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Debunking the 'Peak Oil' Scam, Austrian Style

By Anthony Wile
November 17, 2005

Forward courtesy of Robert Busser

Original Title

Prophet, an FMNN regular commentator and amateur Austrian economist takes a whirl below at summarizing a free-market response to the Peak Oil myth. Here he addresses one of the myth’s more reasonable advocates who has been involved in the debate for several days in feedback, where this Prophet commentary initially appeared.


Dear Richard Walling - it is all a matter of financial literacy! Your statement as follows, "This is a highly technical discussion of reservoir depletion and discovery" may perhaps reveal a misunderstanding of how markets work. Such misunderstandings - if they are such - are certainly to be expected given free-market economics have been rigorously repressed and have not been taught in the schools or even interpolated into economic texts for the most part. Until the Internet and the subsequent explosion of free-market ideologies driven by such outfits as the von Mises Institute, there was no viable methodology to even begin to communicate the truth. It is no one's fault that pernacious tales such as Peak Oil haunt public discourse - they would be far worse, and more immediately catastrophic were in not for the debunking power of this wonderful mechanism of "individual mass communication."

Having said that, here are further points that cut to the heart of the fallacious argument projected by Peak Oil.

1) No one can foretell the future.
The future is infinitely unpredictable in a free-market economy, or even in one such as this that is far, far less than a free market. That is why no free-market economist would engage in a rigorous discussion of the intricacies of such a technical discussion. The Soviet Union apparachicks did so for years and all it got them was bungled projections and a bankrupt society. The beauty of free-market economics is that it depends, as von Mises said, on "individual action" and there is no telling what a single individual may accomplish. And those accomplishments will have nothing to do with bureaucratic projections or numerical assumptions.

2) Consumption will continue to increase.
Supply drives demand. This is another neo-classical economic law. In modern, Western society, consumption of all kinds will increase despite the efforts of those who would like Western citizens to live like stone-age Indians. In fact, short of bombing Western societies back to the stone age, there is almost nothing that can be done to curb consumption and the efforts of so many to do so are further indication of the economic illiteracy that afflicts the Green Left and others of less radical stripe as well.

3) Marginal utility demands that the market, not man, decides.
The law of marginal utility which separates classical and neoclassical economics spells doom for those who believe in rational scarcity. Marginal utility is the unconscious economic calculus of the marketplace - one which prices a glass of water higher if sold near a desert than a lake. It is the MARKET that prices such things, not humans, not five-year plans, not propaganda about the diminishment of certain commodities. If oil is somehow running out, then marginal utility will price oil in such a way that either another resource will come along to take its place (human action) or more oil will be discovered (another consequence of marginal utility).

4) The fallacy of classical economics.
Only economic illiterates look at a graph and conclude that a line runs straight ahead forever. Thomas Malthus, a classical economist did so and concluded that England would starve to death within his lifetime, and he lived hundreds of years ago, and England did not starve. Karl Marx was a classical economist and he made rigid, classical assumptions about the value of labor, etc., and all of these proved false. Classical economics is indeed the economics of Peak Oil and it is as rigid and fallacious now as it was Malthus' day. There is nothing in economics as in life that is a sure thing, despite every Keynesian and statistical effort to claim otherwise.

5) Economic literacy must be acquired over time through study.
It is unfortunately almost impossible to pour economic literacy into people's heads simply by stating its principles. Like other forms of literacy it takes time; ultimately it provides the determined student with a rigorous frame of reference that includes certain bedrock principles. As these prove out - and they do - knowledge turns to certainty, though it is a certainty that is hard to convey, anchored as it is in years of study that others have not undergone. Thus, it is convenient (easier) to point out that the rhetoric of Peak Oil is recycled from over 30 years ago - and was in fact a propagandistic effort then as now, and a cynical one at that. Those who float such phantasmagoria are often among the most educated and powerful; they certainly know better - for it is they who have attempted with some success to wipe out all understanding of free-market economics and to substitute elaborate bureaucratic rituals for Mises celebration of private action.

Inevitably it will not work! Their struggles are growing more desperate and their momentum builds to an uncontrollable speed. Hamlet killed a King and the 20th century global power elite created an Internet. One was a crime, the other a miscalculation but both likely end in rage and tears. Power was so close and once upon a time the world was almost so small you could grasp it!

Anthony Wile

staff reports - Free-Market News Network
"If A Nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be"
Thomas Jefferson.


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