Today, we talk about profit, loss, and the
environment. The University of Houston's College of
Engineering presents this series about the machines
that make our civilization run, and the people
whose ingenuity created them.
Here's a chilling thought.
Suppose a whaling company had gone out and
harvested every blue whale in the ocean in 1960.
Their profits would've been huge. Today that
company would make more from interest on the profit
than they'd make if they were still whaling.
In other words, they could have exterminated the
species and increased their profits as well. That
leaves us with a very uncomfortable feeling about
that kind of arithmetic.
Economist Howard Hotelling first did that
arithmetic 50 years ago. He said, let's think about
a mine owner. He can take all the ore out of the
mine at once. If he does, he'll depress the price.
He might well make the ore worthless.
Or he can draw ore slowly. If he does, then he
delays income and loses interest. If that isn't
complicated enough, remember that the mine will
eventually run out. Figuring out how fast to mine
the ore can be very complicated.
Turn that arithmetic loose on the world around us,
and we get into real trouble. During the '50s,
Hotelling's ideas underwent refinement. People
harvesting natural resources came up with the idea
of a maximum sustainable yield. Here's how it
works.
We ask, for example, how rapidly we should fish for
anchovies to sustain a maximum profit. Once we
know, we harvest that many. But what about the
other fish and birds who live by eating anchovies?
That happened in Peru during the 1970s. First,
Peruvians fished anchovies to the limit. Then
seagulls, who eat anchovies, began starving. Peru
didn't need the gulls, but she did need their
droppings. Now Peru hasn't just lost her anchovy
industry. She's lost her guano industry as well.
Today, fishermen systematically apply Hotelling's
arithmetic to the Pacific halibut. They treat them
like ore in a mine. They maximize their profit
against the day halibut become extinct.
Hotelling's arithmetic, like so much arithmetic of
human commerce, is too simple. There's too much to
take into account. The living species on this
planet are too subtly interwoven. If we maximize
profit from one species, we pay a higher cost
somewhere else. In the end, the species that'll
starve, as we continue feasting, is our own. We
shall die from overfeeding ourselves.
I'm John Lienhard, at the University of Houston,
where we're interested in the way inventive minds
work.
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