Category — Kirzner, Israel
“If resources are not fixed but created, then the nature of the scarcity problem changes dramatically. For the technological means involved in the use of resources determines their creation and therefore the extent of their scarcity. The nature of the scarcity is not outside the process (that is natural), but a condition of it.”
- Tom DeGregori (1987). “Resources Are Not; They Become: An Institutional Theory.” Journal of Economic Issues, p. 1258.
The confounding of physics with economics has plagued a real-world understanding of mineral resource development. The phenomenon of entropy and the laws of thermodynamics rule in their domain. But there is no economic law analogous to the physical conservation of matter. There is no law of conservation of value; value is continually, routinely created by the market process. And this value creation does not deplete–just the opposite.
This insight reorients the peak-oil debate from pessimism about hypothetical future physical resources to here-and-now concerns over incentives and institutions–or the ability of a free market to create a robust energy future.
Market Entrepreneurship … Mineral ‘Resourceship’
Israel Kirzner in the Austrian-School tradition has emphasized the open-endedness of market entrepreneurship. “Entrepreneurial alertness [is] in principle inexhaustible,” Kirzner has stated, wholly rejecting the notion of a “potential stock of entrepreneurial alertness in a society as some quantity ‘available to be used by society’.” In the vernacular of the oil industry, there are no reservoirs of proved, probable, or speculative quantities for entrepreneurship.
The institutionalist conception of knowledge as the ultimate resource powerfully complements an Austrian theory of resources. Thomas DeGregori has defined resources as “a set of capabilities” and “finite but unbounded.” He restated and embellished the “resources are not, they become” thesis of his mentor Erich Zimmermann as follows: [Read more →]
December 29, 2011 2 Comments