A short reading on how outdated assumptions make our economic system unfit for today’s reality and dangerous for our future.
There was a time when wood was wood and stone was stone. An ancient time, when people prised the value and did not speak of price. A disappeared world without a past or future: present only; existing goods or lacking ones. Such a hard life! Then “future” came in mind and speech, and so did loan and debt. Then silver, gold and bronze; and steel, to drag them all. Finance comes as the end.
Whatever It Costs
The world “cost” seems to derive from the Vulgar Latin verb constare that had the meaning of “to stand to” or “to stand with” (in Classical Latin the same verb had a wide range of usages, that also included the concept of cost).
“To stand to” easily recalls our present idea of “price of a good”, like in the Latin expression “quanti constat cervisia?” = “how much is the beer” (literally, “at how many [coins] does the beer stand to?”).
“To stand with” opens to a more in-depth consideration: with what does it (the good that “costs”) stand? With the revenue (rĕdactŭs) of the brewers who cash the coins, of course. It also stands with the profit (lucrum) of the buyers’ business (negotium) that allows them to have coins to spend. Ultimately, it stands with the work (lăbŏr) that produces any revenue (and, consequently, any profit, that is what remains of the income after detracting the expenses and paying the taxes).
The Cost of Labor
Interestingly enough, the work — and only the work is what truly costs: it costs us our effort or money (that needed to pay someone to fatigue in our stead or, as in the ancient times, to buy and nourish slaves aimed at undertaking such onerous tasks).
In fact, who has ever paid for wood or coal, wind and sunlight, oil & gas, Uranium or Iron? We massively disburse for extraction, transportation, and transformation of commodities, for mines and lands’ concession, taxes and customs duties. However, who has ever spent a penny for natural resources to be available on Earth?
Never, never one has paid Nature anything for making resources available. No industry allocates funds to compensate ancient supernovae for producing Iron, Uranium and Carbon. No start-up of the Renewable Energies sector opens loans for the Sun to irradiate light and induce winds. Nor do we compensate Earth for providing us with a breathable atmosphere, drinkable water and a magnetic field that ultimately shields us from the most deadly cosmic rays.
We take it all, as we always did. In this sense, we are still hunters-collectors; and exactly as our ancestors ate out entire species of animals to extinction, so are we now, predating resources without enough questioning on their availability, renewability and ultimate origin. And it is a tragic blunder.
Adam Was the First
The presently dominant economic theory is essentially the same as enunciated by Adam Smith, some two hundred and fifty years ago. As outlined in the previous paragraph, it postulates free access to inexhaustible natural resources. And this is wrong.
In those years, at the dawn of the industrial era, the relatively small human population and its limited per-capita consumption allowed the easy approximation of assuming natural resources as unlimited and, therefore, intrinsically free (if not, as stated, for the labour cost). Are we still in a similar situation? Of course, we are not, and we know it. We first had a clue that the dream was over with the 1970 energy shock, and, nowadays, the evidence that resources are finite is undeniable. For examples: conventional crude oil extraction peaked in 2006, CO2 is building up in the atmosphere and is making average temperatures rising quickly (for the geological standard), and plastics horrendously accumulate in the oceans (yes, comfortable climate and dumping room availability are resources too; and healthy oceans; and breathable air …).
A New Perspective
Everything changes if we adopt a new perspective where resources are exhaustible. Exhaustible, at least, respect both the consumption rate imposed by human activities and the regeneration time governed by geological (formation of fossil fuels), galactic (Sun life expectancy) and cosmic (heavy elements formation in supernovae explosions) events.
What would be the cost of growing thick forests, let them die in thick layers of wood, and artificially heat and compress them to fossilise new coal? Analogously, how much would it cost us to process enough tiny sea animals and plants into new crude oil? As an alternative, we could not but wait up to hundreds of million years and hope for the natural process to repeat.
How shall we put a price on a new Sun formation from sparse cosmic Hydrogen (let alone the hypothetical investment required to refill our iron ores with a hand-made supernova explosion)?
At least with an educational purpose, we can do something: we can estimate the cost of recreating the minimal life-supporting conditions we need (breathable air at an adequate temperature and pressure, water cycle and essential protection from cosmic radiation). We can because we already succeeded in recreating them in an orbiting artificial life-sustaining bubble called ISS, the most expensive laboratory in human history: hundred and fifty billion US dollars.
Considering the number of occupants of the ISS up to now, we can estimate that each person-day would roughly cost 7.5 million USD. Therefore, artificially providing a raw survival bubble for the 72 years of global average life expectancy of a human stands at nearly two hundred billion USD. A price that no one is paying for conditions that we all assume as guaranteed.
Perhaps, we should stop complaining about fuel price and focus on practical solutions to our ultimate problem: natural resources’ consumption. Oh, how different would our perception be if we included the intrinsic value of exhaustible resources and the environmental impact remediation costs into the bookkeeping of any human activity!