallacy as Mr. Tobis back in the 19th century, writing on the Peak Whale Theory.

Wealth Benefits the Environment

Just like actual 20th century data tends to undermine catastrophic climate forecasts, experience over the last century tends to contradict the notion that growth is devastating to the environment. 

We can find the best example right here in the environmental Satan called the USA.  The US has cleaner air and water today than in any time in decades.  Because of technology and growth, we can produce more food on less land than ever -- in fact the amount of land dedicated to agriculture has shrunk for years, allowing forests to steadily expand in the US for over eighty years (that is, until the environmentalists got the government to subsidize ethanol).   No one in Brazil would be burning huge tracts of the Amazon if they enjoyed the agricultural productivity we do in the US.  Sure, we have done some things that turn out to be environmentally bad (e.g. lead in gasoline) but our wealth has allowed us to fairly painlessly fix these mistakes, even if the fixes have not come as fast as environmentalists have desired. 

I will confess that the Chinese seem hell bent on messing up their air and water as much as possible, but, just like the United States, it will be the wealthy middle and upper class of China that will finally demand that things get cleaned up, and it will be their wealth, not their poverty, that allows them to do so.   Similarly, I don't think CO2 reduction will do much of anything to improve our climate, but if we find it necessary, it will be through application of wealth, not squalor, that we overcome the problems. 

Here is a simple test:  Which countries of the world have the worst environmental problems?  Its is the poorest countries, not the wealthiest.

Growth / Climate Tradeoffs

For the sake of argument, let's assume that man-made global warming increases severed storm frequency by 20%, or by 3 or 4 extra hurricanes a year (why this probably is not happening).  Even a point or two knocked off worldwide economic growth means hundreds of trillions of dollars in lost annual GDP a century from now (2% growth yields a world economy of $450 trillion in a century.  3% growth yields a world economy $1,150 trillion in a hundred years.)  So, using these figures, would the world be better off with the current level of hurricanes, or would it be better off with four more hurricanes but $700 trillion a year more to deal with them.  Hmmm.  Remember, life lost in a hurricane correlates much higher with poverty in the area the hurricane hit rather than with storm strength, as demonstrated by recent cyclones in Asia.  This general line of reasoning is usually described as warmer and richer vs. cooler and poorer. 

I cannot speak for Mr. Tobis, but many environmentalists find this kind of reasoning offensive.  They believe that it is a sin for man to modify the earth at all, and that changing the climate in any way is wrong, even if man is not hurt substantially by this change.  Of course, in climate, we have only been observing climate for 30-100 years, while climate goes through decadal, millennial, and even million-year cycles.  So it is a bit hard to tell exactly what is natural for Gaia and what is not, but that does stop environmentalists from declaring that they know what is unnatural.  I grew up in the deep South, and their position sounds exactly like a good fiery Baptist minister preaching on the sins of humanity.

More from Jerry Taylor, who got Tobis started on his rant in the first place.

Postscript:  Here is an interesting chicken or the egg problem:  Do you think Mr. Tobias learned about man-made global warming first, and then came to the conclusion that growth is bad?  Or did Mr. Tobis previously believe that man needed to be fewer and poorer, and become enthusiastic about global warming theory as a clever packaging for ideas most of the world's population would reject?  The answer to this question is a window on why 1)  the socialists and anti-globalization folks have been so quiet lately (the have all jumped onto global warming); 2)  no one in the global warming movement wants to debate the science any longer  (because the point is not the science but the license to smack down the world economy)  and 3)  why so much of the Bali conference seems to be about wealth transfers than environmentalism.

I really want to thank Michael Tobis at environmentalist hang-out Grist.   For years people have accused me of over-reading  the intentions of climate catastrophists, so I am thankful that Tobis has finally stated what climate catastrophists are after (emphasis in the original, but it is the exact phrase I would have highlighted as well)

Is infinite growth of some meaningful
  quantity possible in a finite space? No scientist is inclined to think
  so, but economists habitually make this
  claim without bothering to defend it with anything but, "I'm, an
  economist and I say so", or perhaps more thoughtfully, "hey, it's
  worked until now".

Such ideas were good approximations in the past. Once the finite
  nature of our world comes into play they become very bad approximations. You know, the gods of Easter Island
smiled on its people "until now" for a long time, until they didn't.
The presumption of growth is so pervasive that great swaths of economic
theory simply fail to make any sense if a negative growth rate occurs.
What, for instance, does a negative discount rate portend? ...

The
  whole growth thing becomes a toxic addiction. The only path to a soft
  landing is down; we in the overheated economies need to learn not just
  to cope with decline but to celebrate it. We need not just an ideology
  but a formal theory that can not only cope with reduced per capita
  impact but can target it.

Decline isn't bad news in an airplane. Decline is about reaching
your destination. Perhaps there is some level of economic activity
beyond which life gets worse? Perhaps in some countries we have already
passed that point? Could the time where we'd all be better off with a
gradual decline have arrived? How much attention should we pay to the
folks who say we should keep climbing, that there's no way we can run
out of fuel, that we'll think of something?

So there it is, in the third paragraph, with no danger of misinterpretation.  These folks want economic decline.  That's a fancy way of saying "We want you poorer."

I could spend weeks writing about the fallacies and anti-human philosophy embedded in these four paragraphs, but here are just a few reactions.

The Zero Sum Fallacy

Every generation has people, like Mr. Tobis, who scream that we are all living in a petri dish and this is the generation we run out of Agar.  Of course they are always wrong.  Why? 

Well, first, the prime driver of economic growth is not resources but the human mind.  And the world of ideas has no capacity limits.   This is an  issue that Julian Simon wrote about so clearly.   Tobis is trying to apply physical models to wealth creation, and they just don't apply.  (and by the way, ask the passengers of TWA flight 800 if decline isn't bad news in an airplane).

Further, if we talk about the world of resources, we currently use a trivial fraction of the world's resources.  By a conservative estimate, we have employed at most (including the soil we till for agriculture, extracted minerals, etc) less than 0.0001% of the earth's mass.  In terms of energy, all energy (except nuclear) comes ultimately from the sun  (fossil fuels, hydropower reservoirs, etc are just convenient storage repositories of the sun's energy).  We currently use an infinitesimal percentage of the sun's energy. I wrote much more on the zero-sum wealth fallacy here.  And here is my ancestor blogger in Coyote Broadsheet making the same fallacy as Mr. Tobis back in the 19th century, writing on the Peak Whale Theory.

Wealth Benefits the Environment

Just like actual 20th century data tends to undermine catastrophic climate forecasts, experience over the last century tends to contradict the notion that growth is devastating to the environment. 

We can find the best example right here in the environmental Satan called the USA.  The US has cleaner air and water today than in any time in decades.  Because of technology and growth, we can produce more food on less land than ever -- in fact the amount of land dedicated to agriculture has shrunk for years, allowing forests to steadily expand in the US for over eighty years (that is, until the environmentalists got the government to subsidize ethanol).   No one in Brazil would be burning huge tracts of the Amazon if they enjoyed the agricultural productivity we do in the US.  Sure, we have done some things that turn out to be environmentally bad (e.g. lead in gasoline) but our wealth has allowed us to fairly painlessly fix these mistakes, even if the fixes have not come as fast as environmentalists have desired. 

I will confess that the Chinese seem hell bent on messing up their air and water as much as possible, but, just like the United States, it will be the wealthy middle and upper class of China that will finally demand that things get cleaned up, and it will be their wealth, not their poverty, that allows them to do so.   Similarly, I don't think CO2 reduction will do much of anything to improve our climate, but if we find it necessary, it will be through application of wealth, not squalor, that we overcome the problems. 

Here is a simple test:  Which countries of the world have the worst environmental problems?  Its is the poorest countries, not the wealthiest.

Growth / Climate Tradeoffs

For the sake of argument, let's assume that man-made global warming increases severed storm frequency by 20%, or by 3 or 4 extra hurricanes a year (why this probably is not happening).  Even a point or two knocked off worldwide economic growth means hundreds of trillions of dollars in lost annual GDP a century from now (2% growth yields a world economy of $450 trillion in a century.  3% growth yields a world economy $1,150 trillion in a hundred years.)  So, using these figures, would the world be better off with the current level of hurricanes, or would it be better off with four more hurricanes but $700 trillion a year more to deal with them.  Hmmm.  Remember, life lost in a hurricane correlates much higher with poverty in the area the hurricane hit rather than with storm strength, as demonstrated by recent cyclones in Asia.  This general line of reasoning is usually described as warmer and richer vs. cooler and poorer. 

I cannot speak for Mr. Tobis, but many environmentalists find this kind of reasoning offensive.  They believe that it is a sin for man to modify the earth at all, and that changing the climate in any way is wrong, even if man is not hurt substantially by this change.  Of course, in climate, we have only been observing climate for 30-100 years, while climate goes through decadal, millennial, and even million-year cycles.  So it is a bit hard to tell exactly what is natural for Gaia and what is not, but that does stop environmentalists from declaring that they know what is unnatural.  I grew up in the deep South, and their position sounds exactly like a good fiery Baptist minister preaching on the sins of humanity.

More from Jerry Taylor, who got Tobis started on his rant in the first place.

Postscript:  Here is an interesting chicken or the egg problem:  Do you think Mr. Tobias learned about man-made global warming first, and then came to the conclusion that growth is bad?  Or did Mr. Tobis previously believe that man needed to be fewer and poorer, and become enthusiastic about global warming theory as a clever packaging for ideas most of the world's population would reject?  The answer to this question is a window on why 1)  the socialists and anti-globalization folks have been so quiet lately (the have all jumped onto global warming); 2)  no one in the global warming movement wants to debate the science any longer  (because the point is not the science but the license to smack down the world economy)  and 3)  why so much of the Bali conference seems to be about wealth transfers than environmentalism.

Kevin Drum is concerned that projected drops in Mexican oil production are a leading indicator that the "Peak Oil" theory is coming true.  I would argue that, in fact, it is a trailing indicator of what happens when you let governments run producing assets.  Drum says:

The issue here isn't that Cantarell is declining. That began a couple
of years ago and had been widely anticipated. What's news is that, just
as many peak oil theorists have been warning, when big fields start to
decline they decline faster than anyone expects. So far, Cantarell
appears to be evidence that they're right.

Actually, fields in the US do not tend to decline "all of a sudden" like that.  Why?  Because unlike about any other place in the world, oil fields in the US are owned by private companies with capital to make long-term investments that are not subject to the vagaries of political opportunism and populism.  There are a lot of things you can do to an aging oil field, particularly with $60 prices to justify the effort, to increase or maintain production.  In accordance with the laws of diminishing returns, all of them require increasing amounts of capital and intelligent management.

Unfortunately, state owned oil companies like Pemex (whose assets, by the way, were stolen years ago from US owners) are run terribly, like every other state-owned company in the world.  And, when politicians in Mexico are faced with a choice between making capital available for long-term investment in the fields or dropping it into yet another silly government program or transfer payment scheme, they do the latter.  And when politicians have a choice between running an employment meritocracy or creating a huge bureaucracy of jobs for life for their cronies they choose the latter. 

I am not arguing that US politicians are any different from their Mexican counterparts, because they are not -- they make these same stupid choices in the same stupid ways.  The only difference is that we have been smart enough, Mr. Drum's and Nancy Pelosi's heartfelt wishes notwithstanding, not to put politicians in charge of the oil fields.

By the way, I wrote on Peak Oil here.  A while back I dug into the 1870 archives of our predecesor publication, the Coyote Broadsheet, to find an article on the "Peak Whale" theory:

[April 17, 1870]  As the US Population reaches toward the astronomical
total of 40 million persons, we are reaching the limits of the number
of people this earth can support.    If one were to extrapolate current
population growth rates, this country in a hundred years could have
over 250 million people in it!  Now of course, that figure is
impossible - the farmland of this country couldn't possibly support
even half this number.  But it is interesting to consider the
environmental consequences.

Take the issue of transportation.  Currently there are over 11
million horses in this country, the feeding and care of which
constitute a significant part of our economy.  A population of 250
million would imply the need for nearly 70 million horses in this
country, and this is even before one considers the fact that "horse
intensity", or the average number of horses per family, has been
increasing steadily over the last several decades.  It is not
unreasonable, therefore, to assume that so many people might need 100
million horses to fulfill all their transportation needs.  There is
just no way this admittedly bountiful nation could support 100 million
horses.  The disposal of their manure alone would create an
environmental problem of unprecedented magnitude.

Or, take the case of illuminant.  As the population grows, the
demand for illuminant should grow at least as quickly.  However, whale
catches and therefore whale oil supply has leveled off of late, such
that many are talking about the "peak whale" phenomena, which refers to
the theory that whale oil production may have already passed its peak.
250 million people would use up the entire supply of the world's whales
four or five times over, leaving none for poorer nations of the world.

After reading this article on the earth running out of resources,  I discovered another article from the archives of the Coyote Broadsheet, a predecessor of this blog written by one of my distant relatives, dated April 17, 1870:

As the US Population reaches toward the astronomical total of 40 million persons, we are reaching the limits of the number of people this earth can support.    If one were to extrapolate current population growth rates, this country in a hundred years could have over 250 million people in it!  Now of course, that figure is impossible - the farmland of this country couldn't possibly support even half this number.  But it is interesting to consider the environmental consequences.

Take the issue of transportation.  Currently there are over 11 million horses in this country, the feeding and care of which constitute a significant part of our economy.  A population of 250 million would imply the need for nearly 70 million horses in this country, and this is even before one considers the fact that "horse intensity", or the average number of horses per family, has been increasing steadily over the last several decades.  It is not unreasonable, therefore, to assume that so many people might need 100 million horses to fulfill all their transportation needs.  There is just no way this admittedly bountiful nation could support 100 million horses.  The disposal of their manure alone would create an environmental problem of unprecedented magnitude.

Or, take the case of illuminant.  As the population grows, the demand for illuminant should grow at least as quickly.  However, whale catches and therefore whale oil supply has leveled off of late, such that many are talking about the "peak whale" phenomena, which refers to the theory that whale oil production may have already passed its peak.  250 million people would use up the entire supply of the world's whales four or five times over, leaving none for poorer nations of the world.

Too bad Julian Simon wasn't around to make a bet on whale oil prices.