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7 J. Legal Stud. 165 (1978)
Running Out: The Problem of Exhaustible Resources

handle is hein.journals/legstud7 and id is 169 raw text is: RUNNING OUT: THE PROBLEM OF EXHAUSTIBLE RESOURCES STEPHEN F. WILLIAMS* ARE we likely to run out of oil, iron ore, or other exhaustible resources? The debate is energetic, but, as I shall try to show, it is destined to be inconclusive and largely beside the point. It begs the real question of what institutions are best suited to deal with the uncertainty of future discoveries of new reserves. Positions on the exhaustion issue can usually be classified as pessimistic or optimistic. The pessimists point to the obvious fact that the physical supply of nonrenewable resources is shrinking; once a barrel of oil is used for fuel, synthetic fibers, or whatever, it is no longer there. Even if the resource can be recycled, there will be some irretrievable loss in the process. The optimists usually counter by shifting the focus to a pattern of steady increase in known, commercially extractable reserves-in the case of some resources, a dramatic increase (as suggested by Table 1). And they find further confirmation for their position in the price trends of raw materials relative to the price of labor (see Table 2). To all this, the pessimists reply by saying, in essence, One swallow doesn't make a summer. They suggest that the 1900-1970 pattern is probably more a quirk of fortune than a long- run trend. It is far from clear to me how anyone can have a firm position on the issue. Surely one must find any projection in this area highly uncertain. Whatever the odds, there is enough risk that the pessimists may be right to make it worthwhile to ask how the pessimists' scenario would work out under differ- ent institutions. The first part of this paper deals with the ability of the free market to allocate a nonrenewable resource over time efficiently (i.e., in such a way as to maximize the resource's value). This analysis accepts the human fact that we discount the future to some extent. The discount is manifested in the market by the interest rate: to get a dollar now, one must promise to pay the lender more than a dollar sometime in the future. This part of the paper concludes that the market is in fact roughly capable of maximizing the resource's value. * Professor of Law, University of Colorado School of Law.

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