

Economic Optimism? Yes, I’ll Take That Bet - tokenadult
http://www.nytimes.com/2010/12/28/science/28tierney.html

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Lagged2Death
I think one issue is the length of the bets. Ten years is a very long time for
a human bet, but it's not very long in terms of history, in terms of heavy
industrial technology, or in terms of Hubbert's ideas about resource peaks.

It was obvious that oil was a finite resource from the start, but it took the
better part of 100 years of exploitation for US oil production to peak. Five
or ten years doesn't seem long enough to reliably spot a trend on that scale.

I'm surprised Simmons expected such high prices. As the shock in 2008
illustrated, above a certain price, oil users cut back as much as they can,
which lowers the price again. A sustained price of 200 2005-era dollars per
barrel is a really high; that price would surely kill a lot of demand, which
would probably prevent it from being sustained. Eventually, we may see
$200/bbl, but it will probably be quite a while.

I know hindsight is 20/20, but still, I would have thought a better bet would
be something about the average price of oil over (say) a five year period
always being higher than the average price over the previous five year period.
Then again, maybe Tierney wouldn't have taken that bet.

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kbutler
The effect of increased prices is twofold - the obvious decrease in
consumption (and thus demand, exerting a downward pressure on price) and also
an increase in the incentive to innovate - to find alternatives, and to make
better use of the valuable resource.

The "cornucopian" belief is that the effect of innovation is greater than the
effect of finite resources.

That is, because we innovate, real prices decrease (with prices best measured
in amount of human labor to obtain a benefit). Sometimes the price of a
specific commodity increases (e.g., hours of labor to receive one liter of
oil), but the cost of the benefit decreases (e.g., hours of labor to travel
100 miles).

I'd be very interested to see counterexamples, where the human cost of a
benefit increases.

kb

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wazoox
_> The "cornucopian" belief is that the effect of innovation is greater than
the effect of finite resources._

This doesn't really make sense, of course. A finite resource remains finite
whatever we do. Evidently, as said some Saudi oil minister, "Stone Age didn't
end by lack of stones"n however we face now a very different situation : the
end of cheap petrol is near, but we still have no better or even just roughly
equivalent alternative.

As some remarked, until now we always went from one main energy source to a
better one (animal and human power to coal, coal to oil). We have no better
energy source in view.

Sure, we could be optimistic, or pessimistic, however we know for sure that
humans already met decadency by environmental destruction and resource
exhaustion several times, therefore I don't think that we should just sweep it
away with a "Malthus was wrong!".

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brc
That's just not true. If you're in the USA, today, you can walk down to a
Nissan dealer and order a Leaf : a highway capable (relatively, for new tech)
affordable family car which runs on electricity. Electricity is a far superior
power source than oil, given it can be generated in a variety of ways. And the
technology is here, today, available. The technology to generate and
distribute electricity is here, today, available.

The reason we're not all in electric cars is a combination of inertia and
newness of the tech. But if the oil price doubled in the next 12 months, the
Leaf assembly plant would be running at full capacity. But I disagree strongly
that there is no alternative to oil.

Malthus was wrong and will continually be proved so. You can blindly just
accept human ingenuity will drive things forward as long as people are allowed
to keep the bulk of the reward for their efforts. It might be a leap of faith,
but it's a better one to take than living with a doom and gloom mentality.

~~~
wazoox
_> Malthus was wrong and will continually be proved so._

Malthus was wrong at some points in history, and right at others. The
Sumerians, the Pascuans, probably the Mayans and some others proved Malthus
right several times.

 _> You can blindly just accept human ingenuity will drive things forward as
long as people are allowed to keep the bulk of the reward for their efforts._

No, this is so fantastically wrong that I don't know where to start. This is
so utter bullshit I'd want to cry.

Human ingenuity can't replace resources. We've been awash with resources for a
few decades, but that doesn't mean that times of scarcity won't possibly
happen again.

 _> It might be a leap of faith, but it's a better one to take than living
with a doom and gloom mentality._

No, I'd rather live with the truth, how uncomfortable it is. Blind faith is a
terrible poison to the mind. As said George Bernard Shaw :

 _The fact that a believer is happier than a sceptic is no more to the point
than the fact that a drunken man is happier than a sober one. The happiness of
credulity is a cheap and dangerous quality._

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JoachimSchipper
I like the idea of economists betting on future prices etc - it makes
hypotheses much more testable.

That said, I'm not entirely convinced that pretending that the oil supply is
infinite is wise.

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jswinghammer
Almost no one goes back and checks the predictions of economists. When they do
it's a bad scene.

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JoachimSchipper
Yes, isn't that exactly my point?

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jswinghammer
I agreed with John Tierney's bet when I read about it at the time but for
different reasons. I believed that cheap money was bidding up the prices of
oil and other commodities. I believe this is true again now that China and
India have huge levels of credit expansion.

Eventually these bubbles will burst and we'll see a correction again. Assuming
that the Federal Reserve doesn't do its' part to keep it going.

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pvdm
"...new oil sands projects in Canada now supply more oil to the United States
than Saudi Arabia does." Is this true ? That statement triggered some doubts
in my mind.

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known
Breaking big corporations into smaller companies will create numerous jobs.

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tocomment
Is there really an abundance of natural gas? Why is that?

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laut
Yes. Recently new drilling techniques, which make it economical to drill for
shale gas, have been found.

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StrawberryFrog
That's the kind of bet that you can win repeatedly ... until the time comes
that you don't, and break the bank. Like betting on prices rising in a bubble.

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jessriedel
This wasn't a bet with long odds. It was 50:50.

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StrawberryFrog
The two people agreed to 50:50 odds. That does not mean that the underlying
phenomena are anything like that.

