About the Event
Third Annual Hans Landsberg Memorial Lecture with John E. Tilton: The Hungry Giant: China and Minerals
December 14, 2005
Professor John E. Tilton discusses the possible impact of China's current economic growth (as well as growth in other developing countries, such as India) on the availability of mineral resources and commodities. His lecture draws from his recent book, On Borrowed Time?, in which he examines the longrun threat to modern civilization from the depletion of mineral resources. In addition, Professor Tilton highlights some of the pioneering work that Hans Landsberg contributed to this theme.
Professor Tilton divides his time between Chile, where he holds the chair in mineral economics in the Engineering School of Pontificia Universidad Católica de Chile, and the United States, where he is a research professor in the Division of Economics and Business at the Colorado School of Mines. His teaching and research interests over the past 30 years have focused on economic and policy issues associated with the metal industries and markets. His recent research examines the role of mining in economic development, the environment and mining, material substitution, long-run trends in metal demand, the recycling of metals, the sources of productivity growth in mining, and changes in comparative advantage in metal trade. His most recent book, On Borrowed Time?, published by RFF Press in 2003, examines the long-run threat to modern civilization from the depletion of mineral resources.
John E. Tilton, an RFF University Fellow and professor of mineral economics at both the Colorado School of Mines and Pontifica Universidad Catòlica de Chile, discussed the implications of China's economic development for the availability of mineral commodities on December 14, in a speech memorializing Hans H. Landsberg, one of RFF's founding fathers.
In his introductory remarks, Tilton shared remembrances of Landsberg, a personal friend and the "Ernest Hemingway of the mineral economics profession." Tilton recalled that Landsberg was a great mentor, getting Tilton invited to a conference in Tokyo on the future of nonfuel minerals when he was still a "very unknown junior professor." He also complimented Landsberg’s lean writing style, saying he could make even the most technical of topics come alive.
The balance of his speech focused on whether economic development in China poses a threat to the availability of mineral commodities for the United States and other developed countries. To assess the question, Tilton presented two views of mineral availability: the fixed-stock paradigm and the opportunity-cost paradigm. The first, he said, emphasizes that the available stocks of iron, copper, and other mineral commodities are fixed, since Earth is finite. Demand on the other hand, is variable. According to this view, it's only a matter of time before the fixed stock is consumed, and the end is usually sooner than later.
The second model looks at long-run mineral availability in terms of what society has to give up to obtain its resources. According to this perspective, whether scarcity becomes a problem depends on the "race" between new technology and the effects of depletion. Unlike in the fixed-stock paradigm, Tilton explained, "scarcity is not something that will come suddenly like a car speeding along the highway and runs out of gas."
Applying these models to China, Tilton suggested that the fixed-stock paradigm best fits short-run mineral availability and the opportunity-cost paradigm best describes long-run availability.
In China today, he said, supply is not sufficient to satisfy demand at past price levels. Between the resulting higher prices and scarcity caused by inadequate supply, problems can occur. However, he said, these problems are "short-run and self-correcting." He compared the situation in China to that of Japan 25 years ago, pointing out that Chinese efforts to secure minerals through long-run contracts and foreign investment help provide the capital needed to ensure adequate future capacity.
"These efforts should be welcomed and encouraged by the United States and others and not feared," Tilton said.
Turning to a longer view, Tilton said that although it is counterintuitive, "mineral commodities today are actually more available for developing countries than they were for developed countries a century ago." He attributed this to the innovative technology that has sprung from wealth presumably generated by past consumption of mineral resources. While there is no way to be sure this will remain true for China looking forward, he said, it is at least possible.
Tilton also applied his assessment to petroleum, saying that China's economic growth and rising consumption of this mineral are likely to affect energy supply in a manner similar to the pattern for nonfuel minerals. That is, in the short run, prices will rise. In the long run, China's growth should accelerate both depletion and new technology, thus either increasing or decreasing long-run price. In the case of conventional fuel and natural gas, he said, it is less likely that technology can indefinitely offset the effects of depletion than in the case of nonfuel minerals. However, adding a third timeframe, the medium term, Tilton said that China's growth "should hasten the day when conventional petroleum and natural gas are replaced with alternative sources of energy."
In conclusion, Tilton stressed again that China's consumption of mineral resources should be welcomed. "In a world where, historically, most people have lived in poverty," he said, "economic development in China and India and other developing countries literally means a better life for hundreds of millions of people."
Event Speakers and Video
President, Resources for the Future
John E. Tilton
Question & Answer Session
The Hans Landsberg Memorial Lecture is an annual event dedicated to the memory of Hans Landsberg, a pioneer in energy and mineral economics who was a devoted member of the RFF staff for nearly 40 years.