How Free Markets and Human Ingenuity Can Save the Planet

A review of The Infinite Resource: The Power of Ideas.


The Infinite Resource: The Power of Ideas on a Finite Planet, by Ramez Naam, University Press of New England, 352 pages, $29.95.

"We are a plague on the Earth. It's coming home to roost over the next 50 years or so," warned the famed British television naturalist David Attenborough in the January Radio Times. He added: "It's not just climate change; it's sheer space, places to grow food for this enormous horde. Either we limit our population growth or the natural world will do it for us." Would-be prophets of disaster from Malthus to Paul Ehrlich have been preaching imminent ecological doom for centuries now. All such prophecies have so far failed. But is Attenborough right; is it different this time?

Probably not, Ramez Naam argues in The Infinite Resource: The Power of Ideas on a Finite Planet. Naam is no cock-eyed optimist. He takes seriously the environmental challenges that currently confront humanity, from man-made global warming to the depletion of fisheries, fresh water, and forests. And he believes in peak oil. Nevertheless, he argues that "it's possible for humanity to live in higher numbers than today, in far greater wealth, comfort, and prosperity, with far less destructive impact on the planet than we have today."

Naam is a professional technologist. He is a former Microsoft executive, where he worked on Internet Explorer and Microsoft Outlook, and he's a fellow at the Institute of Ethics and Emerging Technologies. He is also the author of More Than Human: Embracing the Promise of Biological Enhancement and the science fiction novel Nexus. In The Infinite Resource, he argues that human ingenuity combined with the incentives of free markets can yield a world of "almost unimaginable wealth, health, and well-being." Knowledge, he writes, "acts as a multiplier of physical resources allowing us to extract more value (whether it be food, steel, living space, health, longevity, or something else) from the same physical resource (land, energy, materials, etc.)."

Take agriculture. 10,000 years ago it took an average of 3,000 acres to feed one hunter-gatherer; farmers today can feed one person using less than one-third of an acre. "Our innovation in farming technology has multiplied the value of a plot of land by nearly 10,000," Naam notes. If crop yields per acre had remained stuck at their 1960 level, half of the world's remaining forests would have been plowed down by now.

Infinite Resource
Credit: Naam

The energy needed to produce a unit of nitrogen fertilizer has fallen nearly 90 percent since 1900. The energy required to produce a ton of steel has dropped five-fold since 1950. The amount of energy used to heat an average house in the U.S. is down 50 percent since 1978. The amount of energy needed to desalinate a gallon of water has plunged 90 percent since 1970. LED lights use about 10 times less energy than incandescents. Humanity has gotten richer over the past couple of centuries not chiefly by doing more of the same old things, but by developing better recipes.

To illustrate his point, Naam suggests that readers melt down their iPhones and try to sell the raw materials. Of course, they would be worth just a few cents. The value is in the design, which derives from centuries of accumulated scientific and technical knowledge. Not only can an iPhone connect you to nearly anyone on the planet, you can access vast amounts of information instantly, take and store photos and video and audio, navigate the streets of a strange city, check your flight times, and…well, as of January 2013, there were 775,000 apps available in Apple's App Store. "The accumulated knowledge of materials, computing, electromagnetism, product design, and all the rest that we've learned over the last several centuries converts a few ounces of raw materials worth mere pennies into a device with more computing power than the entire planet possessed fifty years ago," Naam writes.

Naam acknowledges that there are environmental problems that, if unaddressed, could overwhelm technological and economic progress. The solution, he suggests, lies in the market, which is "far superior to any competing system for producing innovation, for reducing poverty, for growing wealth, and for increasing productivity." Markets achieve these laudatory effects by means of price signals; if a resource has no price, users can take as much as they want. So all around the world we find rivers, lakes, forests, fisheries, aquifers and the air being "treated as socialist resources, free for anyone to use, exploit, or damage without direct repercussions to themselves."

Naam argues that the solution to most resource problems is to put a price on them so that market actors pay for the damage they cause other users of these resources. Surely that is right, but there is prior step that he largely overlooks: property rights. Prices in markets are negotiated between owners and buyers; the overexploitation of rivers, lakes, fisheries, aquifers, forests, and airsheds occurs chiefly because those resources are unowned. The United Nations Food and Agriculture Organization estimates, for example, that a third of the world's fisheries are overexploited or crashed already, and more than half are fully exploited now with no room to grow. Naam points out that the production of capture fisheries has been hovering around 90 million tons per year for the past two decades. Aquaculture, by contrast, has gone from producing 14 million tons of fish in 1991 to 63 million in 2011. That's a good example of technology and innovation coming to the rescue, but he could have mentioned that aquaculturists enjoy property rights, and that capture fisheries can be protected and restored by giving those fishers property rights as well. Once the fish are owned, fishers have a strong incentive to protect stocks and work to increase their numbers.

Another resource problem cited by Naam is the ongoing depletion of aquifers and streams around the world, chiefly by farmers who are irrigating their crops. Once again, assigning property rights can allow a market price to emerge, forcing users to take into account how they consuming a resource. For example, unitization, a property right system used to manage oil and gas reservoirs, could be applied to aquifers. Similarly, riparian rights can be recognized in rivers and streams. (Another important way to preserve water resources is for governments to stop subsidizing irrigation water and pumps.)

Naam believes the biggest commons problem confronting humanity is global warming, stemming from the fact that burning coal, oil, and natural gas are loading up the atmosphere with extra carbon dioxide. He does a good job of examining the evidence that this could be a significant problem by the end of the century. He properly fears the crony-capitalist distortions that accompany proposals to put a price on carbon dioxide emissions through cap-and-trade schemes. Instead, he argues for a simple per-ton carbon tax imposed at the wellhead and the minehead. For the first five years the tax would be zero, permitting people to begin to make future adjustments and investments. In year six, it would be set at $10 per ton—about 10 cents per gallon of gasoline, and 0.7 cents per kilowatt-hour of electricity. The price would rise each year aiming to reduce emissions by 80 percent by 2050.

Naam sets an eventual ceiling of $100 per ton, equivalent to $1 per gallon of gasoline and 7 cents per kilowatt-hour of electricity. "Pricing carbon is not a big-government initiative," he insists, because all of the revenues would be divvied up equally and sent back to every American. To level the trade playing field, tariffs would be adjusted to take account of carbon taxes for both exports and imports. Assuming that policymakers are going to do something, Naam's proposal is the something that would do the least damage to the economy. Although Naam is likely underestimating the inventiveness of fossil fuel producers, setting a price on carbon would speed up the process of weaning humanity off of fossil fuels and thus allay concerns about reaching peak oil.

Naam has confidence that innovators can dramatically improve solar and wind power, allowing those technologies to deliver the bulk of energy humanity will be using at the end of the century. He points out that the cost of photovoltaic modules has dropped by a factor of 20 since 1980. Nevertheless, he acknowledges that other energy options will likely be necessary for a transition to renewables. Consequently, he urges environmentalists to embrace nuclear power, highlighting the economic and safety advantages of small modular nuclear reactors. In some designs, the reactors can be fueled by the nuclear wastes produced by conventional reactors over the past 50 years, solving both an energy supply problem and a waste problem simultaneously. He also wants to jettison the Price-Anderson Act, a law limiting liability for nuclear accidents to just $12 billion. That will encourage nuclear innovators to come up with safer designs.

That said, Naam does think government-funded research and development can help jump-start many of the technologies he anticipates, especially in energy. I would argue that allocating property rights to common pool resources, and the market prices that would thus result, could well be enough to encourage innovators to develop resource-conserving technologies without recourse to handouts.

While Attenborough laments that humanity is a plague upon the earth, Naam asks an intriguing question: "Would your life be better off if only half as many people had lived before you?" In this thought experiment, you don't get to pick which people are never born. Perhaps there would have been no Newton, Edison, or Pasteur, no Socrates, Shakespeare, or Jefferson. "Each additional idea is a gift to the future," Naam writes. "Each additional idea producer is a source of wealth for future generations." Fewer people means fewer new ideas about how to improve humanity's lot. In any case, Naam shows that current demographic trends suggest that world population will peak below 10 billion before the end of this century.

"If we fix our economic system and invest in the human capital of the poor, then we should welcome every new person born as a source of betterment for our world and all of us on it," Naam writes. He makes a persuasive case that human ingenuity will enable both people and planet to flourish.