Don Boudreaux is on a roll, evidently. Here, he explains why we’ll never run out of oil. This excerpt, pistachio example from Russ Roberts, goes far in explaining the insights of the late Julian Simon, whom politicians and peak-oiler routinely ignore.
My colleague Russ Roberts explains why in his book The Invisible Heart. Imagine, Russ says, a room full of pistachio nuts. You love pistachios and can eat all that you wish as long as you throw each empty shell back into the room whenever you eat a nut. You might suppose that you’ll eventually devour all of the nuts in the room. Their number, after all, is finite.
But some thought reveals this conclusion to be, well, nutty. At the start it’s easy to find pistachio shells containing nuts. The more you eat, though, the more difficult it becomes to find uneaten nuts among the increasing number of empty shells. Eventually, it will not be worth the time and effort required to search amidst the empty shells for the relatively few remaining nuts. You’ll voluntarily leave uneaten pistachios in the room.
And so it is with oil. As we continue using oil, getting more of it becomes increasingly difficult. This increasing difficulty of finding and extracting oil is reflected in its higher price — a phenomenon that prompts consumers to consume oil more carefully and prompts producers to explore for alternatives.
That we’ll never run out is counter-intuitive. Notice their emphasis on price signals. Prices, rich with information and built-in incentives, will carry us to alternatives. Not central planners and Manhattan Projects funded by tax dollars.