Over the last several years we have been persuaded that sustainable management of the earth's resources is a good thing. It's easy to see why. The idea of 'unsustainable development' seems bad practice at best and potentially disastrous at worst. More recently sustainable management has been built into the New Zealand Resource Management Act while the broader notion of sustainable development underpins AGENDA 21 -- which records the conclusions of the United Nations Earth Summit held in Rio in 1992.

This concept of sustainable development impacts on two quite separate areas of economic activity. The first deals with the environmental costs associated with the by-products and side effects of economic activity. Most of us would agree that polluters should bear the cost of pollution and and this indeed is the intention of the RMA. Unfortunately, the Ministry of Conservation demands that we should have "better consideration of the earth's resources with a view to conserving the potential of resources for future generations" This second goal of 'resource conservation' ignores history, is economically wrong-headed, and assumes that human invention has come to a end.

When Karl Popper destroyed Marxist theory in "The Poverty of Historicism" his main argument was that we cannot predict future knowledge. The history of technology is one of shortages of natural resources leading directly to the development of substitute materials, or new processing technologies, or both. For example, an Egyptian bronze manufacturer in the year 1000 BC might have worried about the exhaustion of Nubian tin mines leading to a shortage of bronze. At that time iron cost eight thousand times more than bronze to produce, making it prohibitively expensive as a bronze substitute. But as tin became scarce the ancient metal-smiths developed new techniques which collapsed the cost of iron ten thousand fold making it cheaper than bronze by 700 BC.

Similarly in the 19th century the extensive harvesting of whales created a shortage of whale oil so that it doubled in price in less than ten years. Petroleum soon became a substitute. In 1865 economists predicted that Great Britain would soon run out of coal bringing its factories to a standstill. Higher coal prices promoted the development of more efficient mining methods. It was not long before oil became a direct substitute for coal.

History is full of such examples and there is no reason to believe that the future will be any different. For example genetic engineers are developing plant species which will grow bio-degradable thermo-setting plastics instead of starch. Plastics which cost the same as starch will be an attractive substitute for petroleum products and will divert all those European farmers from growing surplus food into growing useful plastics.

The lesson of history and economics is that all natural resources are infinite. When they become scarce the price goes up and substitutes are found, or new technologies open up new reserves.

The evidence is so clear that one wonders why so many people believe otherwise. Waitakere Mayor Bob Harvey recently published quite reasonable arguments in favour of making a careful decision before committing his ratepayers' money to the Waikato pipeline. But then he concluded:

We have made a positive statement that will be remembered for many years: there is no such thing as an infinite natural resource and as soon as Auckland realises that the better.

This statement is more likely to be remembered for being totally wrong because there is no such thing as a finite natural resource. Bob Harvey is no fool and he is only repeating statements by the Ministry of Environment which has declared in print "Fresh water is a finite resource ..." But fresh water is no more than the oceans plus energy ­ usually supplied by the sun. It's an infinite resource like all the others. Auckland is short of storage because of mismanagement. Claiming that Auckland can run out of water is like saying Wellington can run out of wind. Of course if we don't price it right, it will be wasted. That doesn't make it finite.

Actually the official documents relating to Agenda 21 and the RMA are quite careful and well considered. For example the Resource Management Act specifically excludes minerals and the Government's own Review Group makes a nice distinction between sustainable management and sustainable development. But these niceties are often lost by activists further down the environmental feeding chain.

Another source of confusion is almost certainly the record of biological extinctions. Living species routinely disappear from the earth. The history of life on earth is a history of extinctions, sometimes gradual, and frequently catastrophic. It's easy to believe that if the moa, the huia, and the smallpox virus can disappear then so can coal, copper and gas.

Living species are quite different to natural resources. They develop an equilibrium within an ecosystem over thousands of generations and can collapse into extinction when the system is thrown out of balance. A comet collides with the earth, a new species migrates into the territory, or an uppity primate uses nasty weapons to unfair advantage. We never extract the last grain of copper because its price goes up until we find a substitute but an animal population can collapse once it has fallen below a critical threshold because of insufficient opportunities to reproduce. Animal extinctions have nothing to do with the intensity of use. No farmed animal has ever become extinct. If the early Polynesian immigrants had been farmers rather than hunter-gatherers moa and pigeons might now be as plentiful as sheep and chickens. (Indeed, could we farm native pigeons?)

While plants and animals have an existence independent of human activity the so called natural resources exist only because of human invention. Copper ore was just a bunch of rock until someone discovered how to smelt copper. Bauxite was just clay until electrical energy was harnessed to extract the aluminium. Sand was no substitute for copper until we developed fibre optics. Pitchblende was useless rock until Fermi piled up his atomic reactor in 1942.

These resources are not "natural" at all. They exist only as a result of human invention and imagination and no one can predict our future knowledge. We are back in Popper land. Has tomorrow's most valuable natural resource yet to be discovered? Do we risk delaying its discovery by trying to preserve resources for future generations?

Some argue that sustainable development may be a real issue for underdeveloped countries who export their natural resources as raw materials. This overlooks the fact that New Zealand earned the capital needed to develop its early economy by exporting Kauri and gold as raw materials. Would we be better off today if someone had told us not to?

We have to wonder about the ethics of imposing our own "developed nation" standards on poor countries when those standards will keep them in poverty longer than they need be. Isn't one needless famine one famine too many?

Surely all the evidence indicates that the best way to solve the world's problems of population growth, famine, war, environmental pollution, and tyranny is to promote rapid economic development. Rich nations develop economies which depend on knowledge rather than resource depletion. Rich citizens clean up their environment. Women in rich nations liberate themselves and soon act to halt population growth. Rich free-trading nations have no need to make war on their neighbours because they no longer depend on ownership of physical resources. Famine is caused by tyrants who run planned economies and wage wars to divert attention from their failures.

The communists always argued that the present generation should suffer to ensure a better future for their grandchildren. The golden future never arrived. The suffering, slaughter and deprivation were for nothing.

Market-driven science-based democracies generate ever increasing wealth and future generations will be richer than we are today. So how do we justify depriving people today in order to transfer wealth to the richer generations of our future? Should the Egyptian bronze workers have stopped making bronze to ensure their children had a better life?

If we decide to keep our natural gas in the ground rather than use it today how will we explain this decision to our children when a world shortage of gas leads to the genetic engineering of sugar beet able to produce carbon fuels more cheaply than we can imagine? Or if fusion power solves all our energy problems for ever?

By all means keep New Zealand clean and green. It's good for our lifestyle and good for modern business. But policies which aim to preserve natural resources for future generations are bad economics, bad history, and bad for our children.

Unexpectedly this is one of the first things the US has learned from following the principles of Agenda 21.

In May of this year the US made its first attempt to comply with the environmental accounting standards which came our of the Rio conference. The end result, surprising to some but predictable to economists, is that the value of oil, gas, coal and other minerals has shown no significant change between 1958 and 1991. The value of reserves used has been compensated for by the increase in reserves that can profitably be exploited. Which is exactly what the impact of the law of supply and demand on innovative effort would predict. The US is in no danger of running out of minerals. And nor is anybody else.

So let's honour our Earth Summit commitments and clean up our legislation, starting with the RMA.

Owen McShane, Rangiora Road, R.D. 2, Kaiwaka, Northland 1240 Phone: 64 9 431 2775 Fax: 64 9 431 2772