Physical Scientists Are So Darned Cute When They Finally Understand Economics

Remember Peak Oil? What about Peak Everything? The Limits to Growth myth of impending mineral resource exhaustion was running once again rampant just a decade ago. The world didn’t run out of any critical minerals or metals. Why not? Because as rising demand boosted the prices for minerals like tin, copper, zinc, and iron ore, geologists and entrepreneurs went in search of new sources while manufacturers and consumers economized on the amounts required to make their products.

The current issue of Geochemical Perspectives is devoted to considering “Future Global Mineral Resources.” The good news is that the group of geologists who put together the study have stumbled upon economics and now understand a bit about how demand and supply works. From the abstract:

Some scientists and journalists, and many members of the general public, have been led to believe that the world is rapidly running out of the metals on which our modern society is based. Advocates of the peak metal concept have predicted for many decades that increasing consumption will soon lead to exhaustion of mineral resources. Yet, despite ever-increasing production and consumption, supplies of minerals have continued to meet the needs of industry and society, and lifetimes of reserves remain similar to what they were 30-40 years ago. …

Over the last 150 years, improved technologies, economies of scale and increased efficiency have combined to reduce costs hence allowing lower-grade ore to be mined economically. The net result is that the long-term inflation-adjusted price of most metals has decreased more or less in parallel with increasing production, a second apparent paradox that frequently is not well understood.

The press material released by the University of Geneva to accompany the study notes:

To define reserves is a costly exercise that requires investment in exploration, drilling, analyses and numerical and economic evaluations. Mining companies explore and delineate reserves sufficient for a few decades of profitable operation. Delineation of larger reserves would be a costly and unproductive investment, and does not fit the economic logic of the modern market.

The result is that the estimated life of most mineral commodities is between 20 to 40 years, and has remained relatively constant over decades. Use of these values to predict the amount available leads to the frequently announced risks of impending shortages. But this type of calculation is obviously wrong, because it does not take into account the amount of metal in lower quality deposits that are not included in reserves and the huge amount of metal in deposits that have not yet been discovered.

Hmmm. Who else has made that point? In my chapter “The Depletion Myth” in my 1993 book Eco-Scam: The False Prophets of Ecological Apocalyse I wrote:

Impending scarcity provokes people to search for substitutes and to improve technologies used to exploit natural resources. For example, copper reserves are not only expanded through new ore discoveries, but also through technology. Improvements in refining allow humanity to exploit copper ores now that are eight times less rich than those mined in 1900. … A deposit of copper is just a bunch of rocks without the know-how to mine, mill, refine, shape, ship, and market it.

Similarly in my 2015 book, The End of Doom I report:

Why does the horizon of mineral reserves never seem to go out further than a few decades? Basically because miners and technologists do not find it worthwhile to find new sources and develop new production techniques until markets signal that they are needed. How this process evolves is encapsulated by the USGS report which notes that in 1970 known world copper reserves stood at “about 280 million metric tons of copper. Since then, about 400 million metric tons of copper have been produced worldwide, but world copper reserves in 2011 were estimated to be 690 million metric tons of copper, more than double those in 1970, despite the depletion by mining of more than the original estimated reserves.”

Having now taken on lessons from economics, the researchers writing in Geochemical Perspectives conclude:

We demonstrate that global resources of copper, and probably of most other metals, are much larger than most currently available estimates, especially if increasing efficiencies and higher prices allow lower-grade ores to be mined. These observations indicate that supplies of important mineral commodities will remain adequate for the foreseeable future.

The good news is that humanity is nowhere near peak everything; the bad news is that we are also nowhere near peak doom.

For more on physical scientists’ fruitful encounters with economics, see my 2012 column where I report their astonishing discovery that property rights can save fisheries from depletion.