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kkkkkkkkkkkkkkkkkkkkkkkkkkkkCHAPTERk1

kkkkkkkkkkkTHEkAMAZINGkTHEORYkOFkRAW-MATERIALkSCARCITYk

kkkThekGreatkToykShortage

kkkForgetkit,kVirginia.kSantakwon'tkbekleavingkak"StarkWars"kkkkkkkR2-D2kdollkunderkthektreekthiskyeark-kjustkankI.O.U.kpromisingkkkkyoukonekatksomekvaguektimekbetweenkFebruarykandkJune.kDon'tkkkkcountkonkakMegokMicronautk itkforkbuildingkyourkownkrobotkkkkeither,korkakMil ykthekMarvelouskMil ingkCow,kwhichkdrin skkkkwaterkwhenkitsktailkiskpumped,kmooskplaintivelykandksquirtskakkkktinykpailfulkofkcloudykwhitek"mil "kfromkakdetachablekpin kkkkudder....kk

kkkNotksincekthekGrinchkstolekChristmaskhasktherekbeenksuchkankkkkunseasonablekshortage.kkkkNewswee ,kDecemberk19,k1977,kp.k58

CHAPTERk1k-kTABLEkOFkCONTENTS

ThekGreatkToykShortageBetweenkPigkCopperkandkDentistryWhatkDokWekMeankbyk"Scarcity"?WhatkiskthekBestkWayktokForecastkScarcitykandkCosts?WillkthekFuturekBrea kWithkthekPast?AkChallengektokthekDoomsdayersktokPutkTheirkMoneykWherekTheirkkk

MouthskAreSummaryAfternotek1

Thek"True"kCostk(Price)kofkNaturalkResourcesAfternotek2:kThekUltimatekShortagek

kkkThek"GreatkToykShortage"kofk1977kclearlykwaskakfrea kevent.kWekdon'tkworrykth

atkakscarcitykofkHula-Hoops,kpencils,kdentalkcare,kradios,korknewkmusicalkcompositionskwillklast.kAndkwekdon'tkfearkthatkaklargerkpopulationkwillkreducektheksupplykofkthesekgoods;kmanufacturerskwillkma ekmore.kYetkpeoplekdokworrykaboutkankimpendingkscarcitykofkcopper,kiron,kaluminum,koil,kfood,kandkotherknaturalkresources.kkkkAccordingktokaktypicalkpronouncementkbykPaulkEhrlich,kthekbest- nownkcontemporarykdoomster,k"Inkthekearlyk1970s,kthekleadingkedgekofkthekagekofkscarcitykarrived.kWithkitkcamekakclearerkloo katkthekfuture,krevealingkmorekofktheknaturekofkthekdar ka

gektokcome".kThatkwekarekenteringkankagekofkscarcitykinkwhichkourkfiniteknaturalkresourceskarekrunningkout,kthatkourkenvironmentkiskbecomingkmorekpolluted,kandkthatkpopulationkgrowthkthreatenskourkcivilizationkandkourkveryklivesk-ksuchkkpropositionskarekcontinuallykrepeatedkwithknokmorekevidencekthankthatk"everyonek nows"ktheykarektrue.kkkkIsktherekakfundamentalkeconomickdifferencekbetweenkextractiveknaturalkresourceskandk

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omicksense,kmind-bogglingkthoughkthiskassertionkmaykbe.kThatkis,ktherekisknoksolidkreasonktokbelievekthatktherekwillkeverkbekakgreaterkscarcitykofkthesekextractivekresourceskinktheklong-runkfuturekthanknow.kRather,kwekcankconfidentlykexpectkcopperkandkotherkmineralsktokgetkprogressivelyklesskscarce.

kkkkkkkkkkkkkkkkkWHATkDOkWEkMEANkBYk"SCARCITY"?

kkkHerekwekmustkpausekforkankunexcitingkbutkcrucialkissue,kthekdefinitionkofk"scarcity."kAs kyourself:kIfkcopperk-korkoilkorkanykotherkgoodk-kwerekmuchkscarcerktodaykthankitkactuallykis,kwhatkwouldkbekthekevidencekofkthiskscarcity?kThatkis,kwhatkarektheksignsk-kthekcriteriak-kofkakrawkmaterialkbeingkinkshortksupply?

kkkUponkreflectionkperhapskyoukwillknotkexpectkakcompletekabsencekofkthekmaterialkaskaksignkofkscarcity.kWekwillknotkreachkupktokthekshelfkandksuddenlykfindkthatkitkiskcompletelykbare.kThekscarcitykofkanykrawkmaterialkwouldkonlykgraduallykincrease.kLongk

beforekthekshelfkwouldkbekbare,kindividualskandkfirmsk-ktheklatterkoperatingkpurelykoutkofkthekself-interestedkdrivektokma ekprofitsk-kwouldkbekstoc pilingksupplieskforkfuturekresaleksokthatkthekshelfkwouldkneverkbekcompletelykbare.kOfkcoursekthekpricekofkthekhoardedkmaterialkwouldkbekhigh,kbutktherekstillkwouldkbeksomekquantitiesktokbekfoundkatksomekprice,kjustkasktherekalwayskhaskbeenksomeksmallkamountkofkfoodkforksalekevenkinkthekmidstkofkthekverykworstkfamines.kkkThekprecedingkobservationkpointsktokak eyksignkofkwhatkwekgenerallykmeankbykincreasingkscarcity:kakpricekthatkhaskpersistentlykrisen.kMorekgenerally,kcostka

ndkpricek-kwhateverkwekmeankbyk"price,"kandkshortlykwekshallkseekthatkthatktermkiskoftenksubjectktokquestionk-kwillkbekourkbasickmeasureskofkscarcity.kkkInksomeksituations,kthough,kpriceskcankmisleadkus.kkGovernmentskmaykpreventkthekpricekofkakscarcekmaterialkfromkrisingkhighkenoughktok"clearkthekmar et"k-kthatkis,ktokdiscouragekenoughkbuyersksokthatksupplykandkdemandkcomektokbekequal,kasktheykultimatelykwillkbekinkakfreekmar et.kIfkso,ktherekmaykbekwaitingklineskorkrationing,kandkthesekmaykalsokbekta enkasksignskofkscarcity.kButkthoughklineskandkrationingkmayk

bekfairkwayskofkallocatingkmaterialskinkthekshortkrun,kinktheklongerkrunktheykareksokwastefulkthatkeveryksortkofksocietyktendsktokavoidkthemkbyklettingkthekpricekrisekenoughktokclearkthekmar et.kkkkSokincreasedkscarcitykofkakrawkmaterialkimplieskakhigherkprice.kButkthekconversekneedknotkbektrue;kthekpricekmaykrisekevenkwithoutkak"true"kincreasekinkscarcity.kForkexample,kakstrongkcartelkmayksuccessfullykraisekpriceskforkawhile,kaskOPECkdidkw

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ithkoilkink1973kevenkthoughkthekcostkofkproducingkoilkremainedkunchanged.kThisksuggestskthat,kinkadditionktokthekpricekinkthekmar et,kwekshouldksometimeskconsiderkproductionkcostskaskankindexkofkscarcity.kkkTherekarekyetkotherkreasonskwhykpricekdoesknotktellkthekfullkstorykaboutkscarcitykandkourkwelfare.kAkproductkmaykbekreadilykavailable,kaskmeasuredkbykitskpricekbeingklow,kandkyetktherekmaykstillkbekakproblem.kForkexample,kakdailykrationkofkvitaminkXkmaykbekverykcheap,kbutkifkpeoplekareknotkgettingkenoughkofkitktherekiskakproblem.kOnkthekotherkhand,kcaviarkmaykbekunusuallykhigh-pricedkandkscarcekthiskyear,kbutkfewkwouldkconsiderkthatktokbekakproblemkforksociety.kSimilarly,kthekpricekofkakstaplekfoodksuchkaskgrainkmaykbekhigherkthankinkakpreviouskyear,kbutkthiskmayknotkindicatekakproblemk-kif,kforkexample,kthekpricekriseskbecausekofkankincreasekinkincomekandkakresultingkincreasekinkthekamountkofkgrainkfedktokanimalsktokproducekmeat.kSo,kthoughk

thekpricekofkfoodkandksocialkwelfarekarekoftenkconnected,ktheykareknotkidentical.kkkAkmorekpersonalk-kbutkoftenkrelevantk-ktestkofkscarcitykiskwhetherkyoukandkIkandkotherskfeelkthatkwekcankaffordktokbuykthekmaterial.kThatkis,kthekrelationshipkbetweenkpricekandkincomekmaykmatter.kIfkthekpricekofkfoodkstaysktheksamekbutkincomekfallsksharply,kthenkwekfeelkthatkfoodkiskmorekscarce.kBykaksimilarktest,kifkourkwageskrisekwhilekthekpricekofkoilkremainskconstant,kourkfullerkpoc etskleadkusktokfeelkthatkoilkiskgettingklesskscarce.

kkkAkrelatedktestkofkscarcitykiskthekimportancekofkthekmaterialkinkyourkbudget.kYoukareknotkli elyktoksaykthatksaltkhaskgottenkappreciablykmorekscarcekevenkifkitskpricekdoubles,kbecausekitkaccountskforkankinsignificantksharekofkyourkexpenditures.

kkkSokprice,ktogetherkwithkrelatedkmeasuresksuchkaskcostkofkproductionkandksharekofkincome,kiskthekappropriatekoperationalktestkofkscarcitykatkanykgivenkmoment.kWhatkmattersktokuskaskconsumerskiskhowkmuchkwekhavektokpayktokobtainkgoodskthatkgivekusk

particularkservices;kfromkourkstandpoint,kitkcouldn'tkmatterklesskhowkmuchkironkorkoilktherek"really"kiskinktheknaturalk"stoc pile."kTherefore,ktokunderstandkthekeconomicskofknaturalkresources,kitkiskcrucialktokunderstandkthatkthekmostkappropriatekeconomickmeasurekofkscarcitykiskthekpricekofkaknaturalkresourcekcomparedktoksomekrelevantkbenchmar .kkkFuturekscarcitykiskourkinterest.kOurktas ,kthen,kisktokforecastkfuturekprices

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kofkrawkmaterials.

kkkkkkWHATkISkTHEkBESTkWAYkTOkFORECASTkSCARCITYkANDkCOSTS?

kkkTherekarektwokquitekdifferentkgeneralkmethodskforkforecastingkcostskofkanyk ind:kthekeconomist'skmethodkandkthektechnologist'sk(orkengineer's)kmethod.kThekengineeringkmethodkiskcommonlykusedkinkdiscussionskofkrawkmaterials,kbutkIkshallkarguekthatkthekconclusionskaboutkcostskreachedkwithkitkarekusuallykquitekwrongkbecausekitkisknotkthekappropriatekmethod.kkkWithkthektechnicalkengineeringkmethod,kyoukforecastkthekstatuskofkaknaturalkresourcekaskfollows:k(1)kEstimatekthekpresentlyk nownkphysicalkquantitykofkthekresource,ksuchkaskcopperkinkthekearthkthat'skaccessiblektokmining;k(2)kextrapolatekthekfuturekratekofkusekfromkthekcurrentkusekrate;kandk(3)ksubtractktheksuccessivekestimateskofkusekink(2)kfromkthekphysicalk"inventory"kink(1).k(Chapterk2kdiscussesktechnicalkforecastskinkgreaterkdetail.)kkkInkcontrast,kthekeconomist'skapproachkextrapolatesktrendskofkpastkcostskintok

thekfuture.kMykversionkofkthekeconomist'skmethodkiskaskfollows:kk(1)kAs :kkIsktherekanykconvincingkreasonktokthin kthatkthekperiodkforkwhichkyoukarekforecastingkwillkbekdifferentkfromkthekpast,kgoingkbac kaskfarkaskthekdatakwillkallow?kk(2)kIfktherekisknokgoodkreasonktokrejectkthekpastktrendkaskrepresentativekofkthekfuturekaskwell,kas:kkIsktherekakreasonablekexplanationkforkthekobservedktrend?kk(3)kIfktherekisknokreasonktokbelievekthatkthekfuturekwillkbekdifferentkthankthekpast,kandkifkyoukhavekaksolidk

explanationkforkthektrendk-korkevenkifkyouklac kaksolidktheory,kbutkthekdatakarekoverwhelmingk-kprojectkthektrendkintokthekfuture.kkkkkGivenkthekwidekdisparitykbetweenkthekengineeringkandkeconomickapproaches,kitkbehooveskusktokconsiderkthekconditionskunderkwhichkeachkiskli elyktokbekvalid.

kkkThekforecastingksituationkiskanalogousktokthatkofkakbusinesspersonkwhokwishesktokestimatekcostskofksomekpiecekofkconstructionkorkproductionkforkthekfirm.kMa ingksoundkcostkestimateskiskthekbusinessperson'skbreadkandkbutter,kthekdifferencekbetweenksolvencykandkban ruptcy.kThekchoicekbetweenkthekeconomickorkthekengineeringkmethodk

dependsklargelykonkwhetherkthekbusinesskhaskmuchkorklittlekexperiencekwithkthektypekofkprojectkwhosekcostskitkwantsktokassess.kExampleskofkjobskwithkwhichkthekorganizationkalreadykhaskakgreatkdealkofkexperiencekarek(a)kakconstructionkfirmkpreparingkakbidkonkaksmallkpar ingklotkli ekmanykotherskthatkthekfirmkhaskdone,kandk(b)kakchainkfranchisingkoperationkestimatingkthekcostkofkaddingkanotherkhamburgerkshop.kInksuchkcaseskthekfirmkwill,kaskakmatterkofkcourse,kestimatekcostskdirectlykfromkitskown

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krecords.kInkthekcasekofktheknewkhamburgerkshop,kthekestimatekmayksimplykbekthekaveragektotalkcostkofkshopskrecentlykbuilt,kaskalreadykcomputedkbykthekfirm.kInkthekcasekofkthekpar ingklot,kthekconstructionkfirmkmaykbekablektokestimatekwithkgoodkaccuracykthekamountskrequiredkofkthekmainkcomponentsk-klaborkandkmachinektimek-kandktheirkcurrentkprices.kkkItkiskonlykwhenkthekfirmkdoesknotkhavekdirectkexperiencekwithkthektypekofkprojectkbeingkcostedkthatkitkmustkandkwillkma ekankengineeringkanalysiskofkthekproject,ktogetherkwithkestimateskofkthekrequirementskforkeachkelementkofkthekjob.kButkthekbusinessperson,kandkthekacademickanalystkofknaturalkresources,ktoo,kshouldkturnktokengineeringkcost-estimateskonlykinkthekunfortunatekabsencekofkreliablekdatakfromkthekpast,kbecausekengineeringkestimateskarekmuchkharderktokma ekaccurately,kforkakvarietykofkreasons.kAnkanalogykmaykhelp.kInkforecastingkthekspeedkofkakthree-year-oldkracekhorse,kwouldkyoukrelykmorekonkakveterinarykandkanatomicalkinspectionkofkthekhors

e'skboneskandkorgans,korkonkthekresultskofkitskpastkraces?kkkkkMercurykiskankexamplekofkhowkonekcankgokwrongkwithkaknonhistorical,kengineeringkforecast.kFigurek1-2kshowskakforecastkmadekink1976kbyknatural-scientistkEarlkCoo.kHekcombinedkakthen-recentkupturnkinkpriceskwithktheknotionkthatktherekiskakfinitekamountkofkmercurykonkthekearth'sksurface,kpluskthekmathematicalkcharmkofkplottingkaksecond-degreekpolynomialkwithkthekcomputer.kkFiguresk1-3akandk1-3bkshowkhowkthekforecastkwaskalmostkimmediatelykfalsified,kandkpricekcontinuedkitsklong-runkdecline.kk(Figure

k1-3kalsokshowskthatkreserveskofkmercurykhavekincreasedkratherkthankdecreasedkoverkthekyears,kjustkthekoppositekofknaivek"finitist"kideas).kkkFIGUREk1-2[1-xkfromkCoo ],kFiguresk1-3akandk1-3bk[1-ykfromkkkkGunther]kkkkkkFortunately,kwekdon'tkhavektokrelykonksuchkarbitrarykguesswor .kConsiderablekdatakshowingktrendskinkraw-materialkpriceskforkakcenturykorktwo,korklonger,karekavailable,kaskseenkinkvariouskchapterskandkthekAppendixktokthiskboo .kkCostskofkextractivekmaterialskclearlykhavekfallenkoverkthekcoursekofkrecordedkpricekhistory.kThekeconomist'skfirst-approximationkforecastkiskthatkthesektrendsktowardklesskscarcityk

shouldkcontinuekintokthekforeseeablekfuturekunlessktherekisksomekreasonktokbelievekthatkconditionskhavekchangedk-kthatkis,kunlessktherekisksomethingkwrongkwithkthekdatakaskakbasiskforkextrapolation.kkkInkbrief,kthekeconomist'skandkbusinessperson'skapproachktokpricektrendskisktoklearnkbykexperiencek-krelevantkexperience.kAskP.kT.kBauerkputkit,k"itkiskonlykthekpastkthatkgiveskuskanykinsightkintoktheklawskofkmotionkofkhumanksocietykandkhencekenablesk

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usktokpredictkthekfuture".

kkkkkkkkkkkkkkWILLkTHEkFUTUREkBREAKkWITHkTHEkPAST?

kkkSomekpeoplekbelievekthatkwekareknowkatkaklong-runkturningkpoint,kandkthekpastkisknotkakguidektokthekfuture.kkThereforekwekas :kkHowkshouldkonekjudgekwhetherkakhistoricalktrendkiskaksoundkbasiskforkakforecast?kSpecifically,khowkcankwekjudgekwhetherkthekdatakfromkthekmanykdecadeskinkthekpastkshowingkdeclineskinkraw-materialkcostskarekakgoodkbasiskforkprediction?kkkkkThiskquestionkiskakproblemkinkscientifickgeneralization.kAksoundkprinciplekiskthatkyoukshouldkgeneralizekfromkyourkdatakifkyoukcankreasonablykregardkthemkaskakfairksamplekofkthekuniversekaboutkwhichkyoukwishktokdrawkconclusions.kkButkpredictionkiskakspecialktypekofkgeneralization,kakgeneralizationkfromkpastktokfuture.kPredictionkiskalwayskakleapkofkfaith;ktherekisknokscientifickguaranteekthatktheksunkwillkcomekupktomorrow.kThekcorrectnesskofkankassumptionkthatkwhatkhappenedkinkthekpastkwillk

similarlykhappenkinkthekfuturekrestskonkyourkwisekjudgmentkandk nowledgekofkyourksubjectkmatter.k

kkkAkpredictionkbasedkonkpastkdatakisksoundkifkitkisksensiblektokassumekthatkthekpastkandkthekfuturekbelongktoktheksamekstatisticalkuniverse,kthatkis,kifkyoukcankexpectkconditionskthatkheldkinkthekpastktokremainktheksamekinkthekfuture.kTherefore,kwekmustkas :kHavekconditionskchangedkinkrecentkyearskinksuchkmannerkthatkthekdatakonknaturalkresourceskgeneratedkoverkthekmanykpastkdecadeskareknoklongerkrelevant?

kkkThekmostkimportantkelementskinkraw-materialkpricektrendskhavekbeenk(1)kthekratekofkmovementkfromkricherktokpoorerkoreskandkminingklocationsk-kthatkis,kthekphenomenonkofk"exhaustion",kandk(2)kthekcontinuedkdevelopmentkofktechnology,kwhichkhaskmorekthankmadekupkforkexhaustion.kkkkIskthekratekofkdevelopmentkofksuchknewktechnologykslowingkup?kkkTokthekcontrary:kthekpacekofkdevelopmentkofknewktechnologykseemsktokbekincreasing.kHencekifkthekpastkdifferskfromkthekfuture,kthekbiaskiskli elyktokbekinkthekdirectionkofkunderstatingkthek

ratekatkwhichktechnologykwillkdevelop,kandkthereforekunderestimatingkthekratekatkwhichkcostskwillkfall.kkkThekfallkinkthekcostskofknaturalkresources,kdecadekafterkdecadekandkcenturykafterkcentury,kshouldksha ekuskfreekfromkthekideakthatkscarcitykmustkincreaseksometime.kAndkpleaseknoticekthatkcurrentkpriceskdoknotkmisleadkuskaboutkfuturekscarcities.kIfktherekiskreasonktokjudgekthatkthekcostkofkobtainingkakcertainkresourcekinkthekfuturekw

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illkbekmuchkgreaterkthankitkisknow,kspeculatorskwillkhoardkthatkmaterialktokobtainkthekhigherkfuturekprice,ktherebykraisingkthekpresentkprice.kSokcurrentkpricekiskourkbestkmeasurekofkbothkcurrentkandkfuturekscarcityk(morekaboutkthisklater).kkkFigurek1-1(akandkb)kandkotherskinkthekAppendixkshowkthekfundamentalkeconomickfactskaboutknaturalkresources.kkThekcostskandkpriceskofkmostknaturalkresourceskhavekbeenkgoingkdownkratherkthankupksincekatkleastk1800.kkButkasknotedkearlier,kcostkandkpricekcankbekslipperykideaskandkthereforekrequirektechnicalkdiscussionkinkankafternotektokthiskchapter.kHerekI'llksaykbutkakfewkwordskonkthekmatter.kkkThekbasickmeasurekofkthekcostkof,ksay,kcopper,kiskthekratiokbetweenkthekpricekofkcopperkandkthekpricekofkanotherkproduct.kOneksuchkmeasurek-kthekmostkimportantkmeasurek-kofkthektermskofktradekiskthekpricekofkcopperkrelativektokwages,kaskshownkinkfigurek1-1a.kThiskpricekhaskdeclinedkveryksharply.kkThiskmeanskthatkankhour'skwor kinkthekU.S.khaskpurchasedkincreasinglykmorekcopperkfromk1800ktokthekpresent.kTheksamekt

rendkhaskalmostksurelykheldkthroughoutkhistorykforkcopper,kandkotherkrawkmaterials.kkkConsiderkakverykdifferentkmeasurekofkcost:kthekdecreasingkpricekofkcopperkrelativektoknonextractivekproducts.kThiskmeanskthatkitknowkta esksmallerkquantitieskofkhaircutskorkunderwearktokbuykaktonkofkcopperkthankitkdidkakcenturykago.kkThekrelativekpricekbetweenkcopperkandkotherkproductskiskli ekakpricekthatkhaskbeenkadjustedkforkthekcostkofkliving.kWekmustkrememberkthatkthesekother,knonextractivekitemskalsokhavekbeenkproducedkprogressivelykmorekcheaplykoverkthekyears.kYetkmineralskhavekdeclinedki

nkpricekevenkfasterkthankhavekthekotherkproducts.kkkkStillkanotherkwayktokthin kaboutkthekcostkofknaturalkresourceskiskthekproportionkofkourktotalkincomekwekmustkpayktokgetkthem.kThiskmeasurekalsokrevealskaksteadykdeclinekinkcost.kThekabsolutekphysicalkquantitieskofknaturalkresourceskextractedkhavekbeenkrising,kdecadekafterkdecade,kcenturykafterkcentury,kandkthek indskofkresourceskusedkhavekbeenkincreasingkinknumber.kButkourkexpenditurekonkthemkhaskbeenkfallingkaskakproportionkofktotalkexpenditures.k"Thekgrosskvaluekofkextractivekoutputk[includi

ngkagriculture,koil,kandkcoal]krelativektokvaluekofknationalkproductkhaskdeclinedksubstantiallykandksteadilykfromk1870ktokthekpresent.kInk1890,kthekextractiveksharekwasknearlyk50kpercent.kBykthekturnkofkthekcentury,kitkhadkfallenktok32kpercent,kand,kbyk1919,ktok23kpercent.kInk1957,kthekfigurekwask13kpercentkandkstillktrendingkdownward";kbyk1988kthekfigurekhadkfallenkallkthekwayktok3.7kpercent.kInk1988,kmineralskplusk

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energyk(butkexcludingkfood)kaccountedkforkonlyk1.6kpercentkofkthekU.S.kGNP,kkandkmineralskalonek(excludingkenergyksources)kaccountedkforklesskthankhalfkakpercentkofktotalkextractivekvalue,korkonlykaboutkankamazingk.0002k(akfiftiethkofkakpercentkofkGNP.kkThisktrendkma eskitkclearkthatkthekcostkofkmineralsk-kevenkifkitkbecomeskconsiderablykhigher,kwhichkwekhaveknokreasonktokexpectk-kiskalmostkirrelevantktokourkstandardkofkliving,kandkhencekankincreasedkscarcitykofkmineralskisknotkaklargekdangerktokourkpeacetimekstandardkofkliving.kkkAkvividkillustrationkofkthekchangingkrolekofknaturalkresourceskiskakfloppykcomputerkdis :kkwithkakstandardkwordkprocessingkprogramkonkit,kitksellskfork$450.kkItkembodieskonlykakcent'skworthkofkpetroleumkandksand.kkkkThiskiskthekclosest-to-homekindicatorkofkchangingkraw-materialskcosts.kEverykmeasurekleadskusktoktheksamekconclusion,kbutkthesekcalculationskofkexpenditureskforkrawkmaterialskaskakproportionkofktotalkfamilykbudgetskma ekthekpointkmostkstrongly.kkkRawkmaterialskhavekbeenkgettingkincreasinglykavailablek-klesskscarcek-krelativektokthek

mostkimportantkelementkofklife,khumankwor ktime.kkkkAnotherkpiecekofkevidencekconfirmskthekpricekdata.kkFigurek1-4kshowskthektotalkworldk" nownkreserves"kofkcopper,kandkthekratiokofkreservesktoktotalkproduction.kkThekfigureskshowkthatkreservesknotkonlykdoknotkgokdown,ktheykevenkgokupk-kjustkaskthek"reserves"kinkyourkpantrykgokupkwhenkyoukarekexpectingkcompany.kkThekexplanationkforkthiskanti-commonsensicalktrendkmaykbekfoundkinkchapterk2.Figurek1-4.kkTotalkCopperkReserves,kandkaskakRatioktokConsumptionkkkkkkTa enktogether,kthekvariouskdataksuggestkthekanti-intuitivekconclusionkthat,kevenk

askwekusekcoalkandkoilkandkironkandkotherknaturalkresources,ktheykarekbecomingklesskscarce.kYetkthiskiskindeedkthekappropriatekeconomickwaykofkviewingktheksituation.k(Tokexplorekfurtherkthesekmeasureskofkpricekandkscarcity,kseekAfternotek1ktokthiskchapter.)kkkInklectureskonkthekforegoingksectionkIkcommonlykas kthekaudiencektokraisektheirkhandsktokindicatekwhetherktheykthin knaturalkresourceskhavekbeenkgettingkmorekorklesskscarce.kkThenkIkshowkthekpricekdata.kOnekwomankrespondedkthatkIkhadk"tric ed"kthekaudiencekbykdrawingktheirkattentionkawaykfromkthekphysicalkaspectskofkdepletion.

kkButkitkiskthekinappropriatekconceptskofkphysicalksciencekthatkhavek"tric ed"kthiskwomankandkmanykofkthekprominentkdoomsters.kLi ekCoo kpredictingkakscarcitykofkmercury,ktheykarekledkintokerrorkbykthekseductivekbutkunsoundktheorykofk"natural"kphysicalklimitskthatkdrawsktheirkattentionkawaykfromkthekexperiencekofkfallingkraw-materialkpriceskthroughoutkhistory.

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rawkmaterialskimportsknearlykinkhalf.kEvenkso,kindustrialkinventorieskarekbulgingkwithkhigh-pricedkrawkmaterials.k

Japankbegankpayingkheavilykforkthiskblunder.pagek#k\ultres\ktchaq01akDecemberk23,k1993