Realist, not conformist analysis of the latest financial, business and political news

Capitalism And Markets Create Mineral Reserves – Not God Nor Geography

Yes, of course, geology has something to do with where mineral deposits and reserves are but it’s a much truer reflection of that real universe out there to insist that capitalism and markets create mineral reserves – far more so than anything else to do with continents floating around on the magma and all that. This also isn’t as weird nor perverse as it sounds. For a mineral reserve, just as with a mineral resource, is an economic concept to begin with. That the existence of an economic concept is promoted by a good socioeconomic system shouldn’t come as a shock. And yes, this capitalist free marketry, it is a good socioeconomic system. Not without its problems most assuredly but given that it is the only one that has ever achieved a substantial and sustained increase in the standard of living of the average peeps yes, it’s a good one.

This is, of course, all lovingly explained at length in my book, The No Breakfast Fallacy:

In a nutshell, a mineral reserve is what we have measured, counted, tested, experimented with, and know that we can extract the metals using current technology, at current prices, and make a profit. A mineral resource is what we’re pretty sure this is true of but cannot absolutely prove right now. Note that both involve prices and profit – they’re economic concepts. So, obviously enough, economic conditions make a difference:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]This paper explores the effect of market orientation on (known or available) natural resource wealth using a novel dataset of world-wide major hydrocarbon and mineral discoveries. Our empirical estimates based on a large panel of countries show that increased market orientation causes a significant increase in discoveries of natural resources. In a thought experiment where economies in Latin America and sub-Saharan Africa remain closed, they would have only achieved one quarter of the actual increase in discoveries they have experienced since the early 1990s. Our results call into question the commonly held view that known or available natural resource endowments are exogenous.[/perfectpullquote]

Exogenous is just the economists’ cute word for “comes from outside the system”.

It is absolutely true that what minerals are where does come from outside the economic system used by the human beings above them. But the usable mineral deposits do depend upon that economic system, they’re endogenous in economics cutesy.

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