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Dec
16

Opportunity Cost

Opportunity cost is the cost related to the next-best choice available to someone who has picked among several mutually exclusive choices.[1] It is a key concept in economics. It has been described as expressing “the basic relationship between scarcity and choice.”[2] The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently.[3] Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure or any other benefit that provides utility should also be considered opportunity costs. – Wikipedia

As a culture, we have spent the past 6,000 years honing our abilities to destroy nature under the guise of “extracting resources”. Early on, we clearcut the ancient cedar forests of Iraq, caused the desertification of the oak savanna of Saudi Arabia, turned Greece and Italy from lush forestland into arid agricultural land fit only for goats and grapes. Things slowed a bit after clearing the forests from Germany, France and the British Isles, but once we got our feet under us in the New World, we proceeded with our deforestation efforts. Peak wood forced our culture to look for other sources of fuel. Animal dung, peat and coal took up the slack.

Then we discovered oil.

When these fuels are burned, their precious energy, after undergoing a sequence of degradations, finally leaves the earth as spent, long-wavelength, low-temperature radiation. Hence, we deal with an essentially fixed storehouse of energy which we are drawing upon at a phenomenal rate… The release of this energy is a unidirectional and irreversible process. It can happen only once, and the historical events associated with this release are necessarily without precedent and are intrinsically incapable of repetition… It is upon our ability to evolve a culture more in conformity with the limitations imposed upon us by the basic properties of matter and energy that the future of our civilization largely depends. – M. King Hubbert, Science, 1949, p. 103-109

61 years ago, we knew that we were in a unique period in history. The war was over and the future looked bright. North America was in a great position to assist the world in rebuilding and with our massive resource base we were poised to build a new world for ourselves. It only follows that the “Golden Age” of science fiction happened between 1946 and 1966. Endless possibilities abounded and the authors of the day explored many of them. From cities under the sea to bases on the moon and even as far as interstellar colonization. Of course, reality has a way of never quite lining up with even the most informed predictions. At the time though, we had many many choices before us. From building a sustainable, equitable planet wide society, to the stratified, polluted, criminal mess we find ourselves in now.

Every step along the way of course, our options have narrowed, our choices become bleaker and bleaker. In creating a world where the top 1% live like gods and the bottom 94% live in poverty, we have destroyed the planet for future generations, truly proving that humans are not smarter than yeast. (The 5% not accounted for are the enablers, who in exchange for the scraps from the table have permitted the destruction)

Now we have a choice. But if we wait, we will live in fear of embargoes. We could endanger our freedom as a sovereign nation to act in foreign affairs. Within ten years we would not be able to import enough oil — from any country, at any acceptable price.

If we wait, and do not act, then our factories will not be able to keep our people on the job with reduced supplies of fuel. Too few of our utilities will have switched to coal, our most abundant energy source.

We will not be ready to keep our transportation system running with smaller, more efficient cars and a better network of buses, trains and public transportation.

We will feel mounting pressure to plunder the environment. We will have a crash program to build more nuclear plants, strip-mine and burn more coal, and drill more offshore wells than we will need if we begin to conserve now. Inflation will soar, production will go down, people will lose their jobs. Intense competition will build up among nations and among the different regions within our own country.

If we fail to act soon, we will face an economic, social and political crisis that will threaten our free institutions.

But we still have another choice. We can begin to prepare right now. We can decide to act while there is time. – Jimmy Carter delivered this televised speech on April 18, 1977

Almost thirty four years ago, the writing was clearly on the wall. But we had time to make the changes required in an orderly fashion. More importantly, we had the resources. It would be nice to recount the massive sacrifices made and the huge effort undertaken to change things. The world today would be a very different place, as oil would be a well conserved resource, we would have more than enough time to solve the remaining sustainability problems and perhaps even look to the asteroid belt, the Moon and Mars for new frontiers and resources to keep our per capita standard of living rising on a global basis. The science fiction writers would still have had a chance at having some of their ideas bear fruit while we still had enough of this irreplaceable resource available to enable them.

A more comprehensive statement of our choice might be this:

* Dead planet and dead economy (if insufficient effort is mustered toward reducing carbon emissions, population, and consumption)
* vs. crippled planet (so much climate change, and so many species extinctions are already in the pipeline and cannot now be averted, that a healthy planet is just no longer a real possibility, for at least the next many decades) and sharply downsized economy (if we do reduce carbon emissions, population, and consumption, that will constitute a form of economic contraction that will mean the end of prosperity as we have come to think of it). –  Dilemma and Denial, Richard Heinberg

We are running out of time. Our political systems have been badly compromised by the “Business As Usual” parties, our ecosystems are failing, the climate is a runaway train. Our options are looking narrower and narrower, our choices, well, if the politicians have their way, our choices will be the eco-disaster currently unfolding in Northern Alberta writ large as we begin the fracing of the rest of the planet to liberate the last bits of methane from the coal beds. Political parties are faced with an impossible dilemma: Continue business as usual and keep a tight rein on things for as long as possible, or actually face the reality of our situation as Jimmy Carter tried to get us to do do in 1977 in order to implement the policies that would see us to a “soft landing”. Considering that all politicians want to do is to stay in power, it is no wonder we haven’t seen Steven Harper or Michael Ignatieff trying to explain to Canadians how bleak things really are. Canadians think that we are energy mavens, Saudi Arabia north. We are not. We have little light sweet crude left in the ground, our natural gas reserves are mainly fictitious and we have already sold all of the high EROEI coal to China. Why do you think we are building out the tar sands?

Same reason the United States is drilling three miles down under one mile of water.

So looking at this from a strictly economic point of view, where the resources in the ground were the capital that we had to spend, were we better off squandering it on making several thousand billionaires, many billions of poor people and destroying the capacity of the planet to support life?

What was the opportunity cost of our decisions made since 1949?

What will be the opportunity cost of our failure to act now?

As it ever was…

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