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Energy Realism, Energy Optimism
I am honored to receive the Julian Simon award tonight. My thanks go to the Simon family and the Competitive Enterprise Institute for having this annual award to recognize and encourage new contributions in the “sustainable development” field that Simon pioneered. My appreciation also goes out to a number of groups within the classical liberal “structure of production” that have supported my intellectual development over the last quarter century, and in particular the Institute for Humane Studies at George Mason University, the Cato Institute, and the Atlas Economic Research Foundation.
Julian Simon was very interested in energy and energy-environmental issues. I have identified six of his themes in this area:
- Energy is “the master resource” because energy is pervasive in industrial activity, and energy allows us to transform resources into more valuable goods and services (such as turning salt water into drinking water, a very energy-intensive process)
- Natural resources originate from the mind, not the ground, and therefore are not depletable. Thus energy can be best understood as a pyramid of increasing substitutability and thus supply and not a “bell curve” with any particular hydrocarbon energy.
- The average person in market settings creates (transforms) more inanimate energy than he or she consumes.
- The average person in market settings improves the natural environment more than he or she despoils it.
- Anthropogenic (or man-made) climate change has benefits, not only costs, and human ingenuity can accentuate the positives and mitigate the negatives.
- Virtually every economic and environmental indicator of human welfare related to energy is positive when viewed over time, and these trends can continue indefinitely if the right institutional incentives can unleash the ultimate resource. And Julian Simon would bet on it!
The conclusion from the Simon worldview is that the energy Malthusians are wrong. The hydrocarbon-based energy economy is sustainable and becoming more so in market settings around the world.
I might add a prediction—that the hydrocarbon energy age could still be young, even quite young. The much-hyped emergence of a new renewable energy era by mid-century is less our energy future than our energy past when, indeed, renewables dominated the inanimate energy market. The next energy period is most likely to be the enhanced hydrocarbon era, marked by a technological progression whereby a variety of hydrocarbon energies have become almost perfect substitutes for each other in cleaner and cheaper ways. The recent commercialization of oil sands and orimulsion is creating a whole new competitive field for crude oil. Uneconomic natural gas reserves can now be upgraded into super-clean oil products. Add this to new combustion technologies lowering emissions and innovations such as the hybrid (gas/electric) vehicles, and the renewable, hydrogen-based energy economy seems as remote today as it was decades ago.
Progress has been made in the very contentious energy debate, thanks in part to the intellectual and marketing efforts of Julian Simon. Paul and Ann Ehrlich in their 1996 book, Betrayal of Science and Reason, admitted that “depleting” energies were not becoming scarcer and the air was growing cleaner. The Ehrlichs’ also stated that global cooling was not the problem Stephen Schneider and others once thought. The problem now was officially global warming.
Yesterday, the high profile energy debate was between Julian Simon and Paul Ehrlich. Today, the high profile debate is between Bjorn Lomborg and John Holdren. Holdren is the eminent Harvard Professor who is upset that he and his fellow “scientists” have lost valuable time by having to refute Dr. Lomborg’s claims made in The Skeptical Environmentalist. (Check for yourself—http://www.sciam.com). Holdren now says that inquiry about oil depletion is “asking the wrong question.” He says that the debate is not about “running out of energy” but “running out of cheap energy” and “running out of environment.” Say what? We are not running out of cheap energy and we are not running out of environment, according to the facts.
Holdren, who once advocated “de-developing” the United States to reduce energy usage, now says, “Affordable energy in ample quantities is the lifeblood of the industrial societies and a prerequisite for the economic development of the others.” This is the high ground that must be seized with energy and energy-environmental policy. The energy-is-good view gives a new urgency to the views of Julian Simon and the energy realist school—those individuals and institutions that support affordable, plentiful, reliable energy for not only the energy rich but also the 1.6 billion energy poor.
Conclusion
Ideas have consequences, and facts do too. And facts are what Julian Simon always brought to the fore. The energy realists are winning the intellectual war with energy sustainability whether or not the old-school depletionists or new-school climate alarmists realize it. New forms of hydrocarbon energies are sprouting up for the 21st century and far beyond, and the human influence on climate is simply not producing the crisis signs that the alarmists warn us about.
The political war concerning energy sustainability is another matter. Many battles remain, but with the legacy of Julian Simon and organizations such as the Competitive Enterprise Institute, I am confident that we can win intellectual war and triumph in many more political battles than are lost. This is good news indeed given society’s growing need for and expectations of the “master resource.”