Short-term versus long-term resource economics

Pine needles

The Globe and Mail is reporting on a letter send by former Alaska Governor Sarah Palin to British Columbia Premier Gordon Campbell. It complains about acid mine drainage from the Tulsequah Chief Mine in northwest B.C. Similar problems with the long-term leaching of acid and heavy metal affect many mines in Canada and around the world, including the former copper mine at Britannia, between Vancouver and Whistler.

The general pattern here is one that Frederic Bastiat would have appreciated. People can readily see the apparent economic gains associated with an operating mine, in the form of tax revenues, jobs, foreign exchange earnings, etc. What cannot be clearly seen are the long-term costs associated with all the consequences of that mining. In some cases, these significantly exceed the short-term benefits, meaning the mine has actually been a net destroyer of wealth and human welfare. Jared Diamond’s Collapse also makes this point forcefully, with many examples. Quite possibly, this is the case with fossil fuel industries today, particularly those exploiting unconventional sources of hydrocarbons like the oil sands. By tapping into hydrocarbon reserves that would otherwise remain dormant, they increase the total quantity of greenhouse gasses humanity will add to the atmosphere, increasing the severity of climate change and the probability of abrupt, catastrophic, or runaway warming. Of course, there are also the toxic effects of pollution at the sites of fossil fuel production and use, as well as the destruction of habitat and any associated reclamation costs.

The problem is not one that can be easily solved. Politicians will always be more swayed by apparent and immediate gains and losses than by distant and concealed ones. That being said, we do have the opportunity to counter some of the flawed arguments used to justify harmful practices. Next time someone claims that exports from the oil sands are crucial to Canada’s economic development, consider raising the possibility that their exploitation probably destroys wealth in the bigger picture.

Author: Milan

In the spring of 2005, I graduated from the University of British Columbia with a degree in International Relations and a general focus in the area of environmental politics. In the fall of 2005, I began reading for an M.Phil in IR at Wadham College, Oxford. Outside school, I am very interested in photography, writing, and the outdoors. I am writing this blog to keep in touch with friends and family around the world, provide a more personal view of graduate student life in Oxford, and pass on some lessons I've learned here.

30 thoughts on “Short-term versus long-term resource economics”

  1. The oil sands will never really be remediated, so that seems more like an ecological cost than a deferred economic one. That said, people before probably never expected mines to get as much post-closure management as some do now.

  2. “so that seems more like an ecological cost than a deferred economic one”

    All costs are economic – that’s what it means for it to be expressible. I think what you mean is the cost is simply externalized, the people displaced never compensated. The people who might have used those lands if they had not been destroyed need not be compensated – but this is still a cost born by those people in the form of an unattained benefit.

    The externalization of cost is the hidden giant whose concealment makes capitalism appear “profitable”.

  3. In an ideal world, people would never have used at least part of those lands. I think there can be ecological costs that have no economic meaning.

  4. “In an ideal world, people would never have used at least part of those lands. ”

    Now, I can’t say that these lands have been used by first nations for thousands of years, because I don’t know. But I do know that this kind of assumption (that the vast lands of Canada are mostly un-used) is the exact assumption used to legitimate colonisation, which is really just a nice word for taking what already belonged to someone and pretending it was unused.

    Also, what makes the world in which none of those lands are used so ideal? What’s non-ideal about sustainable hunting and fishing?

  5. We very rarely hunt and fish sustainably, and indigenous people often didn’t either. Where they did, it was often because they lacked the technology to do otherwise.

  6. “Where they did, it was often because they lacked the technology to do otherwise.”

    This is a very strange kind of assumption. You are actually assuming that people meant to interact with their environment in an unsustainable manner, but they lacked the knowledge to do so?

    How long did the Plains indians hunt the Buffalo? How long did they last after “technology” arrived? Did the indians have no technology before? What is the difference between western and pre-contact first nations technology? Is the difference only efficiency? Because in terms of efficiency, the indian technology was far more efficient – it extracted far more from the Buffalo over centuries than we have.

    The kind of thinking which assumes technologies that can extract more quickly are by definition more efficient is blind to the sense in which this “efficiency” is actually terribly inefficient. If what a society needs to do to prevent over consumption is to prevent “technological development” (i.e. China), then that is the sustainable and efficient society. By definition unsustainable consumption is inefficient. This was obvious to Spock in the Star Trek movie where the Enterprise goes back in time to 20th century America, but it is rarely obvious to us.

  7. I read the first half of it, and all of Guns Germs and Steel. It didn’t seem much different from “A Short History of Progress” by Ronald Wright (originally a Massey lecture), although more comprehensive and thoroughly thought out.

    Diamond is better than most at diagnosing the problematic character of western thinking, but he still has trouble seeing the contingency of it. He can’t be faulted for that.

  8. He certainly provides some compelling examples of indigenous peoples behaving in unsustainable ways.

  9. Easter Island being the most obvious example.

    But Tristan is right in that largely, North American native peoples behaved in much more sustainable manners than North American colonialists.

  10. Applying any predicates to notion of “indigenous” as a catch all term for all non-westerners, or all people who don’t come from an empire or advanced civilization is pretty intellectually irresponsible. That said, I’ve done it just as much as anyone in this discussion.

    What I should have done was limit my remark about the plains indians and the Buffalo specifically to th0se groups from the region we call Alberta, specifically around head-smashed in Buffalo jump, since that’s the history I was describing. That history probably couldn’t be universalized over all of what we call “the plains indians”, because in different regions of the plains agriculture was prevalent before contact, and the Buffalo couldn’t have played as central a role to survival.

    I also admitted not to know anything about the first nations groups, if there were any, which may have lived around the oil sands deposits (although even “lived around” is probably to presumptuous an expression since there may have been nomadic groups, or part-nomadic groups which used the land at some times and not others). I will try to find what I can on the net.

    One remark worth mentioning – archeologists discovered that the buffalo Jump near Fort Mcload Alberta was disused for a period of several hundred or a thousand years, and then used again. This shows that simply because a piece of land is not in use for a particular purpose, this does not mean one leaves “as much and as good left over” if it is turned into a wasteland. In the west, we think a thousand years is a very long time. That thought will likely contribute to our downfall.

  11. According to treaty #8 signed in 1899, the Cree, Beaver and Chippewyan people gave up all of their land for some small parcels of land and some money. They retained rights to use all of the land given up for traditional purposes unless that land was being used by settlers for settling, mining, forestry, fishing, etc…

    So, according to that at least the oil sands look entirely “legal”, although I just read the summery here: and there are likely many complications. Still, the document makes it clear that land which could have been used for hunting and fishing cannot be used for that while they are being mined (that’s an externality, legitimized by the treaty). Interestingly, Albertan law requires that open pit mines be restored to “equivalent land capacity” after extraction is complete. However, apparently they have decided that agriculture is “equivalent in capabiity” to boreal forest and muskeg – although it certainly won’t support hunting in the same way. Still, with global warming more agricultural land further north can’t be said to be a bad thing.

  12. Still, it seems wrong to me to say its the ideal world in which some of these lands remain permanently untouched. Our notion that parks need to serve as totally protected eternal wildlife sanctuaries where nothing changes, or where man has no impact, is needed only as a response to a relationship with nature which is characterised elsewhere by destructive domination. In fact, it’s quite new as well – when Canada’s national parks were first established the thing to do was build towns in them and ornate railway hotels. There is actually an interpretive board in Jasper, Alberta explaining this change in social mindset – the title of which reads “Hey – Why is there a town in the middle of this park?”.

    If our interaction with the world around us were not characterized by the absoluteness of a domination, there would be no need to preserve “ideal wilderness”. It’s interesting to recognise also that the preservation of a space as totally natural is itself a way of dominating the space. And – if such preservation includes fire suppression – such preservations of ideal wilderness can actually produce its destruction.

    Not to say we aren’t getting better – we now recognize that fire suppression for the sake of the picturesque is damaging to the forest so we let fires burn when possible. But, even this withdrawal isn’t a form of letting be but an even more perfect exercise of domination and control.

    It is exactly this perfectioning of control over the environment that we sometimes recognize the lack of which in aspects of first nations culture, and rightly recognize this “ignorance” as sustainable. Although, so long as we think in terms like “sustainable” we can’t help but translate such lack of perfect control back into an even more perfect mode of control and stronger longer endurance.

  13. Easter Island being the most obvious example.

    Others include the Anasazi, the first Mayan collapse (before contact with Europeans), and the Henderson/Pitcairn/Mangareva islanders.

    In Charles Clover’s The End of the Line: How Overfishing Is Changing the World and What We Eat, he argues that – aside from a very small number of modern sustainable fisheries – the only situations in which people have fished sustainably in the past have been those where lack of technology kept the total catch size at a sustainable level.

  14. ” the only situations in which people have fished sustainably in the past have been those where lack of technology kept the total catch size at a sustainable level.”

    Again, you are just making the assumption that I’ve tried to call into question – the idea that cultures whose technologies does not enable them to rape the seas simply are “lacking” something. What is desirable about the ability to over consume? Why do we only praise the sustainable cultures which could be unsustainable, which have that capacity, but choose not to be – how is the cultural tendency not to develop more efficient modes of extraction not itself something to be called “sustainable”? Why do we consider the lack of some technology to be the exceptional case, and the case where that technology does come into being the normal one? Why do we continually assume there is something wrong with cultures that haven’t developed the technology to rape their environment? Why do we assume that in every case that technology is simply out there on the horizon?

    It is not difficult to see technological development as a kind of sickness which societies catch, after which they can think nothing but to ever more perfect control over their environment. The perfection of such control leads to too much ability to affect the ecosystem around them, and disaster ensues. The lack of such a desire for control might be equally effective at keeping a society in harmony with its surroundings than the kind of super-knowledge model control which we value.

  15. The point I was making is that environmental outcomes are often the product of non-moral circumstances (such as technological development), rather than competing world views of ethical frameworks.

    The horrible erosion in Iceland, for instance, had a lot to do with its unfamiliar soil geology, compared to the lands previously occupied by those who turned up there.

    Where things were sustainable in the past, at least sometimes it was the product of pure chance, rather than any kind of human design based on ethics or aesthetics. If we want a sustainable society, at a time when we have the capacity to do otherwise, we probably need to invent something new, rather than return our thinking to some kind of potentially mythical previous state.

  16. Perhaps this is most obvious in relation to hydrocarbons. How many states discovered accessible coal, oil, or gas and then decided not to exploit a substantial portion of it, out of environmental concern? How many are cutting back now, due to concern about climate change?

    Everyone from the fairly green (Norway) to those who pretend to be green (Canada) to those with governments apparently uninterested in the environment (Russia) continues to pull the stuff up as fast as possible.

  17. Why is the development of technology a non-moral circumstance? In general, I think it is fruitless to divide off a specifical “ethical sphere” from the rest of cultural life – ethics is just the question of how we should live, and cultural life is just us living. So, all life (and this includes how inventions come about, and how they are taken up) is broadly “ethical”.

    Anyway, I agree that reverting to previous mythic states is not a serious idea. The reason I bring up these “mythic states” is just to try to expose the contingency of what seems necessary to us (i.e. that technological development would lead to unsustainable exploitation).

    Its hard to be personally hopeful about a liberal future, since “sustainably” exploiting, securing, ordering the world is for the human race, a little too like insisting “There must not be a mineshalft-gap!” when it is already far to late to build the bunkers.

  18. In general, I think we need to invent sustainability in the same way Michael Ignatieff argues that we ‘invented’ modern liberalism*: through the progressive extension of powerful ideas into more and more practical areas of life. In the case of liberalism, that meant extending rights to women, ethnic minorities, homosexuals, etc. In the case of sustainability, it will mean crafting policies that progressively curb the destructive character of our society.

    This is also similar to Richard Dawkins’ vision of inventing broader altruism than is compelled by genetics, in the later sections of The Selfish Gene.

    * See the last section of his essay “The Narcissicm of Minor Difference.”

  19. The question of how to ration health care is of course ethical in this banal sense that it is part of life. My point in the other discussion is that it is not a specifically moral question as opposed to any other question of how to maximise some outcome. In a sense the question of which distribution system is best for wal mart is an ethical question. My point here is exactly the same as in the rationing debate – that there is no division between ethical and non-ethical questions as is usually presumed.

  20. What I am saying is that outcomes can vary enormously for non-moral reasons – a kind of parallel to the fact that ‘bad things happen to good people.’

    Bad environmental outcomes can transpire in cases where people show restraint and try to be sustainable, and good ones can occur even in situations where they are as rapacious as they can manage to be. It’s an extension of the fact that physics and statistics aren’t affected by our thinking or moralizing.

    In practical terms, we need to accept that bad outcomes are more likely if we don’t restrain our biophysical impact than if we do. One important such restraint is leaving land untouched. Even from a human-centred utilitarian perspective, doing so can be justified. Unfished sea mounts used to be a key fish breeding habitat, helping to preserve stocks elsewhere. Similarly, other pockets of biodiversity can be seen as a kind of insurance for natural services – that even if we wipe them out in colonized areas, we may have some hope of them recovering.

  21. “What I am saying is that outcomes can vary enormously for non-moral reasons”

    This doesn’t make much sense. If morality is just the welfare of different outcomes, then any action which leads to an outcome is moral simply by being connected in someway to that outcome. So, presumably you are dividing between cases where outcomes are foreseen and ones in which outcomes are not foreseen. But don’t we have lots of examples of actions which don’t foresee their outcomes and yet we do see a moral connection – i.e. criminal negligence causing death? Hegel has the most sensible solution to this by deciding that there is a duty to know to the extent that it is reasonably possible the foreseeable outcomes of your actions. As far as I know, there is no good solution that remains strictly utilitarian.

    My position is just, if you want to run a strict utilitarian account of morality, i.e. its only the outcome which have moral status, then all causes of outcomes are moral by their causal connection to an outcome (as weird as it is that actions are moral only derivatively).

    I think the division you are trying to make works better without moral language. I think what you mean is just “outcome can vary enormously in unforeseen ways”. I don’t see what is added when we say that some society “meant” to be sustainable or not. Who cares whether our society “wants” to be sustainable, unless that translates into it becoming actually sustainable?

  22. We never get to make societal choices as freely as you suggest.

    For instance, imagine there is a massive asteroid on a collision course with Earth, due in ten years. The most ‘sustainable’ thing to do is develop a response. That said, we have no way of knowing it.

    Outcomes in the asteroid world and a non-asteroid world differ enormously, for reasons you need to call non-moral (the quasi-random distribution of asteroids in the universe).

    Dealing with uncertainty means managing risk: something that invariably involves making mistakes. Of course, it is only risks that involve the possibility of global calamity that really cannot be fully hedged against. In other cases, being spread out and diverse in our ways of doing things provides a decent measure of protection, for the species as a whole.

  23. ‘Boom and bust’ of deforestation
    By Richard Black
    Environment correspondent, BBC News

    Cutting down Amazon forest for cattle and soy does not bring long-term economic progress, researchers say.

    A study of 286 Amazon municipalities found that deforestation brought quick benefits that were soon reversed.

    Writing in the journal Science, the researchers say the deforestation cycle helps neither people nor nature.

    They suggest that mechanisms to reward people in poorer countries for conserving rainforest could change this “lose-lose-lose” situation.

  24. Burning fossil fuels costs the U.S. $120 billion a year — not counting mercury or climate impacts!

    “The report estimates dollar values for several major components of these costs. The damages the committee was able to quantify were an estimated $120 billion in the U.S. in 2005, a number that reflects primarily health damages from air pollution associated with electricity generation and motor vehicle transportation. The figure does not include damages from climate change, harm to ecosystems, effects of some air pollutants such as mercury, and risks to national security, which the report examines but does not monetize.”

  25. EPA To Buy Small Town In Kansas

    “The Wichita Eagle reports that Congress has approved funds to relocate the population of the southeast Kansas town of Treece, which is plagued with lead, zinc and other chemical contamination left by a century of mining. Estimates say it will cost about $3 million to $3.5 million to buy out the town, which is surrounded by huge piles of mining waste called ‘chat’ and dotted with uncapped shafts and cave-ins filled with brackish, polluted water. ‘It’s been a long, dusty, chat-covered road, but for the citizens of Treece, finally, help will be on the way,’ said Senator Pat Roberts of Kansas who has been pushing for a buyout of Treece for two years. The population of Treece has dwindled to about 100 people, almost all of whom want to move but say they can’t because the pollution and an ongoing EPA cleanup project makes it impossible to sell a house. The EPA has already bought out the neighboring town of Picher, Oklahoma, stripping Treece of quick access to jobs, shopping, recreation and services, including fire protection and cable TV. Both cities were once prosperous mining communities but the ore ran out and the mines were abandoned by the early 1970s. Of 16 children tested for lead levels in Treece, two had levels between 5 and 10 micrograms per deciliter of blood and one had a level of more than 10, the threshold for lead poisoning.”

  26. “Environmental valuations aim to solve a problem that troubles both economists and ecologists: the misallocation of resources. Take mangrove swamps. Over the past two decades around a third of the world’s mangrove swamps have been converted for human use, with many turned into valuable shrimp farms. In 2007 an economic study of such shrimp farms in Thailand showed that the commercial profits per hectare were $9,632. If that were the only factor, conversion would seem an excellent idea.

    However, proper accounting shows that for each hectare government subsidies formed $8,412 of this figure and there were costs, too: $1,000 for pollution and $12,392 for losses to ecosystem services. These comprised damage to the supply of foods and medicines that people had taken from the forest, the loss of habitats for fish, and less buffering against storms. And because a given shrimp farm only stays productive for three or four years, there was the additional cost of restoring them afterwards: if you do so with mangroves themselves, add another $9,318 per hectare. The overall lesson is that what looks beneficial only does so because the profits are retained by the private sector, while the problems are spread out across society at large, appearing on no specific balance sheet.

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