A New Way to Measure Global Resources

Time and People are our Ultimate Resources

It's a simple calculus. This universe is finite, its resources, finite. If life is left unchecked, life will cease to exist. It needs correcting. – Thanos, Infinity Wars

In a sense Thanos is correct, the number of atoms on our earth is fixed. But wealth is not atoms, wealth is knowledge. Knowledge is not fixed, and it is knowledge that determines the value of things. While the quantity of things is important, it’s their value that really counts in an economy, and value can change as fast as minds can change.

Rearranging atoms can dramatically change their value. The iPhone 12 weighs around 5.78 ounces (164 grams). It is primarily made up of iron, copper, nickel, and tin with tiny quantities of gold, platinum, silver, and 68 other elements.[1] In their basic state, these 5.78 ounces of elements are worth just a few dollars. Add knowledge and they can become worth thousands of times more.

Much of what we value is not physical, but spiritual, in the sense that it appeals to our intellect and tastes and ethics. This is why we value services, beautiful music, art, literature, movies, architecture, and so on. We value the design and arrangement of things. We inscribe our creativity on physical objects, but the objects are not what is really valued. Is the value in the ink and paper that contain Shakespeare’s sonnets or the Mona Lisa’s canvas and paint?[2]

As George Gilder has noted, scarcity is what we want, abundance is what we have. Since our wants are infinite and always exceed our resources, we live in a world of permanent scarcity. Scarcity is a state of reality and cannot really be measured. However, we can quantify and measure abundance. By measuring how much things cost and how these costs change over time, we can calculate abundance. If something costs less over time it is becoming more abundant. If it costs more, it is becoming less abundant.

Measuring global resource abundance considers both resource abundance and population size and entails three steps.

1. Time Prices

We buy things with money, but we pay for them with time. There are money prices and there are time prices. Time prices are simply the ratio of money prices divided by hourly income. Money prices are expressed in dollars and cents and time prices are expressed in hours and minutes.

Time prices are much better than money prices for several reasons. First, time prices contain more information than money prices. Since innovation lowers prices and increases wages, time prices more fully capture the benefits of innovation. Second, time prices avoid the subjectivity and contention associated with GDP deflators, CPI adjustments, and other efforts to adjust for monetary inflation. Third, time prices can be calculated on any product with any currency at any time. Based on these factors, we consider time prices to be the true prices.

The first step in measuring global resources is to convert money prices to time prices. If a pizza is $20 and you are earning $15 an hour, the time price of a pizza is 1.33 hours. If the pizza price increases to $22 but your hourly income increases to $20, the time price is now 1.1 hours. The nominal money price increased by 10 percent, but the time price decreased by 17.3 percent.

2. Resource Abundance Multiplier

The second step is to calculate the resource abundance multiplier. The resource abundance multiplier is the ratio of the start time price divided by the end time price. In our pizza example the ratio would be 1.33 divided by 1.10 or 1.20. For the same amount of time required to work to earn the money to buy one pizza in the start year, you now get 1.2 pizzas or 20 percent more pizza. From this calculation we can say that pizza abundance has increased by 20 percent.

3. Global Resource Abundance

The third step is to calculate the global resource abundance by multiplying the resource abundance multiplier by the population size. This will provide a snapshot of global resource abundance at different points in time. For the start year of the analysis, we index the resource abundance to a value of one and population to one as well, so global resource abundance is equal to one in the start or base year of analysis. The end year is equal to the end year resource abundance multiplier multiplied by one plus the percentage change in the population. If population increased by 10 percent and the pizza resource abundance is now 1.2, the global resource abundance would be 1.1 x 1.2 or 1.32. What this value indicates is that global resource abundance increased 32 percent from a value of one in the start or base year to 1.32 in the end year. One can also calculate the compound annual growth rate in global abundance using Excel or a financial calculator with the number of years in the analysis period. If our pizza analysis covered a five-year period, the compound annual growth rate in global pizza resource abundance would be 5.7 percent. At this rate global pizza abundance doubles approximately every 12.3 years.  

Summary

Global abundance considers both resource abundance and population. The analysis looks at the change in abundance over time and is a three-step process. The process includes converting money prices to time prices, calculating the resource abundance multiplier, and then multiplying the resource abundance multiplier by the size of the population. Comparing global resource abundance at different points in time will indicate if abundance is increasing or decreasing.

This framework for quantifying, measuring, and analyzing the relationship between resources and population is explored in great detail in our forthcoming book, The Age of Superabundance. The book also applies the framework to a variety of datasets covering hundreds of products, some going back as far as 1850. In one example, we look at an index of 50 basic commodities from 1980 to 2018 and found that global abundance increased by 503 percent. Every one percent increase in population corresponded to a one percent decrease in time prices which indicated a seven percent increase in global resource abundance.

Thanos might be an entertaining evil character, but he is certainly ignorant of how human beings are infinitely ingenious, creative, and innovative.

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[2] Cesar Hidalgo at