01.23.09Humans ARE Smarter than Yeast
Are humans smarter than yeast? In this interview about peak oil, Richard Heinberg tries to show us a parallel between yeast and humans:
“If we put yeast in a bottle of grape juice, they’d be eating up the sugar in the grape juice, consuming their energy source, and at the same time they’d be giving off a waste product, namely alcohol, which would be poisoning them. So their numbers would proliferate until they ate up their energy sources and poisoned themselves with their waste product, and then they’d have a die-off. Were doing exactly the same thing with fossil fuels: we’re eating up our energy source as fast as we can, and we’re polluting our environment with the waste product. So, are we smarter than yeast? That’s the question.”
Now, if humans really were like yeast, this would be a frightening scenario. But fortunately for us humans, we are not mindless bacteria. Instead, we are acting humans. We choose. We have purposes. We use means to achieve ends. Yeast do not have free will, do not use means to achieve ends, and hence cannot act.
When humans cooperate with each other to live in society, their actions are governed by the immutable laws of economics. The most basic laws are those of supply and demand:
If demand for a good increases, or if the good’s supply decreases, its price will be higher than it otherwise would have been. Consequently, the higher price will discourage demand while encouraging increased supply. Conversely, if demand for a good falls or if the good’s supply rises, its price will be lower than otherwise. As a result, the lower price will encourage increased demand while discouraging supply. On a freed market these incentives create a tendency for supply to equal demand.
This is just common sense. Superbowl tickets are expensive because a lot of people want them; but the high price discourages uninterested fans. When gas prices skyrocket, we cut back on driving. When strawberries are in season, the price falls, and we buy more of them. These are all examples of supply and demand in everyday life.
So what does this have to do with fossil fuels? If humans are “eating up our energy source as fast as we can”, then the supply will fall, causing the price to rise. The higher price will discourage consumption and provide incentives for people to increase the supply — either through conserving the resource, discovering new supply, inventing new technology, or by substituting different resources. Even though humans are using up resources, the price system — manifested in human action — automatically responds to a shortage by creating incentives for people to increase the supply. Scarcity creates incentives for abundance. Humans will not use up all their resources and experience a die-off because, through the marvel of the price system, resources are allocated to reflect supply and demand.
Even in the worst case scenario where no new resources are discovered, no new technologies are invented, and no substitutes are found, a die-off very unlikely. The laws of supply and demand will still apply. As resources become more and more scarce, the price will rise, and people will have to change their lifestyle to reflect the “post-carbon” reality. Peak-oilers talk about the necessity of “post-carbon communities”. What they don’t realize is that if oil does run out, it will be market forces that lead to urban gardening, walkable communities, re-localization, and the rest of the post-carbon lifestyle.
Of course, this is only true for the price system of a freed market. If government violently intervenes in the economy and prevents or distorts the functioning of the price system, then even the wildest doomsday predictions of socio-economic collapse might come true. Peak oil is a very real problem for statism, and is another reason for the separation of society and State.
Heinberg’s analogy breaks down because humans can allocate resources through the market price system, whereas yeast cannot. Yeast will mindlessly deplete their energy source and experience a die-off. Humans, when faced by scarcity, will react to high prices by finding new resources or changing their behavior. This is the core difference: humans act, yeast don’t.
Thus, humans are smarter than yeast. However, we must qualify that statement: When it comes to economics, some humans are not smarter than yeast.
I agree that market mechanism can send signals to individuals through price and induce a correction of their behavior. However these corrections always come too late and are too violent. We would be better off preparing alternative forms of energy now that we have not hit the oil wall yet then wait for the shock before doing anything.
But more importantly I think you are missing an important point in Heinberg’s argument though: “So their numbers would proliferate until they … poisoned themselves with their waste product”.
Air pollution is an externality of your perfectly free market and its potential destructive effects does not get translated into pricing signals. There is nothing to deter the development of more polluting alternatives to oil that are slowly stifling us to death.
JC is correct I think; the key question is time. Will market signals come early enough, and play out over a long enough period of time, for market forces to react? What it really boils down to is, what will the shape of the supply curve over time look like? Not the typical curve “S” of economics, but supply of resources , such as oil, over time. If it turns out to be very “peak-y”, with a sharp run up followed by a rapid decline, we’re in very deep doo-doo.
We are a bit like yeast in that the time horizon for business people to make decisions is 2-5 years, if that. Most humans are governed by decisions made in this short-sighted business realm. Scientists are trained to “see” longer, decades and even centuries in advance, and with typically much higher IQs than the population at large, scientists serve as the reconnaissance scouts for the future of human civilization. Scientists have egos and make mistakes, so the most important trends are subjected to peer review. Finally (and this is something often overlooked) scientific insights and forecasts are stamped and updated with a degree of confidence from the peer review community.
Does government have a role in all this, somewhere? Yes it does. When the scientific community, such as the discipline of petroleum geology, assigns a higher and higher confidence rating to predictions of peak oil (such as the last Petro Geology conference in London) this becomes something that as non-yeast, we should take prudent steps to mitigate. Private companies will remove any executives that take action to mitigate oil shortages 20 years from now, as this reduces shareholder value (earnings payout) in the near term. Policymakers, however, can take heed of scientific forecasts and based upon the degree of certainty assigned to a forecast, government can incent moves to mitigate forecasted problems. An example would be, gradually lowering income taxes while simultaneously raising taxes on liquid fuels. This is revenue neutral but can start a migration away from the at-risk resource bottleneck identified by scientists, long before it becomes a life threatening crisis.