It sounded very intelligent and convincing to me at 18, and sounds downright idiotic to me now.
Read up on the Simon/Ehrlich wager. Nobody knows the future, but your professor was demonstrating a solid economic principle.
But teaching undergrads about tungsten and not fish is just propaganda.
Edit: To be clear, the point is not that my professor was idiotically wrong about oil and tungsten specifically. The "idiotic" part is to assume and furthermore imply to young students (who don't know any better) that the general principle holds equally well in all domains. Maybe "arrogant" would be a better word than "idiotic".
And if we found alternatives to Tuna, it doesn’t mean that other species like sharks and Orca can.
Economically, mining is exploitation of any resource on a basis which fails to account for the full ecological formation costs of that resource.
In the case of petroleum, we can look at one ecological cost: time.
Petroleum formed over a period of hundreds of millions of years. It's been extracted by humans for a couple of hundred years. Even on napkin math, the time cost is being discounted by on the order of one million fold.
If the resource were so vast that it could not be meaningfully exhausted, this wouldn't be an issue. But we've hit peak conventional oil within numerous major producer countries, and quite probably the world, which corresponds to roughly half the total exploitable resource having been exhausted.
The economic theory most often mentioned for pricing of nonrenewable resources is Hotelling's Rule, formulated in 1932. I've read that paper numerous times, and the fact that strikes me most about it is that although it cites earlier economic works and numerous references of the author himself, it cites absolutely no scientific, geological, or petrochemical references. It's utterly devoid of any real-world grounding.
And we have pricing data to invalidate it, one of the most comprehensive being crude oil prices dating to 1870 or so. That's published as part of BP's Annual Statistical Review of Energy, showing both nominal and inflation-adjusted prices.
What's clear is that price does not follow the trend predicted by Hotelling, but rather reflects, at various times, unrestrained extraction (when the price collapses), various catellisations and embargos (when it peaks), and several periods of long-term managed output, during which it remains quite nearly constant. The longest and most stable such period was from the early 1930s to the early 1970s, following the establishment of regulated extraction in the United States (at the time the world's peak, and surplus-capacity, provider of oil).
Immediately prior to this period, following major discoveries and unregulated extraction in East Texas, the price fell from a target $1/bbl to $0.13/bbl, and finally as low as $0.02/bbl. The rational for pricing wasn't Hotelling's model, but the bare minimum price required to meet marginal costs of extraction.
More recently, in the 2000s and 2010s, what's emerged has been the flip side of demand destruction, where prices of oil can rise to the point that economic activity can't support them, and demand collapses, with it ultimately price (as more expensive marginal wells are withdrawn from production). Price has see-sawed between highs as the global economy surged, and lows, as it collapsed. Sometimes exogenously as with the 2020 global COVID pandemic, which saw US spot futures prices fall negative briefly at contracts expired and delivery had to be made --- there was no available storage and traders paid to have their oil offloaded.
The upshot is that extractive commodity prices don't behave as one might expect during periods of exhaustion. Rather than rising monotonically, they'll jump around on thin trading, surges in supply and demand, and external influences.
Condolences ;)
> I've come to realise is that economics has a very shaky grasp on the actual
It can't be taken seriously if the first thing it does is disregard externalities.
Economics is here only to validate the current system, has no other meaning than that.
As Herman Daly has noted: know your enemy.
I've found in particular the rationale around land rents for minerals and extraction, dating to David Ricardo, are an interesting place to poke around. Hotelling's Rule is based on that, though through an intermediary.
There's also the associated legal concept of the Rule of Capture, which is applied to the notion of property rights in mineral resources is also based on some curiously fallacious legal argument. Which also leads me to realise that amongst various categories of knowledge, legal practice seems to be its own animal, based variously on statute, precedent, and persuasion, rather than empirical foundations.
(Other realms of knowledge include revelatory knowledge, commonly in religion; convention and authority, in various fields; communities of practice as with technical arts and some societies; and poetic or literary knowledge, essentially of narrative and record which are passed down but again need have no basis in any external empirical foundations.)
There's the equivocation between economic wealth and accounting profits, which are ... somewhat related ... but divided by the fact that the former includes all accounting of external costs and benefits, whilst the latter does not. Financial systems are cost- and risk-externalising machines.
I've recently discovered Katharina Pistor through the Ezra Klein podcast. She writes on the relationship of property to economics. She is hitting on themes I'd been struggling towards and does some excellent analysis and research. Transcript:
<https://www.nytimes.com/2023/01/13/podcasts/transcript-ezra-...>
Book: The Code of Capital (2019) <https://libgen.rs/book/index.php?md5=D936D0247CB138F23F157A7...>
Naomi Oreskes and Erik Conway have just published The Big Myth, which looks at the selling of the notion of free markets, specifically in the US. It's an outgrowth of their earlier work on disinformation in the tobacco, CFCs/ozone layer, lead, and oil / global warming disinformation campaigns by major corporations.
<https://www.kirkusreviews.com/book-reviews/naomi-oreskes/the...>
I've yet to land a copy, but from several interviews the work seems useful though quite probably incomplete, as there was an earlier practice of such advocacy in Britain, as evidenced by The Economist's prospectus announcing in 1843 a new publication "THE ECONOMIST, which will contain— First.—ORIGINAL LEADING ARTICLES, in which free-trade principles will be most rigidly applied to all the important questions of the day..."
<https://www.economist.com/unknown/1843/08/05/prospectus>
A later editor of the Economist, Francis Wrigley Hirst, was key in persuading Oliver Wendell Holmes of the concepts of free markets and their applicability to the realm of free speech, ultimately leading to the expression "the free market of ideas" in a 1950s US Supreme Court judgement. That draws on (though mischaracterises) John Stuart Mill's writings on free speech and liberty as well.
I've written on that last variously on HN, this seems a reasonably coherent summary:
<https://news.ycombinator.com/item?id=22850549>
For those interested in more, an Algolia search: <https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...>
Susan Gordon's written on how J.S. Mill's notions have been distorted and misrepresented in "John Stuart Mill and the 'Marketplace of Ideas'" (1997) <https://philpapers.org/rec/GORJSM> (full text on Sci-Hub / LibGen).
Other criticism of the concept, Stanley Ingber, "The Marketplace of Ideas: A legitimizing myth": <https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article...> (PDF)
There's more, though this is a good start and seems to be less generally acknowledged even amongst notable critics of economic orthodoxy. Steve Keen, Philip Mirowski, and Mariana Mazzucato would be other good names to read.
