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The sad misunderstanding of what is an economic resource that we should be sparing with our use of

Summary:
That we wish to be efficient, even miserly, with our uses of economic resources is obvious enough. By definition economic resources are scarce so using fewer of them to do any one thing allows us to have more things within our resource limits.So far so good - but it is then necessary to define what is an economic resource whose use we desire to be efficient with our use of, even miserly in how we apply it. This being exactly the thing which is not currently done:The extraction and processing of resources to make consumer products is responsible for over half of global carbon emissions and 90% of the destruction of nature – yet the prime minister’s 10-point plan for a green industrial revolution missed a crucial 11th point on reducing resource use. The “whack-a-mole” strategy of targeting

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That we wish to be efficient, even miserly, with our uses of economic resources is obvious enough. By definition economic resources are scarce so using fewer of them to do any one thing allows us to have more things within our resource limits.

So far so good - but it is then necessary to define what is an economic resource whose use we desire to be efficient with our use of, even miserly in how we apply it. This being exactly the thing which is not currently done:

The extraction and processing of resources to make consumer products is responsible for over half of global carbon emissions and 90% of the destruction of nature – yet the prime minister’s 10-point plan for a green industrial revolution missed a crucial 11th point on reducing resource use. The “whack-a-mole” strategy of targeting only some types of waste, such as plastic straws and stirrers, is so far short of what is needed and doesn’t do anything to prevent extraction in the first place. Our dependence on ever-increasing consumption can’t be tackled without a clear plan. A legally binding UK target to halve resource use by 2050 would focus minds in the same way climate targets are doing.

We can hear the sneer there about using up things to produce mere “consumer products” as if that’s not the aim of all economies - to produce for the consumption of the people what the people desire to consume. But leave that aside, what is necessary here is to define what is a resource that we should be sparing in our use of:

For a successful transition to a resource efficient, circular economy

That’s not correct. It is what many are asserting but it’s still not correct. For a circular economy can - in some instances and activities either does or will - consume more resources than a non-circular one.

For example:

A stimulus programme focused on green and digital infrastructure, research and development, energy and care work could create more than 1.2m jobs within two years and more than 2.7m jobs during the next decade, according to research.

Human labour is an economic resource, a scarce resource. So, this plan insists upon using the labour of 2.7 million people. That’s the use of a scarce resource to achieve it.

Yes, we’re fully aware of the fact that there can be and even are externalities and so on. But it is still true that “resource” is not just what is dug out of the ground. Thus that is not the thing or things that we desire to optimise our use of. We need to optimise the use of all resources - land, labour, capital, knowledge, and on and on.

We also have a system to work this out for us, the price system. Sure, we need to ensure that externalities are implanted into it but once that’s done we have our calculating machine for what does require more resource use. If it’s more expensive then it’s using more resources.

The circular economy often enough is more expensive than the linear. Therefore we should not be being circular in order to reduce our use of resources. For that very expense is telling us that the circularity isn’t necessarily resource saving.

There is an easier way of putting this too. If, once externalities are included, you are making a profit doing something then you are reducing resource use against the alternative methods of doing that thing, also against the alternative uses of those resources. Therefore the circular economy is not something that requires government action nor a plan - it’s something we can leave to that greed and grift of capitalism. Or the enlightened self-interest as a preferred formulation.

That is, the environmental work required isn’t to build a new economy, nor to force a specific mode of production, it’s to build the right price system, the one that includes those externalities. Once that’s achieved then we can just stand back and let the system itself chew through the information that directs it.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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