In Progress
Lesson 1 of 0
In Progress

Time

“Man is subject to the passing of time. He comes into existence, grows, becomes old, and passes away. His time is scarce. He must economize it as he economizes other scarce factors. The economization of time has a peculiar character because of the uniqueness and irreversibility of the temporal order.”

–Ludwig von Mises

Human action happens across time. All economic decisions take place across time, and production requires time. Being mortal, man’s time on earth is scarce, and that scarcity makes it an economic good, and makes it valuable. Time’s irreversibility makes it a unique economic good. You cannot buy back the time they spent on something, or continue to increase your time indefinitely, as you could with other goods. Mises and the Austrian economists wrote eloquently about the importance of understanding the time dimension of human action, and the unique nature of time as an economic good. This chapter will go further by building on the work of Julian Simon to argue that human time is the ultimate resource, and that economic scarcity is a consequence of the scarcity of human time. The economizing of time is the ultimate economizing act, from which all economic decisions flow. Given more time humans can make more of any economic good.There are no binding physical constraints on the production of economic goods, and with the dedication of more human time and effort, the output of any good can be increased indefinitely. Only the scarcity of time is what forces us to make choices between economic goods, creating their scarcity.

  1. The Ultimate Resource

In his book The Ultimate Resource, Simon argues that human time, or human labor, is the ultimate resource because it can be used to make all economic goods and resources. The dedication of time to any production process would lead to an increase in the supply of its output, which leads Simon to argue that using the term “resource” to describe material goods is a misnomer, as material resources are the products of utilizing the ultimate resource, human time, in production processes.  The term resource suggests a fixed pool that humans draw down as they consume, but in reality,  resources need to be produced before they are consumed, and their production is not limited by the physical abundance of these metals in the crust of the earth, but in the amount of time humans dedicate to producing them. Raw materials, metals, and fuels are not given to us as manna from heaven, but they are the complex output of sophisticated production processes to extract them and prepare them for deployment to the meeting of human needs.

  1. Simon’s bet

Watching as the world was being swept up in the 1970s hysteria about the depletion of resources and overpopulation, Simon wass not content with merely writing on the issue. He sought to expose the vacuity of the hysterics idea by challenging one of the 20th century’s foremost hysterics, Paul Ehrlich to a public bet on the question. 

Ehrlich had published a large number of hysterical diatribes not worthy of including in this book’s bibliography in which he had predicted the exhaustion of several essential resources to humanity due to overpopulation in between misanthropic rants about eugenics and coercive measures to bring down human population. Simon challenged Ehrlich to specify any resources he was confident would run out or become much more scarce over any period longer than a year, and Simon would bet him $1,000 that each of them would actually be cheaper, in real terms, by the end of the period.

The bet must have seemed like a donation to Ehrlich, such was the conviction of his hysterical warnings about the imminent depletion of critical resources. Ehrlich specified five metals and a period of ten years to assess their price, from 1980 to 1990. By the end of the period, each of these metals was cheaper than at the start, in real terms. Thirty years later, these metals have only gotten cheaper in real terms, while their annual production continues to increase every year.

The reason that the price of all these metals dropped is that their scarcity is relative, not absolute. They are scarce to us because the time and resources required to produce them must be diverted away from the production of other resources. Simon understood that as human population increased, and demand for these metals increased, they would have more resources directed toward their production, and their quantities would increase, and the prices would decrease. The rise in demand causes a rise in prices, which affords larger profits to producers of these metals, which provides them with more money to spend on investment, and allows them to attract more investment. This investment goes into prospecting, extraction, refinement, and distribution of the metals, all of which leads to an increase in productivity: the output per unit of input. As discussed in more detail in Chapter 4, larger capital investments allow the employment of more complex and longer methods of production that give a higher productivity of worker. 

As a geologist, Ehrlich’s conception of scarcity was based on estimates of consumption compared to reserves, without regard for the role of human action bringing about changes in these numbers. Ehrlich essentially compared the proven reserves of metals to their annual consumption numbers and estimated the number of years it would take humanity to run through our reserves. 

Simon, as an economist, understood the dynamics driving the production of these metals, even though he had little familiarity with the geological realities. By understanding economics as the study of human action, as was discussed in chapter 2, Simon knew that the scarcity of these metals depended ultimately on the amount of time humans dedicated to them, and that was in turn dependent on the incentive humans faced to produce these resources, not on geological limitations. Should the demand for the metal increase, there is no limited pool to be depleted. There are always other lands to prospect and deeper mines to dig. The availability of resources is not the limiting factor to the production of anything. In the same way that availability of rocks on earth is not a limiting factor to the size of your house.  Stones are plentiful, but preparing them for construction is what is costly. What we really value are not resources, but economic goods made out of resources. That’s what requires time, and that’s what’s scarce. That is the scarcity from which all other scarcities originate. The raw material is everywhere around us, but the time to produce economic goods from it is scarce. Humans are not passive of recipients of manna that can run out. Humans are the producers of all these resources, and when demand for these metals increases, the most important determinant of their scarcity is the action of the humans who produce them, and the incentives they face. As they face larger demand for it, they have the incentive to produce more of it and invest more in its production. As productivity increases, we are able to obtain larger quantities of the supply of the good per amount of time invested in producing it, meaning that the real price of the good, as measured in terms of human labor will continue to decline. 

This fact is borne out by commodity markets’ data for decades. While commodity prices can and usually do rise in terms of national currencies, that is a result of the debasement of national currencies. When measured against wage rates, all commodities are in long-term price decline, even as consumption numbers steadily increase. In a world of hard money, as under the gold standard, it would be perfectly normal to expect prices of all commodities to consistently decline over time, with only occasional and temporary increases precipitated through the vagaries of supply and demand. 

Only with this framework can one understand why humanity has never run out of any resource, even after many millennia of exploiting the earth, and relentless predictions of imminent doom as we run out of resources. Not only have we not run out of any of these resources, but in fact, even as real prices continue to decline, annual production of virtually all resources continues to rise every year, the proven reserves that exist of each resource have only increased with time as our consumption has gone up. If resources are to be understood as being finite, then the existing stockpiles would decline with time as we consume more. But even as we are always consuming more, prices continue to drop, and the improvements in technology for finding and excavating resources allows us to find more and more. Oil, the vital bloodline of modern economies, is the best example as it has fairly reliable statistics. As Figure XX shows, even as consumption and production continue to increase year on year, the proven reserves increase at an even faster rate.1 According to data from BP’s statistical review, annual oil production was 46% higher in 2015 than its level in 1980, while consumption was 55% higher. Oil reserves, on the other hand, have increased by 148%, around triple the increase in production and consumption.”

  1. Material Abundance

Similar statistics can be produced for resources with varying degrees of prevalence in the earth’s crust. The rarity of a resource determines the relative cost of extracting it from the earth. More prevalent metals like iron and copper are easy to find, and relatively cheap as a result. Rarer metals, such as silver and gold, are more expensive. The limit on how much we can produce of each of those metals, however, remains the opportunity cost of their production relative to one another, in subjective human valuation, and not their absolute quantity. There is no better evidence for this than the fact that the rarest metal in the crust of the earth, gold, has been mined for thousands of years and continues to be mined in increasing quantities as technology advances over time. 

[Gold mining annual production]

If annual production of the rarest metal in the earth’s crust goes up every year, then it makes no sense to talk of any natural element as being limited in its quantity in any practical sense. Scarcity is only relative in material resources, with the differences in cost of extraction being the determinant of the level of scarcity. 

To support Simon’s contention, it is worth remembering that the diameter of the earth is 12,742 kilometers. By contrast, the deepest mine in the world, Mponeng gold mine near Johannesburg, is ‘only’ 3.84km deep, or about 0.027% of the diameter of the earth. For perspective, if the earth was a ball with a diameter of 1 meter (or 3.28 feet), the deepest hole ever dug in its crust would be 0.027cm (or 0.012in) deep, less than the thickness of three pages of this book.  The vast majority of the earth’s surface has not been dug in search of resources, and in the few places where we have dug, we have, quite literally, barely scratched the surface of the earth. All of the resources humanity has used in millennia of consumption and exploitation are a tiny fraction of the bounty available in earth. 

The limit on the availability of any of these resources has never been their physical abundance in earth, but rather the quantity of time that humans dedicate to producing it. It is entirely possible to drastically increase our production of any metal or resource, by simply dedicating more human time to its production. The limit on how much we can produce of any material remains the amount of time we can dedicate to its production, and the opportunity cost in terms of other materials. It is not the absolute quantity of the material in earth.

Three types of measures of resources:

1-Low end measure: Proven or known reserves, what can be extracted with current technology and prices: Increase over the long run, everywhere

2-High ceilingcieling measure: Total crustal abundance and ultimate recoverable reserves, total amount in earth’s crust. Enormous and unmeasurable

3-The most economically relevant measure is that of “ultimate recoverable resources,” which the U.S. 

Geological Survey presently assumes is one hundredth of 1 percent (.0001) of the amount in the top kilometer of the Earths surface. 

The USGS considers 1% of 1% of the earth’s crust’s top kilometer to be recoverable resources. That is what they expect can be recovered with current prices and technologies. 

So the ultimate recoverable resources is only 0.0001 of the mineral present in the top kilometer of the earth’s crust, or two kilometers out of the entire diameter of the earth. The earth’s diameter is 12,742km, meaning that its volume is 1.083e12 km3. The volume of the 1km outer strip from which the USGS calculates the ultimate recoverable reserves is 5.1e8, or around 0.047% of the earth’s total volume. The top 1% of the crust of the earth is roughly 60% larger than the Atlantic Ocean, or twice the size of the Indian ocean.

So the ultimate recoverable resources available to us are defined as 1% of 1% of the total supply of a material present in 0.0471% of the earth’s volume. If what we could ultimately recover from a mineral is only one ten-thousandths of its raw form present in less than half a percent of the earth’s volume, then we can clearly conclude that the total quantity of the metal in the crust of the earth is a completely meaningless and irrelevant metric to human life. Even by the most conservative estimates, we find that the total crustal abundance of any particular naturally occurring substance are many uncountable multiples of the total amount humans consume of each resource, and that quantity constitutes no meaningful limit or binding constraint on our level of consumption. It is quite likely that the total crustal abundance of any particular metal is equal to millions of years of human consumption. Even if current supposedly unsustainable consumption trends were to continue for millions of years, we would not be able to dig through the entirety of the earth’s contents of any particular metal. The limit and constraint on how much we can produce from each metal in any given year will continue to be the amount of time and resources we direct to its production. 

Beyond being used to illustrate their abundance for writing this economics textbook, these aggregate measures of resources on earth are a completely pointless and irrelevant metrics that do not factor into the economic decisions carried out by anyone anywhere. There are no economic decisions that pertain to the total stock of metal on earth, and all individual economic decisions pertaining to a resource are made at the margin, based on the next marginal unit of land to be exploited, the marginal cost of extracting the next unit, and the marginal revenue expected from selling it. At no point can any individual or entity make any economic decision pertaining to the total aggregate stock of a material on earth. Economic calculations are constantly being done at the margin, and they pertain only to scarce resources that involve an opportunity cost. Minerals in the crust of earth are not scarce, and they offer no utility to humans. Producing usable materials from them, on the other hand, requires real decisions to be made about allocating marginal units of scarce resources into the production process.

A useful analogy here is to think of earth’s resources as the water in an ocean, and our extraction of earth’s minerals as the equivalent of desalinating seawater to make it potable. The amount of water available for drinking at any point in time is not a function of the quantity of water in the sea; but of the amount of desalination that can be performed. No economic decision needs to factor in the total quantity of water in the ocean; economic decisions pertain only to the application of scarce resources, labor, capital, and land, to the process of desalination. It would be insane for the operators of the desalination plant to concern themselves with the availability of water in the ocean, when their plant requires real resources for its operation.

The desalination plant could operate nonstop for years and the ocean sealevel will not be affected. It is silly to worry about the sea running out of water in such a world; the only threats to water availability concern the operation of the desalination plants. 

Land Abundance

It is often heard that land is scarce, because the size of the earth is fixed. But a deeper look at this claim illustrates it is not different from any other claim of material scarcity. While land 

  1. Time Scarcity

The only scarcity, as Julian Simon brilliantly demonstrated, is in the time humans have to produce these metals, and that is why the global wage continues to rise worldwide, making products and materials continuously get cheaper in terms of human labor. The one resource whose price has continuously risen throughout history is human time, as measured by wages. As we continue to find more ingenious ways of increasing output of physical resources, their real price, in terms of human time, continues to decline, while the value of human time continues to rise. 

When a human is born into this world, their time on it begins. That time is uncertain, it may be as brief as an hour, or it could last a whole century. Nobody knows how long he will live, but what man soon realizes is that he cannot live forever, and thus his time left on earth is only ever declining. From that realization, man begins to economize their time.

In contrast to the relative and constantly decreasing scarcity of material objects, human time’s absolute scarcity generally increases with time.  This is intuitively true individually, as growing and aging makes man realize his time on earth only gets scarcer, giving it more value. It can also be seen on the market in the price that is paid for human labor across time. As humans spend more time working and producing, they increase the abundance of material objects, making them drop in value across time. 

The price of labor across time

The price of leisure

number go up, up, up, up, up

Wages in England

==Simon’s Index==

[Estimates of prices in terms of time needed to earn them]

Over time, everything gets cheaper but time becomes more expensive.

Humans have constantly found ways to economize on time, by finding ways of surviving, through the mechanisms described in the forthcoming chapters. Acquiring property, investing in it to increase its value, investing in capital, trading, specializing, inventing new technologies, finding new sources of energy. The sum result of all these new technologies and methods of economizing is our modern civilization, and the incredibly high productivity and purchasing power it provides the average individual compared to the past.

If you don’t like your wages now, just compare them to what they would have been like 500 years ago.

More than fifty years after the publication of Ehrlich’s diatribes, the planet’s population has more than doubled, and the prices of all the essential commodities have continued to decline in real terms as the price of human time continues to increase. Blindly unrepentant and immune to introspection in the way only government-funded academics can afford, Ehrlich continues to this day preaching the impending demise of humanity through overpopulation and resource depletion. 

Simon’s conception of human time as the ultimate resource clarifies the entire nature of economic scarcity. Whereas economists had generally posited the scarcity of material goods as the starting point of economic analysis, it would be more accurate to understand scarcity as a function of the finiteness of human time. While material goods are technically scarce in the world, their absolute quantities on earth are not what makes them scarce, and not relevant to our decisions about their scarcity. What makes them scarce for us is the time that is required to produce them, since that is limited and scarce in a very vivid sense to us.

The inevitability of death, and the finiteness of time, and hence its scarcity, necessitate a constant accounting for opportunity cost, and from that comes all of man’s economic thinking and action. Material decisions  Understanding scarcity as a function of the scarcity of time helps us understand opportunity cost, and why the economic way of thinking must always include the cost of the forgone alterna tive. It is because human time, being scarce, means there is always an alternative valuable use of time available for an individual, and that must always be taken into account. 

  1. Opportunity cost
  2. The scarcity of time is why humans have to think not just about direct monetary costs associated with any activity, but also the opportunity cost: the cost of an activity in terms of the forgone alternative a person would have engaged in. The fact that our time is scarce means we cannot engage in all activities at all times, and must choose. Even if resources were not a constraint, the time needed to carry out activities is always a constraint, and humans must factor in the alternatives they forgo every time they take part in an activity. 
    1. Time preference

    In addition to all these properties, human time is also uncertain. Death is possible for every person at any point in time. No person knows with certainty how long they will live, or when they might die. This creates in man a time preference: a universal preference for earlier over later goods. Individuals always prefer consuming or having a good today over any future period, because survival is never certain. Time preference is always a positive value, meaning that utility today is always preferred to the same utility tomorrow. This can also be understood as a consequence of the finite nature of time. Humans also prefer to have resources sooner rather than later, since, in the case of durable goods, they would be likely to enjoy their services for longer the earlier they receive them.

    While time preference is always positive, its value varies depending on the degree to which humans discount future utility compared to present utility. A relatively low time preference indicates a low degree of discounting of future utility, indicating relatively higher concern with the future. A higher time preference implies a higher degree of discounting of future utility, and relatively lower concern with the future, and a strong present-orientation. 

    1. Economizing time

    Economics is ultimately about economizing the amount and subjective value of our time on earth. 

    Economic scarcity is really the scarcity of time. With enough time we can make infinitely large quantities of anything we want. When we economize, we are ultimately economizing our time and collaborating with others on economizing their time.

    That human time is limited makes it scarce, and the subject of economizing behavior. Time’s irreversibility gives economizing it a peculiar character, as Mises put it.  Simon elaborated on this peculiarity best when he argued human time is the ultimate resource, it is the one thing from which all other resources can be created, and the one resource that continues to get more costly over time.

    That time is scarce means that humans are constantly looking to economize it into being spent in the ways that offer them the most satisfaction, or in the most valuable ways. The future being uncertain and time preference being universally positive mean that humans constantly seek to maximize the value of their present time. 

    Leisure is the term used to denote the time people spend doing things they enjoy that bring them immediate pleasure, as opposed to things they are coerced into doing, or things which they do for future reward or satisfaction. Leisure is how economists refer to good times. Everyone likes to have a good time, and there is nothing wrong with it. Life is finite and humans naturally want to spend it doing the things they enjoy rather than the things they don’t enjoy. Eat, drink, and be merry for tomorrow you die. Time preference, in other words, is always going to be positive.

    Everyone would like to spend all their life in leisure. But since we are not eternal creatures living in the garden of Eden, too much leisure will inevitably mean an early death through starvation or the violent vagaries of nature. We cannot just enjoy leisure indefinitely, because we are always capable of conceiving of ways in which we can improve the quality and quantity of time we have on earth. 

    It is not just the value of our present time that humans seek to economize. We also would like to maximize the quantity of time we have on earth, in other words, to try to live long and not die early. We also would like to maximize the value of our future time. Human reason allows us to conceive of ways to act to increase our chances of survival, and to provide for our future selves. Reason allows us to conceive of a better future, to work for it, and to sacrifice present enjoyment for its sake. Reason also allows us to conceive the consequences of failing to provide for the future, and to compare them to others. Humans can spend every minute of their lives caring only about their present, but would eventually arrive at a present moment where their situation is very precarious, because of their failure to provide for it in the past. The more an individual values the future and works and provides for it, the more likely they are to survive.

    Ultimately, the economic question is how we trade off present utility with longer survival and future utility. The most important trade an individual conducts is their trade with their future self. The simplest trade is the one involving forgoing immediate pleasure in favor of labor to provide for the future. As a person is enjoying their present, they will experience a need for sustenance and shelter, at the very basic level. But food needs to be hunted, or grown, and shelter needs to be built or acquired. That requires sacrifice of present enjoyment in favor of labor. 

    Man’s reason leads him to realize he can provide for his future self and improve his chances of survival. He can understand that labor, while unpleasant in the moment, and involving the cost of forgoing pleasure, will allow him to reap rewards in the future.  Reason, and the desire to live long and well, conspire to lower man’s time preference. They not only call on him to abandon leisure in search of the hardships of work, but to also provide for his future self through deferring current consumption, saving for the future, and accumulating durable goods and productive capital. 

    It is this process of lowering of time preference, future orientation, and provision for the future that sets in motion the process of civilization, as Hans-Hermann Hoppe put it. “once it is low enough to allow for any savings and capital or durable consumer-goods formation at all, a tendency toward a fall in the rate of time preference is set in motion, accompanied by a “process of civilization.””

    As humans reap the benefits of future provision and low time preference, they become more likely to engage in it. Work, and the accumulation of capital, lead to increases in productivity, increasing the value of an individual’s time. The more people are able to provide for their future, the less uncertain it becomes, which in turn encourages further concern for the future, saving, capital accumulation, and a likely increase in the quantity and the value of an individual’s time on earth.

    1. Economizing Action

    The following eight chapters of the book will each focus on important tools humans have developed, consciously and spontaneously, to increase the amount and value of our time. This list is not meant to be exhaustive or conclusive, and these categories contain significant practical overlap, but this book will still focus on explicating each of these concepts. 

    1. Labor
    2. Property
    3. Capital
    4. Technology
    5. Energy
    6. Division of labor
    7. Money
    8. Entrepreneurship

    Express each one as a function of economizing time

    These tools, are, in essence, how humans economize our time. The ultimate trade-off we all face is that our time can be spent on leisure, enjoying things we like, or it can be spent in economic activity, with the aim of increasing the length and value of our time.

    All of these economic tools share one thing in common, they are completely peaceful, and everyone involved does so out of their own volition. 

    1. Hayy ibn Yaqthaan

    The first philosophical novel by Ibn Tufayl. Best-seller in Europe in 17th and 18th centuries. Inspired Locke’s Tabula Rasa.

    English translation 1708, The Improvement of Human Reason: Exhibited in the Life of Hai Ebn Yokdhan

    Inspired Daniel Defoe to write Robinson Crusoe (1719), the first novel in English. 

    Inspired Newton

    As the bird builds its nest, the lion hunts the deer, and the bee builds its comb, man acts–he uses his reason to ensure his survival in the present and to provide for his future.

    Mowgli, Tarzan, Romulus and Remus

    The story of Robinson Crusoe or Hayy ibn Yaqthan exists across many cultures and civilizations, indicating the universality of its core lesson. Human reason is capable of understanding the essential material realities of life, and human survival instinct compels man to act upon this understanding to improve their reality.