False Predictions based on accurate knowledge

In 1960…a best-selling book said that the United States had only a 13-year supply of domestic petroleum at the existing rate of usage. At that time, the known petroleum reserves of the United States were not quite 32 billion barrels. At the end of the 13 years, the known petroleum reserves of the United States were more than 36 billion barrels. Yet the original statistics and the arithmetic based on them were both accurate. Why then did the United States not run out of oil by 1973? Was it just dumb luck that more oil was discovered—or were there more fundamental economic reasons?

Just as shortages and surpluses are not simply a matter of how much physical stuff there is, either absolutely or relative to the population, so known reserves of natural resources are not simply a matter of how much physical stuff there is underground. For natural resources as well, prices are crucial. So are present values.

Sowell, Thomas, Basic Economics: A Citizen’s Guide to the Economy (Basic Books, 2004) p.205

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