The Simon Abundance Index: Debunking the myth of resource depletion and ‘peak oil’ – Ivo Vegter

In this article, Ivo Vegter challenges the idea that human activity on Earth is unsustainable due to the belief that we are running out of non-renewable resources. Vegter uses data and charts to illustrate that the Earth’s crust contains a vast amount of non-renewable resources, and we are currently mining only a small fraction of it per year. He also highlights the failed predictions of ‘peak oil’ and argues that the fear of resource depletion is rooted in the outdated Malthusianism worldview. Ultimately, Vegter advocates for a more optimistic view of humanity’s ability to innovate and find solutions to environmental challenges.


The age of resource abundance

By Ivo Vegter*

A core belief of those who believe human activity on Earth is unsustainable is that we are running out, or soon will run out, of non-renewable resources. The Simon Abundance Index says otherwise.

It is hard to grasp scale. The largest open-cast mine in the world by volume of material removed, Codelco’s Chuquicamata copper mine in northern Chile, which took over a century to dig, is more than a kilometre deep. It looks, and is, vast.

When you look at this environmental protest against brown coal at a strip mine in Garzweiler, Germany, the mine looks like a massive scar in the landscape, reducing the protesters to mere ants.

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Images such as these have convinced many people that we’re extracting so much non-renewable material from the Earth that it cannot possibly last. 

Yet few people comprehend the sheer volume of the Earth’s crust. What humanity has mined in its history is a mere pinprick, compared to the non-renewable resources still theoretically recoverable.

In 2021, we mined about 2.8 billion tons of metals, the vast majority of which (93.4%) was iron ore. But the crust is on average 40km deep, ten times as deep as our deepest mines, and weighs about 6×1022kg.

So, at present, we’re mining about 0.000000000005% of the crust per year. 

To illustrate, scientists estimate that there are about one quadrillion metric tons of diamonds beneath the Earth’s surface. It is estimated that a total of 1.2 billion carats, or 2 400 tons, have ever been mined. That is 0.00000024% of the total theoretical supply.

Of course I’m not suggesting we could possibly exploit more than a small fraction of the Earth’s crust, but these numbers do put the scale of our resource extraction into perspective.

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Peak oil

Let’s take oil as another example. For longer than I’ve been alive, we’ve been told that we are about to reach, or have reached, peak oil. We’re running out.

The original forecast was made in 1956 by Marion King Hubbert, a Shell geologist who estimated that US oil production would peak no later than 1975, and global oil production would peak between 1985 and 2000. Technically, it is defined as the time when 50% of the world’s oil reserves will have been depleted.

Here is a chart of actual global oil production: 

Other than a pandemic-induced blip, there is no sign that oil production is in crisis.

Yet peak oil alarmists are still at it, and are still fretting about population growth (although that scare story also turned out to be a damp squib).

Mainstream media have been recycling peak oil stories for decades. 

Back in 2008, National Public Radio reported that world oil production has already peaked, or flattened, according those who believe in peak oil theory. 

They were wrong. More than a decade later, in 2020, Bloomberg wrote: ‘Peak oil is suddenly upon us’.

‘What is peak oil? Have we reached it?’ asked Treehugger in 2021.

‘Peak oil has finally arrived. No, really’, declared the Washington Post in 2022.

Eventually, of course, they’ll be right, as oil demand declines in favour of alternative resources, such as solar or nuclear energy. For now, however, here’s a chart of proven oil reserves for the last 40 years. Clearly, there’s no sign to panic, just yet.

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Thomas Malthus

The resource depletion fear, as indicated by the peak oil alarmists’ concern over population growth, is classic Malthusianism. Thomas Malthus was an economist who in 1798 published An Essay on the Principle of Population

He wrote it as an antidote to the age’s optimism about the progress of society, and argued that growing production of food and other resources improved the general welfare, but that this improvement could not last, because it led to population growth, which, being exponential, would inevitably outstrip the linear growth in productivity.

Thus, society would suffer war and famine, which would reduce the population until it once again fell below the food and resource production level required for a decent standard of living, upon which the cycle would repeat itself.

History has proven Malthus wrong, decade after decade, and century after century, and yet this remains the dominant world view of environmentalists: that we will inevitably reach a point at which the demands of a growing population outstrip the resources humanity can command to feed it, by which time either the Earth’s resources will be depleted, or the human population will crash catastrophically, or both.

Paul Ehrlich, author of The Population Bomb in 1968, was – along with the Club of Rome – among the most famous early proponents of neo-Malthusianism in the modern era of environmentalism.

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Julian Simon

It was to counter this idea, that resources would become more scarce as the human population grew, that Julian Simon, an environmental economist and senior fellow at the Cato Institute, entered into a wager with Ehrlich in 1980.

Ehrlich has written, ‘If I were a gambler, I would take even money that England will not exist in the year 2000’.

Simon offered to take that bet, and responded with something more concrete. He offered to stake $10 000 on his belief that ‘the cost of non-government-controlled raw materials (including grain and oil) will not rise in the long run’. 

Using price as a mutually agreed-upon proxy for resource scarcity, Simon asked Ehrlich to choose any date more than a year in the future, and select five commodities that he believed would become more scarce (i.e. cost more) on that date. 

Ehrlich chose a date ten years in the future, in 1990, and picked copper, chromium, nickel, tin, and tungsten. 

He lost, on all five counts. (For more on that famous bet, read The Doomslayer, a 1997 article in Wired magazine.)

Simon’s thesis is not that the Earth’s resources are limitless, although he is often dismissed as a cornucopian. His belief is a little more nuanced. He believes that the notion of ‘finite resources’ is nonsensical for practical purposes, since it cannot account for what he called the ‘ultimate resource’, namely human ingenuity.

If a particular resource becomes more scarce, its price will rise. This incentivises people to either discover more of it, or economise on its use, or recycle it, or, in extremis, develop a substitute. 

This is why, when assessed by unit price adjusted for wage growth and inflation, most resources have become less scarce between 1880 and 1990. This is also why, Simon argued, a growing population is actually a positive development: it produces more human productivity and more human ingenuity, which, by their action upon scarce resources, makes the value produced from resources more abundant.

Abundance Index

Julian Simon is no longer with us. He died in 1998, a year after that Wired profile was published. His theory about resource abundance, however, lives on. 

It lives on in the Simon Abundance Index (SAI), launched five years ago by Marian L. Tupy (another Cato Institute fellow who may be familiar to South Africans of a classical liberal or libertarian persuasion), and Gale Pooley, at Human Progress.

The sixth edition of the index shows that the Covid-19 pandemic, and government responses to it, have caused a substantial turnaround in the long-term trend, which is that resources have on average become less expensive, and consequently, more abundant, since 1980. 

In 2022, the index stood 420% above its 1980 baseline, implying a compound annual growth rate of 4% and a doubling of resource abundance every 17.65 years.

The SAI measures the ‘time price’ of 50 basic commodities by dividing their nominal unit price by the average global nominal income per hour worked. Because average wages have risen much faster than commodity prices, their real prices declined. 

By adjusting for population growth, Tupy and Pooley calculated that the personal resource abundance of the average inhabitant of planet Earth rose by 190% between 1980 and 2022. That means that one hour of work today will buy someone 2.9 times the resources that one hour of work would have bought them in 1980.

The authors expect the SAI to resume growing in 2023, as economies begin to recover from the pandemic crisis. 

They conclude: ‘Despite the recent decline in SAI, resource abundance is still increasing at a faster rate than the population is growing. We call that relationship superabundance.’

Finite planet?

Describing the planet as ‘finite’ is a trite observation. It serves the doom-mongers of a Malthusian worldview, but it isn’t particularly useful for policy decisions.

It ignores both relative scale and the impact of the most important attribute we possess: human resourcefulness.

Describing the Earth’s resources as abundant, or even superabundant, does not mean that we will never run out of any particular resource, or that human progress does not involve significant resource management challenges. 

Humanity’s impact on the extent and quality of natural habitat makes this abundantly clear. 

It does, however, mean that we might be a little more confident that not every crisis is an existential crisis, and that people have the ability to adapt, to change their resource use, and to bring their ingenuity to bear on new problems as they develop. 

Malthus thought the progress of the 18th century was unsustainable. Here we are, more than two centuries later, still making progress. Ehrlich thought that the progress of the first half of the 20th century would end by the 1970s and 1980s. Yet here we are, more than 50 years later, still making progress, still producing enough for a growing population to eat, and still making massive strides in reducing poverty. 

If history can teach us anything, it is surely that Julian Simon’s worldview is the correct one. And by his standards, we’re not doing so badly at all.

*Ivo Vegter is a freelance journalist, columnist and speaker who loves debunking myths and misconceptions, and addresses topics from the perspective of individual liberty and free markets. Follow him on Twitter, @IvoVegter.

The views of the writer are not necessarily the views of the Daily Friend or the IRR.

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