“The Cheaper the Energy the Better” (Julian Simon in 1993 speaks to us today)

[Editor note: This piece, written during the BTU tax debate by Julian Simon (1932–1998), is reproduced for its relevance for today’s energy debate]

As the fight intensifies about an energy tax in the budget bill, some cool heads ought to reexamine the underlying belief that it is good for us to “conserve energy.” We see that belief in headlines such as “The High Cost of Cheaper Energy,” and Washington Post editorials like “A Totally Free Market Leads to Over-Consumption.”

Conservation Isn’t Necessary or Good

Some people simply believe that it is ipso facto a good thing to use less energy and have less economic growth. As Paul Ehrlich put it, “Giving society cheap abundant energy is . . . like giving an idiot child a machine gun.” Other backers of the bill seek not only to preserve the supply of energy but also to return to a “simpler life” (for others, of course, not for themselves) because it will make us better human beings. As Amory Lovins puts it, “If nuclear power were clean, safe, economic, assured of ample fuel . . . it would still be unattractive.”

Perhaps most common are those who somehow believe that there is an economic rationale for “saving” energy. That unstated and unanalyzed belief is seen in columnist Jim Hoagland’s statement, “A rejection of energy taxes would send a message down the national spinal cord that America can still afford to use more of and pay less for the least efficient fuels.”

The economic-saving rationale for an energy tax is not, however, widely accepted among economists whose business it supposedly is to understand such matters. I’d bet that the consensus of leading economists does not support the public belief in energy conservation. (I also repeat my public offer to wager a week’s pay that the price of any type of energy will be lower at any future date than now, which would prove that there is no impending shortage and then no basis for tax restraints on energy use.)

Unfortunately, however, the thinking of economists on subjects like these seldom reaches the public because there is no established channel for it, whereas opinions that reflect the conventional beliefs of the day–and energy conservation is one of those beliefs–are routinely published and televised.

So we risk a national energy “plan” that would twist energy industries into knots by requiring conservation and forcing the substitution of other fuels for oil and coal, and eventually reduce supply and raise prices. It would waste our time and effort, slow the progress of civilization, and cripple the economy in order to mitigate a shortage of energy that a clutch of environmental doomsayers speculate will finish us off starting perhaps seven billion years from now. (Yes, you read right. That’s 7,000,000,000 years.) They write fearfully about an increase in entropy–the disappearance of order and the disintegration of all patterns of life into chaos.

Yet the trend in energy supply is just the opposite of what is assumed. Over the decades and centuries, energy has become less rather than more scarce, just like all other raw materials such as copper and land. And there is no reason to believe that this trend will ever reverse–it can go on forever.

Energy: An Expanding Resource

Governmentally-mandated conservation of energy would only drag down this progress. The historical facts entirely contradict the commonsensical Malthusian theory that the more we use, the less there is left to use, and hence the greater the scarcity. Energy has been getting more available, rather than more scarce, as far back as we have records. Through the centuries, the prices of energy — coal, oil, and electricity — have been decreasing rather than in- creasing, relative to the cost of labor and even relative to the price of consumer goods. The same is true of all natural resources. And nuclear energy costs less than either coal or oil.

Another way to look at the matter: Energy has become less and less important as measured by its share of GNP, just as have all other natural resources.

For perspective, reflect on the history of another resource that people have worried about since time immemorial: land. It has always seemed as obvious as the nose on your face that the supposedly-fixed supply of agricultural land must eventually limit the growth of population, by making food increasingly more expensive as the number of people grows. But lo and behold, just the opposite has happened. Food has decreased in price, nutrition has become progressively more abundant, and hunger and famine have diminished worldwide, even as population has grown. The explanation lies in the advance in knowledge of how to produce food.]

Just as people throughout history have said that the supply of land is limited and cannot be increased, many people have said that the energy-cost trend must turn around sometime because energy is “finite.” And they have gone on to assert that we should reject conventional economics and build a new system of “ecological economics” that uses energy as a standard of value. Here they resemble Marx and his labor theory of value in seeking a material standard of value, a solid physical foundation on which to stand.]

Energy differs from other resources because it is “used up,” and cannot be recycled. Energy apparently trends toward exhaustion. It seems impossible to keep using energy and still never run out of it, or even reach a point of increasing scarcity. But just as with land and copper, there are other forces at play which make it possible for us to have increasing amounts of the services we need and desire even as we boost the demands we make upon the supplies of those resources.

Advances in technology are the reason the prices of energy and other natural resources decline even as we use more of them. One saving grace is declining use of energy. Consider the steam engine, which at first operated at perhaps 1 percent efficiency. Engines nowadays operate perhaps thirty times more efficiently. That is, they use perhaps a thirtieth as much energy for the same result. When someone finds a way to increase the efficiency of a resource by, say, 1 percent, the discovery not only increases the efficiency of the energy we use this year, but it also increases the effective amounts of that resource in reserve or as yet undiscovered.

Also important are increases in energy supply. We learn how to dig deeper, pump faster. And we invent new sources of energy, as we went from wood to coal to oil to nuclear fission. We can also “grow” oil substitutes as long as there is sunlight to raise plants. Of course nuclear fission power will be available at constant or declining costs practically forever. And who knows, there may be nuclear fusion, or some other suns to take care of our needs after this one runs out. We’ve got seven billion years to discover solutions to the theoretical problems that we have only been able to cook up in the past few centuries of progress in physics. It’s reasonable to expect the supply of energy to continue becoming more available, forever.

Julian L. Simon , adjunct scholar at Cato Institute, teaches business administration at the University of Maryland, and is the author of books on resources and population economics. Rob Bradley, with permission from the Julian Simon family, added the two subtitles and deleted two “Can Delete” paragraphs dealing with the land example.