This week’s column (PDF) from John Mauldin is good, really good. He offers a guest post from Jesse Ausubel, Director, Program for the Human Environment, The Rockefeller University. Don’t let the source fool you (maybe I should be more cautious?).
The title of Ausubel’s post is “Nature Rebounds.” In it, he examines the increasing forestation, crop yields, demand for commodities per unit of output, efficiencies in the production of proteins, etc. In virtually all cases, he sees…well, he sees that “nature rebounds.”
But nature isn’t rebounding in a vacuum; it is rebounding in a world where man has more impact than ever in history: there are more of us than ever before, and on average, globally, we have a better standard of living – more people are in the middle class (meaning they have access to and the means to acquire more things) than at any time in history. Both population and consumption are blamed for the destruction of mother earth, of Gaia, yet Ausubel demonstrates with numerous examples that the opposite is occurring.
Note: while much of his data is US based, not all of it is. He addresses the point that he focuses primarily on America:
People will object that I have spoken little about China and India and Africa. I respond with a remark from Gertrude Stein, who came from Oakland. Stein said about 1930 that America is the oldest country in the world because it had been in the 20th century longer than any other country. In fact, as early as 1873 America became the world’s largest economy, and since then a disproportionate share of the products and habits that diffuse throughout the world have come from America, particularly California. My view is that the patterns described are not exceptional to the US and that within a few decades, the same patterns, already evident in Europe and Japan, will be evident in many more places.
Some examples from Ausubel before I get to the reasons why I so appreciated this post:
Farming: crop yields are increasing while there is a corresponding decrease in inputs – land, water, fertilizers, and the like. Chicken production has vastly outpaced that of pork or beef – chicken being the more efficient convertor of inputs to outputs.
Forests and global greening: demand for wood products per unit of GDP is decreasing; Ausubel offers an interesting global map, contrasting the “green” of 1990 to the “green” of 2010. Much of the world is “greener,” representing increased vegetation, over the twenty-year period.
Materials: in a study examining 100 commodities, it is found that most have either decreased or leveled off in use per unit of output of GDP; Ausubel offers a picture of a modern smartphone contrasted against sixteen material-dependent products that are replaced. Water usage has stayed flat in the US since 1970 despite an increase in population of 80 million people.
Oceans: here is one place where Ausubel does not see the same improvements in husbanding of resources (no surprise to me, as oceans are perhaps the least “owned” asset on earth). Yet, via the increased impact of fish farms (turning unowned into owned), he sees even the exploitation of this resource turning.
Why do I like the post?
Interventionists will point to government regulation and the like for the outcome depicted by Ausubel. The US regulatory system has saved the environment from the evils of capitalism, they claim. Beside my view that this is wrong, it also places the cart before the horse.
Advanced economies can afford (suffer) such regulation because they are advanced. Have you seen the environment in a third-world, undeveloped economy? A farmer scraping by for his daily existence can’t afford to care a whit about the environment. The question is: what is an advanced economy?
My definition: an advanced economy is one where the division of labor has the opportunity for continual expansion, where non-market rules are least disruptive; where money facilitates trade. Where prices and profit and loss are allowed to do their work, relatively freely.
For money to facilitate trade, prices must be developed. An advanced economy is one built on prices generally formed through market processes: sellers compete against sellers and buyers compete against buyers. Profit and loss separates the winners from the losers – those who make the most efficient (meaning, best meeting market demands at the market price) use of resources win. Those who do not, lose; they then leave resources for the more efficient producers to transform.
An advanced economy is one where prices and profit and loss suffer the least hindrances by official and unofficial disruption, thus ensuring the most efficient uses of resources.
Ausubel analyzes the use of many commodities. Other than currency markets, there is probably no more widely traded markets than one will find in commodities. Every consumer and every producer in the world bids for these, and many of these commodities can be shipped globally in an efficient manner. My point is, as relates to market-derived pricing (and within the context of the central-bank manipulated world in which we live), few markets more efficiently distribute resources better than commodity markets, because few markets offer more robust information and pricing mechanisms.
This is the foundation required for government to then have the luxury to burden. Not the other way around. Look at the Soviet Union or Communist China a few decades ago. There were no economies more regulated by government than these, and the people were poor and the environment was dying. All that government regulation didn’t bring about efficiency; regulation didn’t bring about a clean environment. Freeing the market did (and is doing) both of these things.
Ausubel offers evidence that demonstrates that advancements by man are greening the planet, not destroying it. All of this at a time when we supposedly aren’t doing enough to save the planet, where it is supposedly the advanced and advancing economies that are destroying the planet at the expense of those poor people living in third-world poverty conditions.
All this happened before Elon Musk offered the world eternal salvation and before the Pope threatened the world with eternal damnation.
It has happened and will continue to happen because of the relatively free market – from the market moving more and more people to the middle class. It will continue to happen as long as markets are left relatively free, as this is the best means by which to secure the most efficient use of nature’s resources.