Mona Mallard Duct Tape Industries, the world's a leading producer of duct tape (that all-purpose, omni-present, shiny gray tape), is located right here in Shady Valley. Perhaps you've heard that they recently developed a new-fangled form of duct tape that's certain to revolutionize duct tape as we know it. This revolutionary development has, however, created a "situation" that we, pedestrian explorers of the economy, should consider. Mona Mallard's new duct tape uses "quagliminium," a relatively limited mineral found only in the quaint and courteous Republic of Northwest Queoldiola. Prior to this duct tape development, quagliminium had only one use, as lubricant for OmniStraight shoestring straighteners. The Northwest Queoldiolan supplies were sufficient to lubricate shoestring straighteners well into the year 3000. As a duct tape input, though, quagliminium deposits will be exhausted in a scant 50 years. Should we, could we, allow Mona Mallard to exhaust the supply of quagliminium? If they do, how will future generations lubricate their shoestring straighteners? Should we call for a moratorium on quagliminium use?

We Eat to Live

Before we get too deeply into the question of conserving quagliminium and other natural resources, we must face an unwavering fact of human existence. To perpetuate our lives, we must (let me reiterate MUST) make use of our planet's natural resources. We MUST cut down trees, bust the sod with tractors, suck oil from the ground, bull-doze an occasional mountain, slaughter some cows, and yes, use quagliminium. Our natural environment can not remain in it's pristine, natural state as long as we're on the planet.

The quality side of our natural environment is discussed in more detail under the heading of pollution. The next few pages are devoted to the question of quantity.

A Shrinking Pie

My favorite planet -- the third one from the sun -- is blessed with bountiful natural resources. It provides us with an abundance of raw materials that we have used over the millennia to satisfy our myriad wants and needs. But, as we noted all of the way back in Fact 1, Our Limited Pie, these natural resources are limited. Our planet came with only so much stuff. Certainly the quantities are large, but they are limited. This, of course, is our age old problem of scarcity.

The situation facing quagliminium is representative of that for most natural resources on our planet. Our supplies of fossil fuels (coal, oil, and natural gas), minerals, clean air and water, fertile soil, wilderness areas, and, well, most every natural feature on the planet, seem to be on a rapid road to exhaustion.

The reason for this is two-fold:

• First, we have a great many people roaming around the planet, moreso than at any time since the beginning of time. At last count, there were 5 1/2 billion sets of wants and needs seeking satisfaction.

• Second, we're rapidly increasing the standard of living -- that is, the quantity and quality of stuff consumed -- of these 5 1/2 billion people. Providing food, clothing, and video games for 5 1/2 billion people requires increasing amounts of natural resources.

Let's reiterate that we, right now at this very moment, are hitting the pinnacle of humanity's use of natural resources. We are mining, extracting, and transforming our natural resources at a rate unmatched in the history of our planet. Pretty awesome thought, eh? Let's dig a little deeper.

All Resources are not Created Equal

While our resources are fixed, some are more fixed than others. Economists, and others who lose their hair worrying about the supplies of natural resources, like to note three sorts:

• Perpetual. These are resources, like rainfall and sunshine, that persist regardless of anything we do. The sun keeps shining and the rain continues to fall. The amount available today is certainly fixed, but like magic, their supplies are automatically replenished tomorrow.

• Renewable. These are resources, like plants and animals, that naturally perpetuate themselves without any actions on our part. Their supplies are also fixed at any given time, but they can be expanded. In fact, unlike perpetual resources, we can affect the supplies of renewable ones. We can help their growth -- a process that is exemplified by farming, forestry, and fisheries. Or we can exhaust their supplies, if we're not careful. We haven't the space to list the plant and animal species that have achieved the distinction of extinction in the last 100 years through the, often unknowing, efforts of human beings.

• Nonrenewable. These are other resources, like fossil fuels and minerals that have absolutely, totally, completely fixed amounts for all time. Some of these resources (minerals) were bestowed upon our planet by the forces creating the universe billions of years ago. Others (fossil fuels) were provided by the benevolence of the geological forces shaping our planet a scant hundred million years ago. The forces creating them are unlikely to return in the foreseeable future. Once these resources are used up, they are gone, nada, no more.

Making the Most of What We Have

On the one hand, we have natural resources that are limited in different ways. On the other hand, we have 5 1/2 billion people demanding goods and other stuff produced from these resources. Our mission is to determine the best -- that is, most efficient -- way of using these resources.

It is not, however, just those 5 1/2 billion people that enter into our efficiency question. Billions of people, yet unborn, will be greatly affected by our use of natural resources today. Any resources we use now can not be used by future generations. Let's see what we need to consider for each of the three sorts of resources noted above.

• Let the sun shine in. We don't need to concern ourselves over the use of perpetual resources. It matters not how much we use today, because more will be waiting tomorrow. In fact, from an efficiency view, we should make the most use of any and all available perpetual resources. When we don't use perpetual resources, we're missing out an a valuable opportunity that has absolutely no cost. Let me reiterate that point. Using perpetual resources -- especially the sun's energy -- imposes no opportunity cost on future generations. This is as close as we can get to a free good.

• Use, but don't abuse. Renewable resources can be used like perpetual resources, to a point. Renewable resources have what we can call a "rate of regeneration," that is, the natural rate of growth. So long as the rate we use renewable resources is less than this rate of regeneration, we're in good shape. We'll never exhaust the supply or cause extinction. For example, if 10,000 trout in a stream have a natural 5 percent growth rate, then we can catch 500 each year without reducing the total below 10,000. Moreover, if a new seedling is planted each time a mature tree is chopped down, then our forests will continue into perpetuity. Problems, of course, result when our use outpaces regeneration.

• Use a little, save a little. The question facing nonrenewable resources is: How much do we use today to satisfy our wants and needs, and how much do we save for future wants and needs? Each drop of oil, every cubic inch of natural gas, and any molecule of iron used today imposes an opportunity cost on humans of the future. We get it and they don't. For efficiency's sake, we need to make sure that the value we get from today's use is equal to the opportunity cost on the future -- the value future generations give up. We need to spend more time on this question. Read on.

An Unknown Value

There's a big problem in efficiently using nonrenewable resources because we don't know the opportunity cost imposed on the future. In that the people are yet to be born, we don't know what value they'll place on resources and the goods they produce. Will our descendants 100 years from now think a gallon of gasoline is worth $1? Will they think it's worth 10 cents? $10? Who knows? We certainly don't. Not now. Not today.

If we don't know the future value, then how can we decide how much to use today and how much to save for tomorrow. If, for example, we conserve a gallon of gasoline, giving up $1 worth of satisfaction in the process, but our descendants give it a 10 cent value, then we made a big mistake. We've traded $1 dollar of satisfaction today, for 10 cents of satisfaction tomorrow. Alternatively, if we use a $1 gallon of gasoline now that would have been worth $10 for future humans, then we've screwed up once again. We've lost $10 of future satisfaction for $1 of current gain.

Thoughts on Future Value

While we may not know what the future will bring, we can make some educated guesses. Let's ponder some of the things that are likely to affect the future value of a nonrenewable natural resources. In that value is affected by both supply and demand, let's consider each.

• On the supply side, the most obvious source of value is the quantity of nonrenewable resources available. All things considered, if the supply is less, the value is likely to be higher. We naturally tend to value stuff more when we have less of it. This alone would make future, diminished supplies of nonrenewable resources more valuable.

• On the demand side, the value of nonrenewable resources springs from two related items. First, resources are more valuable when they produce more valuable (consumer satisfying) goods. Oil is valuable today, because it's used to power our beloved and exceedingly valuable cars. Future supplies of oil would be less valuable it future people didn't value cars as greatly. Second, resources are more or less valuable depending on the availability of alternatives used to produce valuable goods. A tankful of oil is much less valuable if we have another source of car fuel.

Taken together, these two items suggest that our future generations will tend to place a greater value on our (their) shrinking supplies of nonrenewable resources, unless and until alternative resources are found.

A Whimper, Not a Bang

When we use nonrenewable resources today, their prices (that is, values) will tend to rise into the future. With smaller supplies, future generations will value what's left more dearly. As such, they (the future folk) are naturally going to conserve. They're going to direct what's left to their own highest valued uses. They'll also seek out alternatives to their limited supplies.

Contrary to occasional projections of gloom and doom, we're not likely to suddenly "run out" of our finite natural resources. Over the years, our resources will dwindle and we'll be forced to develope, discover, or invent new ones. We may eventually run out of some resources, but it won't be an event reported with blaring headlines in the morning newspaper. It'll probably be little more than a sentence or two buried in a book (or on computer disk) somewhere deep in dusty library: "Historians estimate that ________ (fill in your favorite nonrenewable resource) was no longer used during the first/last (pick one) half of the _______ century."

Some Options

The question, though, is what can we, or should we, do at the present. Should we conserve the limited resources we have, to reduce the opportunity cost on future generations? Should we let the future worry about their own resources?

• Conserve. If we pursue the option of intense conservation, saving as much as we can today, then future will certainly have more resources available. Is this, however, a wise choice? Historically, each generation has been better off (higher living standard) that the previous one. Technological advances are largely responsible for this. As such, by conserving, we're probably sacrificing needlessly. We may conserve gasoline for cars that will never be built, replaced instead with something far superior.

• Invest. The probable prosperity of posterity, however, should not be taken for granted. Exhausting our resources today, doesn't mean they should be used unwisely. Technological advances and a rising standard of living are the result of investment. We have a high living standard today because our ancestors had the foresight to invest in productive resources. We could use our nonrenewable resources for current gratification. If we, however, used those resources for investment in technology, education, research, and capital, then future generations will be better able to deal with exhausted supplies.

This all means that we shouldn't be overly concerned with future supplies of quagliminium. If society wants and needs the new-fangled duct tape developed by Mona Mallard Duct Tape Industries, then we don't want to haphazardly prevent it's production. As the supply of quagliminium runs out, then OmniStraight will have the impetus to seek out new lubricants for its shoestring straighteners. In fact, they might find or develop an even better lubricant. That's how it has worked before. Conserving just for conservation's sake usually creates unnecessary hardships.

With this in mind, here are a few tips:

Natural Resource Conservation Tips

• Care should be taken NOT to overuse renewable resources, like plant and animal life. If used properly, then can last into perpetuity.

• Perpetual resources need to be used as much as possible. Each day that sunshine goes unused is a wasted day. This is an area of public (government) investment that is sorely lacking. A great deal of solar energy technology is on the horizon, but it needs the big-time investment bucks that only government can provide. If you ever considered writing an elected official over anything, this is a good choice.

• We're probably more concerned with exhausting our nonrenewable resources than we need to be. They WILL be exhausted -- eventually. Our concern is best directed toward HOW they're used before exhaustion. The more we use these resources for investments in technology, education, and productive capital, the fewer problems our descendants will face.

• Another way to alleviated some problems of resource exhaustion, one that's growing in importance, is recycling. Every ton of materials reused today, is a ton of stuff that's not extracted from the ground. Recycling is a double-bonus coupon for our society. Not only does it limit the use of resources, it also reduces pollution.

A Tycoon Of The MUTUAL FUNDSxxx

The Economics Of Dueling POLITICAL VIEWS

Today, you are likely to spend a great deal of time searching for a specialty store hoping to buy either a pair of blue silicon oven mitts or a coffee cup commemorating the 2000 Olympics. Be on the lookout for telephone calls from former employers.
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