Scarcity is a fact of life. More to the point, it’s a fact of economic life. Anything that can’t be had without using up some resource(s) to get it now and to get more of it later is, by definition, an economic good. So what economics has to offer in this vein is an understanding of the impersonal mechanisms by which motivated people interact with one another to overcome scarcity. It doesn’t matter that they don’t know or necessarily agree with each other on which scarce items are the ‘most important’ in some larger sense. Self-interested individuals and unanticipated commercial opportunities have always been the most reliable engines of economic growth, raising standards of living for millions whom those ambitious and inventive folk neither do nor perhaps care ever to know.
It’s almost never a straightforward march to success, either. After many thousands of unsatisfactory or unsuccessful experiments, for example, Edison developed an incandescent light bulb that, with no plan to do so, paved the way for many practical uses for electricity.
Entrepreneurship itself can be an unplanned endeavor. There are numerous cases of unintentional entrepreneurs stumbling upon ideas for transforming nuisances into resources, literally ‘creating’ value through insight. This requires only the brain power and imagination to see and transform trash into treasure. The stories of early petroleum exploration in Pennsylvania are stories of attempts to drill for water, and to drill for salt, often frustrated by contamination with oil seepage into the process. Likewise the accidental discovery of penicillin, and the also accidental discovery of Teflon. All of these discoveries—penicillin, petroleum, electric light, and the super-slick non-stick Teflon material, were made possible by the freedom to engage in repeated trial and error. Notably, they only became widely available because they were allowed to test their commercial viability in the marketplace. In countries where market forces have been suppressed,
trial and error cannot sort out worthwhile from worthless endeavors, and economic well-being has suffered as a result.
If trial and error are necessary, as they seem to be, and the freedom to fail and to follow unanticipated discoveries is also part of that process, the history of scientific and industrial development can inform us today. There is no substitute for the discovery process that the market provides.
Which brings us back to the questions of how to address the economic questions that currently engage U.S. lawmakers and policy folks. Particularly to the energy questions. For some time, the dominant voices in energy policy discussions have eschewed market solutions in favor of policy—meaning government-directed industrial policy—solutions. We’ve written about them frequently here, here, and here, just to illustrate a few.
Broadly speaking, however, there are only two paths to consider. One is to let the market handle energy by allowing entrepreneurs to discover what, where, and how well new and existing resources can be brought into play to help overcome scarcities. Remember, scarcity is a fact of life, so we are not going to eliminate energy scarcity. The trick is to find the way(s) that get around that best, most cheaply, and by means that are consistent with a free society–including its business environment. While it is quite true that we operate in a
global energy market, there are very definitely things the U.S. can and is seemingly more willing to do to ease domestic energy restrictions. They are based on the economics rather than the politics of the question, and history demonstrates that that is a solution that works.
The other path is to adopt a full-bore command economy posture, directing supply options, resource identification and availability of energy. Less prominent, but very much a part of the plan, is the need to restrict existing consumers’ energy use and dramatically slow the growth of energy use internationally (read: less developed countries). This is just in the nature of a comprehensive industrial policy, and would presumably be coordinated from a central command post (be it Congress, or a coalition of governmental entities). With a weak dollar, severely limited domestic production and refinement of petroleum, and climbing world prices for energy—and now, alarmingly, foodstuffs as well, the ‘take command of the economy’ approach is one that has been placed on offer from the political realm, and will no doubt have appeal. . While command and control haven’t worked elsewhere, they could appear to offer a way to quell economic fears.
In the U.S., many of the questions about the economic future and well-being hinge, or seem to hinge, on finding solutions to questions surrounding energy production and usage. “Don’t just stand there, do something” might better be replaced by “Don’t just stand there, get out of the way. This is the job of the market.”