Sunday, July 08, 2007

Global Resource Bubble

Picture of Earth from NASAEveryone has heard of an economic bubble. One of the causes, as described in Wikipedia is,

The cause of bubbles is often disputed although some experts believe that the cause of bubbles can be explained by the "greater fool's theory." The greater fool's theory explains the behavior of a perennially optimistic market participant (the fool) who buys an overvalued asset in anticipation of selling it to another rapacious speculator (the greater fool) at a much higher price. The bubbles continue as long as the fool can find another (greater) fool to pay up for the overvalued asset. The bubbles will end only when the greater fool becomes the greatest fool who pays the top price for the overvalued asset and can no longer find another buyer to pay for it at a higher price.

There is another kind of bubble, a "psychological bubble" or "reality bubble" where people isolate themselves from other people or situations that they do not want to deal with. This is not a neurosis. We all do it. We construct our own reality that explains who we are, why we are here and our position in the world around us. It is a method of coping.

Sometimes the reality bubbles are physical, such as countries. Sometimes they are emotional, like religion. Reality bubbles can be burst, just like economic bubbles, but this is rare because it is human nature to bend reality to fit our preconceptions.

These two bubbles, the economic and the reality bubbles are at the heart of another bubble, the global resource bubble. We humans like the way the world is developing and we don't want it to stop. The fact that the kind of growth we have experienced up to this point is not sustainable is not a reality we can face or accept. That is why so many people for so long have denied that we are running out of oil or global warming is a reality. That is why people fail to see that the world is already over-populated. If we are satisfied with our standard of living, we want to maintain it. If we are not satisfied, we want to raise it. In both cases, that means ever increasing economic growth, ever increasing population and ever increasing destruction of the environment.

Unfortunately, just like the Dot.COM bubble or the housing bubble, the global resource bubble will eventually burst. Theoretically the human race could manage the situation and evolve our economies to provide an acceptable standard of living for everyone using resources in a sustainable manner, but that is not going to happen.

We are guilty of the "greater fools theory" on a global scale. In this case it is not an overvalued asset we are buying, but an undervalued asset, the very world we live in, and the fools are people not yet born.

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