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Saving Water Even as We Grow

Blog Post | Food & Hunger

Saving Water Even as We Grow

Amid record drought, communities in the American West are finding ways to do more with less water.

The American West is in the grips of its worst drought in more than a millennium. Reservoir levels in some areas have dipped to all-time lows. The shortages are especially dire in the Colorado River Basin, which supplies water to 40 million people and irrigates four million acres of farmland.

There are plenty of gloomy headlines on the West’s water crisis. But beyond the front page is a lesser-known story of remarkable adaptation: over the past few decades, western communities have found ways to use far less water, even as populations grow and economic output increases. It’s a testament to the ability of humans to respond to water scarcity, and it illustrates what more is needed to enable continued adaptation in the future.

Consider Las Vegas. Since the drought began two decades ago, the city has cut per capita water use by half. Total water use has fallen by 26 billion gallons since 2002, even as its population has grown by 800,000 residents. Or take Phoenix, another fast-growing metropolitan area. Since 1980, the city’s population has more than doubled, yet its total water use has declined by one-third

The same is true in much of the American West. Since 2000, Albuquerque’s per capita water use has fallen 48 percent; Denver’s by 38 percent; and Los Angeles’ by 29 percent. San Diego’s water use has plummeted from nearly 220 gallons a day per person in 2007 to less than 140 gallons per person. Total water use in the city is down 40 percent. A recent study of 20 western cities found that population growth from 2000 to 2015 increased by an average of 21 percent, while total water use declined by an average of 19 percent. 

How has this happened? In his book Water Is for Fighting Over: And Other Myths about Water in the West, the writer John Fleck explores the impressive ability of people to adapt to water scarcity without sacrificing economic growth. When people have less water, Fleck writes, they find ways to use water more efficiently. Often, that’s through stormwater capture, wastewater recycling, aquifer storage, lawn buyback programs, and other innovations.

In San Diego, city officials have invested in desalination plants, sewage recycling, raising dams, and other water-saving measures. A new wastewater recycling project is expected to meet roughly half of the city’s drinking water needs by 2035. In Nevada, water managers have implemented “cash for grass” programs, which offer rebates to businesses and residents who tear out lawns and replace them with water-efficient alternatives. The program has resulted in significant per capita water-use reductions, according to the Southern Nevada Water Authority. 

Modern cities, it turns out, are quite water efficient, especially when compared to irrigated thirsty desert croplands. In Arizona, building houses to accommodate a growing population has resulted, somewhat counterintuitively, in significant water savings in the region. By one estimate, converting 100 acres of Arizona cotton fields into subdivisions with quarter-acre lots can cut water use by roughly a third. 

Prices also play a role. Water prices in San Diego reached as high as $1,736 an acre-foot  (enough water to cover an acre of land, about 326,000 gallons) last year, up from $620 in 2007, encouraging conservation and spurring water-saving innovations. In other parts of the West, however, water prices remain low despite recent drought conditions. Salt Lake City, for instance, has among the lowest water prices of major U.S. cities; it also consumes more water than other desert cities. 

The agricultural sector, which uses roughly 80 percent of all water in the West, is also conserving water. In California, for example, farm water use in 2015 was 14 percent less than in 1980, while economic output from farming was up 38 percent. This is due in large part to rising crop yields. Farmers can now grow more crops on less land while using less water, enabling them to transfer some of that saved water to cities or, in some cases, to increase environmental flows for fish and wildlife habitat.

This adaptation story is one to celebrate and sustain. Contrary to apocalyptic media reports, western communities have decoupled water consumption from economic growth. But despite these recent successes, more water conservation is needed in response to today’s prolonged drought conditions.

Tapping water markets is one way to do so. Markets allow users to move water from lower-value to higher-value uses, thereby encouraging conservation and promoting more efficient use. In practice, however, a variety of legal and policy barriers can prevent win-win water trades from occurring. Reducing barriers to water markets is crucial to enabling further adaptations to drought in western states.

The American West has a remarkable ability to adapt to water scarcity. Current drought conditions are bad, but they are likely to spur even more water-saving innovations and policy reforms in the future. Ultimately, that ingenuity will enable people to conserve water while allowing the West to continue to prosper. 

Blog Post | Energy & Natural Resources

In Defense of Cornucopianism

The counterintuitive truth: non-renewable resources, like oil or copper, will never run out.

Dr. Pangloss, a character in Voltaire’s satirical novel Candide, has the famous delusion that we live in the best of all possible worlds. If you have a pessimistic slant, you might consider “Panglossian” an apt descriptor for those of us who endlessly chant about progress. To avoid Panglossianism, any good herald of progress keeps two thoughts in their head at once: the world has plenty of problems, but it is also getting better.

We die, but later than we used to. A smaller and smaller share of the world’s population is illiterate, undernourished, or extremely poor. People in almost every country are less likely to die from tuberculosis, diarrhea, and other maladies that ravaged humanity for millennia. Even war deaths and homicides seem to be on a long-term decline (with a handful of countries like El Salvador, Honduras, and Venezuela bucking that trend).

The late Hans Rosling’s term, “possibilist,” is a more accurate description for those who recognize that we live in an imperfect but improving world. A possibilist, wrote Rosling, is “someone who neither hopes without reason, nor fears without reason, someone who constantly resists the overdramatic worldview.” Still, even this type of optimism annoys detractors.

One recent accusation of Panglossianism comes from two eminent evolutionary biologists, Heather Heying and Bret Weinstein. In the newly released A Hunter-Gatherer’s Guide to the 21st Century, they attack “Cornucopianism,”  the economistic belief that infinite growth is possible and that resources aren’t finite. “The vast majority of Earth’s resources are finite,” they argue. “From rubber to wood to oil, from copper to lithium to sapphires, all are limited.”

This idea is unfortunately common. In Human Race: 10 Centuries of Change on Earth, a book that I reviewed this summer, the prolific British historian Ian Mortimer argues that it is a certainty that oil will run out. Because we’re exploiting the black gold so ruthlessly, he writes, “it will run out at some point in this current millennium, there is no doubt about that; it is just a matter of when.” (Emphasis added). Both these notions are wrong – or at least seriously overstated.

Mortimer’s oil

According to the latest BP Statistical Review of World Energy, the world’s proven reserves of oil totaled 1,732.4 billion barrels last year. During 2019, the most recent pre-pandemic year, the world consumed about 31 billion barrels, meaning that we have just shy of 56 years of proven oil stocks left – a little less if oil consumption were to keep rising with its historical trend. By that logic, Mortimer is being conservative; oil will run out this century.

Not quite. In 2000, we used 25.2 billion barrels of oil out of proven reserves of 1300.9 billion (52 years of supply left). Today we have 56 years of supply left, even though we now use about 25 percent more oil than we did in 2000. Over the last twenty years, then, humanity has used a lot of oil, but oil has become more plentiful. How can that be?

While the total amount of oil in the ground doesn’t change very much from one year to another, three more important things do:

  1. How much oil we know about.
  2. How much of that oil we can technically extract.
  3. How much of that oil it is economical to extract.

Those three things change over time, and that makes a great deal of difference. We find oil in places we didn’t know it existed, and new technologies unlock previously inaccessible reserves. And, if oil does become scarcer, its price increases, thus incentivizing lower consumption and increased production. As long as prices are free to reflect economic reality, the “cornucopian” conclusion follows: oil will not run out before it becomes obsolete.

A late-nineteenth-century whaler could have made the same argument as Mortimer. Whales are finite resources. They reproduce slowly. Given humanity’s greed, want for light, and ever-faster whaling ships, Moby Dick doesn’t stand a chance. His kind will perish sometime next millennium.

Except, of course, reality played out very differently. Today, almost all species of baleen whales on the IUCN’s Red List are several rungs above Critically Endangered (most are on the LC – Least Concern – rung), and all but two species of Right Whales are increasing. Humpbacks, those majestic creatures that astonish tourists in every ocean, may have surpassed their pre-industrial numbers, according to research reported on in Time Magazine.

What happened was that new inventions outcompeted whale oil for fuel and lighting, and consumer demands – and wealth – changed, so much so that almost every country has banned the hunting of whales.

The Cornucopia of raw materials

Raw materials like copper, silver, tin, or wood are finite. Thus, the pessimists worry, they must one day run out. But this conclusion is wrong. Raw materials are physically limited, but resources are economically infinite. That’s because economic value isn’t intrinsic to the physical item. Instead, value is subjective, existing only in the minds of consumers and in the ends that consumers choose. In other words, we can get an infinite amount of value from a given quantity of material.

Andrew McAfee from MIT showed that we can get more from less. The number of atoms may be fixed, but those atoms can be combined and recombined in an infinite variety of ways, allowing us to satisfy our needs and desires in ways that are better, faster, cheaper, and less wasteful. Furthermore, there is no limit to how much we can specialize or restructure our labor, production, and consumption.

Materials can also be re-used. Almost all the copper that humanity has ever extracted from the Earth (some three trillion tons or so) is still with us – in the buildings that shelter us, the wiring that moves our electricity, the equipment that entertains us, and the servers that power and store our digital lives.

We have hundreds of years of uranium reserves left and even more of coal. The known deposits of bauxite, the ore from which we extract aluminum, will last for hundreds of years at current use. Or perhaps even longer than that. When raw materials become too “scarce” and, therefore, too expensive, we will switch to using something else to power our civilization. While there is some final quantity of oil and other raw materials in the ground, market prices and technological improvements will ensure that we will never use them all. They will last forever.

Heying and Weinstein’s “Cornucopianism” charge may be countered by another word, a more empirically sound and researched one: Marian Tupy and Gale Pooley call it “Superabundance” – “a condition where abundance is increasing at a faster rate than the population is growing.” They show that 50 common raw materials have become less scarce over the last forty years when we adjust for inflation and increases in income.

Contrary to claims of scarcity, it seems that more people and more economic growth tend to benefit, not impoverish, humanity. Although the planet houses many more people who are competing for the same materials, we have more access to more raw materials than we had twenty or forty years ago. This is a feature, not a blip or an accidental bug.

When we properly consider the power of market prices to ration resources, our ability to uncover substitutes, and the history of technological change, a very counterintuitive conclusion emerges: non-renewable resources, like oil or copper, never run out.

That may not be the best of all possible worlds, but it’s a lot better than most people think.

Blog Post | Mineral Production

No, We Won’t Run Out of Resources

We’ve been adapting to resource scarcity for millennia. The idea that we would stop today, at the pinnacle of our development so far, is a peculiar one.

Pessimists often claim that human progress is about to come to a screeching halt. They say that the resources that make progress possible are about to run out, dooming us to a reversal in living standards. The Club of Rome, along with nearly every environmentalist, tells us that incessantly, usually pointing to a supposed mineral shortage that will end civilization. The pessimists insist that everything must be recycled and that we must have a completely circular economy. Alas, they fail to understand how the mineral industry actually works. On a deeper level, they fail to understand that humans have agency. We are not merely buffeted by the natural world but can solve problems ourselves.

Another group that fails to appreciate our problem-solving ability is the American Chemical Society (ACS). The Society has a list of “endangered elements,” which they think might run out in the near future. The idea that we could run out of hafnium is enough to make geologists guffaw – I actually tried this once, and that’s what happened: not just giggles but proper belly laughs. Germanium, another on that list of likely shortages, illustrates my point even better. The world doesn’t use much of it, perhaps 150 tons a year. Some of that is recycled. (There’s nothing wrong with recycling, but insisting that we must recycle is wrong.)

We first started using germanium for electronics before we switched to using silicon computer chips. Germanium is still the material of choice for getting a warm and fuzzy sound on a guitar pedal, but today, germanium is mostly used for night sights and long-distance fiber optics. That’s because adding a little germanium to glass allows it to carry light for longer distances. So, we like having germanium around, and we would miss it if we ran out.

Early germanium extraction methods used coal. There’s a little germanium in nearly all coal and more in certain other deposits. If you collect the vapor after burning coal, the germanium concentrates in the ash and can be collected. The chemical company Johnson Matthey used to have a plant in Cheshire, England, to the delight of fuzzy guitar pedal enthusiasts. Later, we realized that certain zinc ores could also provide germanium, and the world supply pivoted to a zinc mine in DR Congo. Then, we got wise to the harmful effects of coal dust floating around the countryside. Coal power plants installed electrostatic precipitators on their chimneys to collect the dust, and coal once again became the primary source of the world’s germanium.

It might seem lucky that today’s germanium supply is just a byproduct of producing electricity. But to think of it as luck is to get things the wrong way around. We are problem solvers, not just the recipients of happenstance. In the absence of that luck, we could build a factory to do it anyway. That’s how the world’s largest germanium producer, in China, works. They mine coal, burn it in a power station, and collect the germanium-infused dust. Rumor has it – and it might just be a rumor because it’s so cute – that the germanium content is so rich that they give the electricity away to the local town for free.

The point of my germanium example is to show that we are not dependent on the current methods of mineral extraction, nor do we need luck to avoid shortages. We are tool-making creatures. If we have a problem, we study the world around us and develop a way to solve it.

Like germanium, every item on the ACS list of “endangered elements” actually has a vast current supply. The current mineral extraction methods might have problems, but the total amount of resources that we can use is imponderable. And if our current methods come up a little short, we’ll find better methods of extraction.

Our adaptive abilities should be obvious, though they clearly are not. We’ve been adapting to resource scarcity for millennia, and the idea that we would stop today, at the pinnacle of our development so far, is a peculiar one.

Blog Post | Energy & Natural Resources

Resources Are More Abundant Than Ever, and People Are the Reason

Additional human beings add to our economic capacity rather than diminishing it, because people are the solvers of economic problems.

Our research into the relative abundance of resources began when we looked at updating the famous wager between the cornucopian University of Maryland economist Julian Simon (1932–1998) and three neo-Malthusian scholars: the Stanford University biologist Paul Ehrlich; the University of California, Berkeley ecologist John Harte; and the University of California, Berkeley scientist and future director of President Barack Obama’s White House Office of Science and Technology John P. Holdren.[1]

The Ehrlich group bet $200 each on five metals: chrome, copper, nickel, tin, and tungsten. Then they signed a futures contract which stipulated that Simon would sell these same quantities of metal to Ehrlich’s group for the same price in ten years’ time. Since price is a reflection of scarcity, if population increases made these metals scarcer, Simon would pay, but if they became more abundant, and therefore cheaper, Ehrlich would pay. The bet would last from September 29, 1980 to September 29, 1990.

Between 1980 and 1990, the world’s population rose from 4.4 billion to 5.3 billion, or 20.5 percent. Yet the price of the five-metal basket barely moved, rising in nominal terms from $1,000 to $1,003.93, or 0.4 percent. Given that inflation amounted to 57.4 percent, all five metals became cheaper in real terms. In October 1990, Ehrlich mailed Simon a spreadsheet of metal prices and a check for $576.07, which represented a 36 percent decrease in inflation-adjusted prices. Ehrlich’s wife, Anne, signed it.

Ehrlich and his group lost because they thought like biologists. In 1971, for example, Ehrlich and Holdren wrote that as “a population of organisms grows in a finite environment, sooner or later it will encounter a resource limit. This phenomenon, described by ecologists as reaching the ‘carrying capacity’ of the environment, applies to bacteria on a culture dish, to fruit flies in a jar of agar, and to buffalo on a prairie. It must also apply to man on this finite planet.”

Simon won because he thought like an economist. He understood the powers of incentives and the price mechanism to overcome resource shortages. Instead of the quantity of resources, he looked at the prices of resources. He saw resource scarcity as a temporary challenge that can be solved through greater efficiency, increased supply, development of substitutes, and so on.

The relationship between prices and innovation, Simon insisted, is dynamic. Relative scarcity leads to higher prices, higher prices create incentives for innovations, and innovations lead to abundance. Scarcity gets converted to abundance through the price system. The price system functions as long as the economy is based on property rights, the rule of law, and freedom of exchange. In relatively free economies, therefore, resources do not get depleted in the way that Ehrlich feared they would. In fact, resources tend to become more abundant.

Simon’s victory would have been even more impressive had he used time prices (TP). The TP denotes the amount of time that a buyer needs to work in order to earn enough money to be able to buy something. That is the relevant price from the individual’s vantage point. Unlike money prices, which are measured in dollars and cents, TPs are measured in hours and minutes of labor.

The easiest way to calculate TP is to divide the nominal price by the nominal hourly income. If an item costs you $1 and you earn $10 per hour, then that item will cost you 6 minutes of work. If the price of the same item increases to $1.10 and your hourly income increases to $12, then that item will only cost you 5 minutes and 24 seconds of work. The most important thing to remember is that as long as hourly income is increasing faster than the money price, the TP will decrease.

As we already noted, over the course of the Simon-Ehrlich wager, the nominal price of the five-metal basket rose by 0.4 percent. Over the same period, the average global nominal GDP per hour worked increased by about 67 percent. To calculate the TP of the five-metal basket, we divided the nominal prices of the basket by the average global nominal GDP per hour worked. We found that the average TP of the five-metal basket fell by almost 40 percent. Had Simon and Ehrlich used TPs, Ehrlich would have owed Simon $627.57, or 8.93 percent more than he actually paid.

Remember that the bet between Simon and Ehrlich took into account the nominal prices of the five metals on September 29, 1980 and September 29, 1990. However, if we look at the average annual nominal prices of the five metals between 1980 and 1990, the average TP of the five-metal basket declines by 54.8 percent. So, for the same length of work, the average inhabitant of the globe saw his resource abundance increase from 1 basket of the five metals to 2.21 baskets. That amounts to a 121 percent increase in the average personal resource abundance (pRA). The average compound annual growth rate in personal resource abundance (CAGR-pRA) came to 8.27 percent, thus indicating a doubling of the average pRA every 8.7 years.

Did Simon get lucky by picking a propitious decade for his bet with Ehrlich, as some scholars argue he did? We decided to use our methodology to bring the bet up to the present. Between 1980 and 2018, the average TP of the five-metal basket decreased by 57.3 percent. Instead of just one basket, therefore, the same length of work bought 2.34 baskets. That amounts to a 134 percent increase in the average pRA. The average CAGR-pRA came to 2.27 percent, thus indicating a doubling of the average pRA every 31 years.

Finally, we have decided to extend our analysis of the Simon-Ehrlich wager all the way back to 1900. Between 1900 and 2018, the nominal price of the five-metal basket increased by an average of 3,660 percent. We were not able to calculate average global nominal GDP per hour worked for a representative sample of countries going back to 1900, but we do have excellent data on the U.S. blue-collar hourly compensation rate and the U.S. unskilled hourly wage rate going back to the eighteenth century. We used those two as our denominators to calculate TPs.

The average nominal U.S. blue-collar worker hourly compensation rate increased by 22,800 percent. That means that the average TP of the five-metal basket fell by 89.2 percent between 1900 and 2018. Thus, the U.S. blue-collar worker saw his resource abundance increase from one basket of the five metals to 9.26 baskets. The average pRA increased by 826 percent. The average CAGR-pRA rate amounted to 1.91 percent, thus indicating a doubling of the average pRA every 36.7 years.

The average nominal U.S. unskilled worker hourly wage rate increased by 14,100 percent. As such, we found that the average TP of the five-metal basket fell by 82.6 percent between 1900 and 2018. So, the U.S. unskilled worker saw his resource abundance increase from one basket of the five metals in 1900 to 5.75 baskets in 2018. The average pRA increased by 475 percent. The average CAGR-pRA amounted to 1.49 percent, indicating a doubling of the average pRA every 46.7 years.

Table 1: Personal Resource Abundance Analysis of the Simon-Ehrlich Wager

Source: Authors’ calculations.

Note that the above Personal Resource Abundance analysis looked at the abundance of the five metals from the perspective of an individual human being. The question that we tried to answer was, “How much more abundant have resources become for an average inhabitant of the planet or a typical U.S. worker between two points in time?” We believe that this is a key question in resource economics.

Next, we introduce the Population Resource Abundance analysis, which estimates the rise in total abundance in the world in general and in the United States in particular. It is this Population Resource Abundance analysis that allows us to quantify the relationship between abundance of resources and population growth—a question that’s central to the disagreement between Simon and Ehrlich.

You can think of the difference between the two levels of analysis by using a pizza analogy. Personal Resource Abundance measures the size of a slice of pizza per person. Population Resource Abundance measures the size of the entire pizza pie.

Table 2: Population Resource Abundance Analysis of the Simon-Ehrlich Wager

Source: Authors’ calculations.

As noted, the world’s population rose by 20.5 percent between 1980 and 1990. Yet population resource abundance (PRA) rose from one pie to 2.64, or 164 percent. The compound annual growth rate in population resource abundance (CAGR-PRA) amounted to 10.21 percent, indicating a doubling of PRA every 7.13 years. Furthermore, we found that every one percent increase in population corresponded to an 8.41 percent increase in the PRA of the five metals.

Between 1980 and 2018, the world’s population rose by 71.2 percent. Yet PRA rose from one pie to 4.01, or 301 percent. The CAGR-PRA amounted to 3.72 percent, indicating a doubling of PRA every 18.97 years. Furthermore, we found that every one percent increase in population corresponded to a 4.23 percent increase in the PRA of the five metals.

Between 1900 and 2018, the U.S. population increased by 330.3 percent. Based on blue-collar compensation, the U.S. resource abundance (PRA) rose from one to 39.84, or 3,884 percent. The CAGR-PRA amounted to 3.17 percent, indicating a doubling of PRA every 22.2 years. Furthermore, we found that every one percent increase in the U.S. population corresponded to a 11.76 percent increase in the PRA of the five metals.

Based on the unskilled wage rate, the U.S. resource abundance (PRA) rose from one to 24.73 or 2,373 percent. The CAGR-PRA amounted to 2.76 percent, indicating a doubling of PRA every 25.5 years. Furthermore, we found that every one percent increase in the U.S. population corresponded to a 7.18 percent increase in the PRA of the five metals.

Figure 1

Source: Authors’ calculations.

Finally, we found that humanity is experiencing what we term Superabundance—a condition where abundance is increasing at a faster rate than the population is growing. Data suggests that additional human beings tend to benefit, rather than impoverish, the rest of humanity. That vindicates Julian Simon’s observation that:

There is no physical or economic reason why human resourcefulness and enterprise cannot forever continue to respond to impending shortages and existing problems with new expedients that, after an adjustment period, leave us better off than before the problem arose.… Adding more people will cause [short‐​run] problems, but at the same time there will be more people to solve these problems and leave us with the bonus of lower costs and less scarcity in the long run.… The ultimate resource is people—skilled, spirited, and hopeful people who will exert their wills and imaginations for their own benefit, and so, inevitably, for the benefit of us all.

This essay is based on an upcoming book by Marian L. Tupy and Gale Pooley with the working title The Age of Superabundance: How Population Growth and Freedom to Innovate Lead to Human Flourishing on an Infinitely Bountiful Planet.