RFF: Going Malthusian in the 1970s (precursor to climate alarmism)

By Robert Bradley Jr. -- January 26, 2016

“A review of energy developments in 1976, published in RFF’s Resources magazine (Jan–March 1977, p. 3) reached a Hotelling-like conclusion: ‘Nonrenewable and exhaustible fuels supply most of our needs now,’ the staff article stated, ‘but they will be increasingly expensive to obtain and use, until, around some distant corner, they will be replaced’.”

In its first half century, RFF’s central message has gone from energy optimism to energy pessimism, complete with an embrace of major government intervention in energy markets. The transformation began in the 1970s with a fixity/depletion view of mineral resources, which spawned conservationism (less energy usage for its own sake, with a government role).

And when the energy-short 1970s turned into the energy surplus of the 1980s, RFF’s angst shifted to issues surrounding a human influence on global climate, primarily from carbon dioxide (CO₂) emissions from the burning of coal, oil, and natural gas. RFF embraced climate alarmism even before global warming became a national issue.

Resource Optimism

A plethora of factual, optimistic studies on natural resources were published from the early 1950s until the early 1970s. Resources for the Future was the locus of much of this activity. Among its studies were:

• Bruce Netschert, The Future Supply of Oil and Gas (Baltimore: The Johns Hopkins Press, 1958);
• Sam Schurr and Bruce Netschert, Energy in the American Economy, 1850–1975 (Baltimore: The Johns Hopkins Press, 1960);
• Neal Potter and Francis Christy, Trends in Natural Resource Commodities: Statistics of Prices, Output, Consumption, Foreign Trade, and Employment in the United States, 1870–1957 (Baltimore: The Johns Hopkins Press, 1960);
• Hans Landsberg et al., Resources in America’s Future: Patterns of Requirements and Availabilities, 1960–2000 (Baltimore: The Johns Hopkins Press, 1963);
• Harold Barnett and Chandler Morse, Scarcity and Growth: The Economics of Natural Resource Availability (Baltimore: The Johns Hopkins Press, 1963);
• Hans Landsberg and Sam Schurr, Energy in the United States: Sources, Uses, and Policy Issues (New York: Random House, 1968); and
• Joel Darmstadter et al., Energy in the World Economy: A Statistical Review of Trends in Output, Trade, and Consumption since 1925 (Baltimore: Johns Hopkins Press, 1971).

Two notable studies not affiliated with RFF were the Twentieth Century Fund’s America’s Needs and Resources: A New Survey (1955) and the aforementioned 1962 study prepared for the U.S. Senate, An Assessment of Available Information on Energy in the United States.

Studies by RFF economist Orris Herfindahl melded theory and data to reach optimistic conclusions. His major work included Copper Costs and Prices: 1870–1957 (Baltimore: Johns Hopkins Press, 1959); Three Studies in Minerals Economics (Washington: Resources for the Future, 1961); David Brooks, ed., Resource Economics: Selected Works of Orris C. Herfindahl (Baltimore: Johns Hopkins Press, 1974); and Herfindahl and Allen Kneese, Economic Theory of Natural Resources (Columbus, OH: Charles Merrill, 1974).

A 1968 RFF staff report, U.S. Energy Policies: An Agenda for Research, reported the “widespread belief that energy requirements for the next twenty years or more can be met without serious upward pressure on real costs” (1968, 23). RFF’s Joel Darmstadter and Milton Searl (1973, 7) testified before Congress in May 1973: “The estimated U.S. resources of shale oil and crude oil are so large that it is unlikely that there will ever be a time at which the nation will not be able to develop substantial additional supplies of oil.”

A 1975 book by Mason Willrich, Energy and World Politics, which was assisted by Darmstadter, took the M.A. Adelman position that “our immediate difficulties are not due to physical scarcity of energy resources or to economic scarcity of low-cost resources; rather, they have arisen because of monopolization by a relatively few governments of the world’s known low-cost oil resources” (1975, 59).

… To Resource Pessimism

Then the tide turned toward pessimism and alarmism. A 1975 essay by John Krutilla and Talbot Page, citing helpful input from the Environmental Defense Fund, Natural Resources Defense Council, Sierra Club, and Wilderness Society, was long on conservationism and government intervention and short on the supply-side and free market.

“Towards a Responsible Energy Policy” was depletionist (“we will be forced to rely on new domestic sources and to pay higher prices for energy in the years to come [from] … our previous policy encouraging [mineral resource] exploitation,” 78), and interventionist (“we might consider the appropriate taxation of commodities whose prices do not reflect the external or environmental cost of their production, distribution, and consumption,” 87).

The authors took a very hard line on allowing greater offshore production, placing the burden of proof on government and drillers to “minimize the social costs” (92) of drilling, extraction and transportation. The turmoil in energy markets from federal price and allocation controls got a free ride, and the OPEC-led doubling of oil prices was scarcely considered as intervention enough to remove the case of alleged market failure from underpriced energy. The authors ended their essay with a call for greater “public participation” to set energy policy, with “more explicit consideration … to Intertemporal welfare distribution than has been true in the past” (100).

A review of energy developments in 1976, published in RFF’s Resources magazine, reached a Hotelling-like conclusion: “Nonrenewable and exhaustible fuels supply most of our needs now,” the staff article stated, “but they will be increasingly expensive to obtain and use, until, around some distant corner, they will be replaced” (January-March 1977, 3). A 1977 RFF book, Conservation & Economic Efficiency, included a foreword by Walter Spofford Jr, head of RFF’s Quality of the Environment Division, referring to “the continual erosion of a finite natural resource base” (Page, xi). An RFF book edited by V. Kerry Smith, published in 1979 with papers from a 1976 conference, also cited environmental issues and depletion of mineral resources (1979, xi).

RFF’s sea change toward resource pessimism was in full flower with a 1979 book, Energy in America’s Future: The Choices Before Us, and continued, as discussed in the next chapter, with Energy Today and Tomorrow: Living with Uncertainty (1983). It was also evident in the presidential address of Sam Schurr to the International Association of Energy Economists (later renamed the International Association for Energy Economics), when he warned, drawing on Energy in America’s Future, that the nation was “running out of time … for launching the necessary technical and policy initiatives” (1979, 9).

Why the Great Turn?

Why did RFF turn away from resource optimism? Restated, why did their bevy of Ph.D. economists fail to recognize the institutional (man-made) reasons for the unprecedented scarcity, namely government price and allocation controls?

Several things were at work: the nonconfrontational nature of RFF leaders Hans Landsberg and Sam Schurr in the face of contrary thinking; an underlying view of resources as fixed quantities subject to “depletion;” and the interest of RFF funding sources in a government role for resource problems.

Perhaps the greatest factor was the death of Orris Herfindahl, head of RFF’s mineral resource program. Herfindahl was no depletionist, and his death in 1972 at age 54 took away a leading thinker in the field. Commented M.A. Adelman, who lost a key intellectual ally: “It was the worst possible moment for him to die, he would be so badly needed” (Adelman to author, December 18, 2003).

The proper interpretation, one that RFF was well-positioned to champion, was that government intervention created the resource problem, and re-established free market incentives could introduce resource abundance. The American Enterprise Institute, as it turned out, filled the void left by RFF.

Richard Gordon on RFF’s Shift

The late Richard Gordon, a notable free-market energy scholar of the 2oth century, offered his opinion of the Great Turn from resource optimism to resource pessimism at RFF.

Throughout its history, Resources for the Future has been a major source of penetrating analyses of resource availability and the deficiencies of government intervention. Ironically, during the energy turmoil of the 1970s, RFF’s efforts faltered. The main contributions were two externally-funded efforts that showed excessive concern over depletion and were too tolerant of government intervention.

The main problem was the disappearance of RFF’s ability to fund external researchers. Those researchers had produced most of the main contributions to resource optimism and criticism of government. (A critical exception was the work of Orris Herfindahl, who died before the turmoil.) Sam Schurr and Hans Landsberg were astute observers of energy and key in fostering the prior external studies. However, they were not analytic and thus presided over studies that lacked a framework that ensured proper consideration of the underlying resource situation and the drawbacks of intervention.

Later RFF work, undertaken by more analytic people such as Milton Russell and Douglas Bohi, returned to the prior orientation. Still later, however, funding problems would severely limit RFF activities in energy and increase the long-standing focus on environmental-oriented studies. These were excellent at describing the workings of these policies but weak on skeptical appraisal of the rationales for intervention. [1]

 The Malthusian virus that infected RFF in the 1970s regarding mineral resources has now infected the organization regarding climate change. The ‘we are running out of resources’ mantra is now replaced with ‘we are running out of livable climate’.

Intellectual error leading to big-money intellectual cronyism — let history take note for a better future.

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[1] Bradley, Capitalism at Work: Business, Government ,and Energy (2009), pp. 346–47.