By Gregory F. Rehmke
How Free Markets Can Create Infinite Energy, or Why Can't Texas Be More Like New York City?
A talk given to the New York City Junto, Thursday, January 4, 2001.
To illustrate that the world is not in any meaningful way overpopulated, Julian Simon noted that if everyone in the world moved to Texas each person would still have about 1,800 square feet of living space. Enough room for a family of four to live in an average size house with a front and back yard.
Since Julian Simon made these calculations for his book The Ultimate Resource the world's population has grown. I recalculated this with the estimated current world population of 6 billion and now in talks to high school students I cite the square feet per person at 1,500, which still leaves 6,000 square feet for a family of four (a still comfortable 60 by 100 foot lot).
But over the years in presentations to high school students, I have been peppered with objections and questions: "What about roads?" and what about parks, lakes, shopping malls, etc. Students ask practical questions. If I say everyone in the world could live in Texas, they want to know how.
Why not take their questions seriously? The free-market system has an astonishing ability to respond to the unexpected, from everyday shifts in demand to hurricanes and other disasters. Imagine if everyone in the world woke up tomorrow and decided they wanted to live in Texas. Could markets coordinate the efforts and ingenuity of millions of entrepreneurs and businessmen in building the necessary infrastructure, homes, apartments, etc.?
Or what if aliens land and force everyone on Earth into Texas (perhaps after blowing up the White House as in the movie Independence Day). The aliens in Independence Day were pretty stupid. The expended enormous energy blowing up the world's major cities. If they wanted earthlings out of the way in order to developing mining operations on Earth, they would have been better off moving the world's cities to Texas.
So, how could market forces allow humanity to adjust to such a forced relocation?
This isn't an entirely science fiction question. A meteor could strike the Earth and do a similar amount of damage.
And an Atlantic Monthly cover story last year argued that an ice age, according to recent geological evidence, the Earth's climate shifts more rapidly than previously thought. &endash;a new ice age could hit in just a few years (click here to go to article on Atlantic Monthly web site). The article claimed that an Atlantic Ocean conveyer-belt that moves warm water north and cold water south could be suddenly disrupted. Temperatures in Europe would drop dramatically, since Northern Europe is warmed by the Gulf Stream. In just a few years northern Europe would be too cold to grow food (which could either save the European Union billions in farm subsidies, or cost them more ). Anyway, the article further claimed that armies would be marching around to conquering farmland in the south. But I would argue that market could adjust to a sudden ice age just as it could adjust to everyone in the world living in Texas.
In fact an ice age would bring astonishingly rapid adjustments through the world as farming relocated to new regions. Food prices would rise initially which would be hard on poor countries and not that big a deal for rich countries. In fact most of the poorest countries are hot ones now, so farm output for them might increase.
When disasters strike, whether hurricanes, meteors, govt. response is to declare national emergencies and suspend the rule of law and the very market forces that provide us the most resiliency to respond to unexpected changes in circumstances. Markets provide the information about relative scarcity and prices provide the incentives for millions or billions of people to coordinate their responses. F. A. Hayek's great article "The Use of Knowledge in Society" uses a disaster to tell its story of the power of prices and market. It starts with a flood in a copper mine in Chile (click here for this article online).
So the importance of explaining how markets help society deal with emergencies is to innoculate people against government "emergency measures" the next time a disaster strikes.
A separate reason why this kind of thought experiment is useful follows from the distortions caused by decades of interventionist immigration policies in America and around the world. When libertarians argue for open immigration and for the U.S. to remove immigration barriers the most difficult issue is the practical one of adjustment from the status quo to a free system. People respond to calls for ending U.S. immigration restrictions by saying that if we opened the borders now, millions of immigrants would flood in from Mexico and South America, but tens or even hundreds of millions would quickly travel here from China and India. How could markets handle that?
Well, markets could, and most people Americans as well as others around the world would be better off for it. The point of economic analysis and population-oriented thought experiments is to illustrate why and how.
Another reason to spend time with futuristic scenarios is to promote understanding of the optimistic perspective on technology, on market economies and on people. Most of the problems people associate with "over"population or population growth are really problem caused by the lack of the rule of law, of clearly defined property rights and enforceable contracts.
Problems in New York City like high rents and a shortage of housing are, or course, caused by regulations and government interventions that restrict the construction and development of new housing. Traffic congestion and a creaky, cranky transit system is caused by government mismanagment of roads and mass transit. So the main problems of daily life in New York City would be solved with private property, enforceable contracts and free markets.
The problems of daily life in west Texas are not so easily solved. It is an empty land--empty of people. There is beautiful scenery in part, but few cities and towns. West Texas cities like Lubbock, Amarillo, San Angelo and Midland are like oases in the desert.
Texas is a better place now in 2001 with ______ people that it was in 1980 with _____ or in 1960 with ______ or in 1900 with ______. I simply argue it would be a better place still in 2010 with ________ or _______ or even 6 billion.
Moving to Texas
Aix-en-Provence in the south of France is a beautiful place. I had a chance to visit there a few years ago for a talk at a Summer University for college students. The city was beautiful and densely populated. Narrow cobblestone roads ran between 6 to 8 story apartment buildings, most with shops on street level. The main street through town was a marvelous wide boulevard. If I were building a housing development and tourist attraction in Texas I would try to bring in thousands of stone masons and other construction workers try to build this part of paradise in a free country.
Imagine the new governor of Texas was a very ambitious man. Imagine him not satisfied with being Governor of Texas but with visions of being Governor of the World! He has limited powers as Governor, but by far the biggest limitation on his power is that so many of the world people don't even live in Texas. So he can't even try to govern them.
If he were to appoint me his advisor, I could try to help him govern the world. What would attract the world's people to Texas is freedom. In Texas freedom is a stronger tradition than in most of the rest of the country. For one thing the federal government owns very little land in Texas, unlike the rest of the country and especially the west were the federal government owns 50% of the land. Texas came into the union as a sovereign state, so most land stayed or became private property.
I would advise the new governor of Texas to visit Las Vegas. Have you been there lately? It is not just a place for gambling. It is becoming a place for tourists as well. Perhaps Las Vegas looked at a map of the U.S. ten years ago and noticed how many Indian reservations there are around the country and knew they would be facing stiff competition for future gamblers.
But Las Vegas seems like an odd place for a tourist destination, unless you have never seen a desert before. The nearby mountains are beautiful at sunrise and sunset, but there is not a lot of natural beauty to see. But like Aix-en-Provence, the tourist attraction is not the countryside, it is the city and it's buildings and shops and boulevards and people.
Las Vegas now has buildings and shops and boulevards to attract tourists. You can visit Venice, Paris, New York, Ancient Egypt and Rome. In the Venecian you can ride in a gondola to the piazza and sit "outside" in the cool midday air sipping cappucino. P.J. O'Rourke says it has everything Venice does, except the stink.
The Paris Casino has a mini-Eiffel Tower great breads from French paistry shops and buffets of fine French foods. Many of the workers are from french-speaking Romania however, so lack the skill of delivering a authentic French insult.
So I would try to impress upon the Governor of Texas the brilliance of this strategy of inviting the world's great cities to Texas.
First we would have to assure investors that Texas would have the population to fill millions, even billions of new homes and apartments in Texas. And for that Texas could apply, as Iowa has, for a waiver from federal immigration restrictions. Iowa has less people now than it did 100 years ago. Restrictive immigration policies have depopulated hundreds of midwestern cities and towns. So Iowa and many other depopulated cities, including many in New York (check map) are trying to attract more immigrants.
In Texas we would need hundreds of billions of dollars in housing construction and infrastructure in order to accommodate billions of new immigrants. The good news is that there are hundreds of millions of really poor people in the world who are looking for work. They don't know it maybe, but they are really looking for freedom. But they are looking for freedom to work in all the wrong places. They should look in Texas. They should have cards that read "Have Poverty; Will Travel."
So new Texas world cities could be constructed with world labor. Texas is a big enough place, and with enough coastline, I would advice the Governor of Texas to offer Hong Kong a new embassy in Texas. And to, in fact, offer them one the size of Hong Kong itself somewhere along the Texas coast. It could be a new port city to compete with Galveston and Houston. The new city charter would be based on the one that worked so well over 100 years for Hong Kong, once the freest city in the world. Let Hong Kong investors finance this new city and port. And they could easily fine millions of people to begin construction. In fact, construction could be financed in part by the impoverished chinese immigrants themselves. Right now the going rate for getting to New York illegally from China is around $40,000. All that is needed is to offer citizenship to anyone investing $40,000 in this new Hong Kong, Texas. Ten million Chinese immigrants would bring 400 billion (400,000,000,000) investment dollars to Texas. That should be enough to get things started.
Of course, most impoverished Chinese people don't have $40,000. They borrow it believing they will be able to find work in New York City and will be able to save enough to pay back those that transported them.
In and around Hong Kong, Texas would be factories and farms providing jobs and food. Elsewhere in Texas would be New Bombay and New New Delhi, maybe along the hi-tech I-35 corridor between Austin and San Antonio. Millions of highly educated and English-speaking people from India would bring inexpensive programming skills as well as hundreds of other skills to Texas.
Americans have long liked to assume that they are a special people, somehow uniquely capable and deserving of the stunning wealth that has been created and that we enjoy in America. But it is liberty that is unique to America and the western world of the last couple hundred years. Rose Wilder Lane tries to describe this astonishing force of nature, the power of free people in the beginning of her book, The Discovery of Freedom:
["Men are alive on this earth, only because the imperative human desire is to attack the enemies of human life. Today many Americans ma
One of the interesting things about Texasworld is the boost in world wide growth rates that we could bring about. Academics and comentators get excited when they average growth rates in China of 7% or 8%. But every Chinese immigration to the U.S. enjoys an individual economic growth rate of maybe 1000% the first year: from $100 a month income to $1,000 and then maybe another 100% the second year to $2,000 a month.
Moving Chinese people to the U.S. seems a more effective way to boost prosperity economic development than shipping capital to China.
Perhaps the greatest loss of human prosperity over the last 50 years has been the billion Chinese locked up in China under communist rule. How many billions of hours of creative human endeavor were lost? How many hundreds of millions of lifetimes of business acheivement and entrepreneurship lost. How many tens of millions of lifetimes stolen from engineering development, medical research and scientific discovery? We should reflect not only on how miserably these billion plus Chinese people have lived under Communist rule but also how much the world lost when a billion minds were locked up and isolated from the world.
China could have easily followed the course of Singapore in 1950. The president of Singapore was also a communist, but he inadvertantly deregulated the Singapore economy and discovered the benefits of markets. Chinese in China could have had the same per capita income as Chinese in Singapore, Hong Kong and Taiwan.
This gives us a sense of what would result from liberating hundreds of millions of Chinese not over the next 50 years as China gradually liberalizes, but over next two or three as Chinese people are invited to live free in Texas. They might continue a live of hard labor and long hours, but their children (plural!) would go to college and be engineers, businessmen and doctors (while working in Chinese restaurants during the day). (Everyone time I chatted with workers in Chinese restaurants when I lived in Houston, they were working on engineering degrees at area colleges.)
So the Texasworld presentation will outline preliminary ideas on market responses to possible global emergencies, and will look at the technologies for growing food and producing energy for vastly high population densities, in Texas, in New York or on the Earth in general.
Gregory Rehmke has a degree in Economics from the University of Washington and has worked with the Reason Foundation, the Institute for Humane Studies and the Free Enterprise Institute. Mr. Rehmke is a member of the Mackinac Center Board of Scholars and has written on environmental topics for PERC Reports, a newsletter of the Political Economy Research Center in Bozeman, Montana. He written over one hundred articles on public policy topics as well as published resource books, study guides, and newsletters focused on the economic aspects of over 20 past high school debate topics.
Economic Thinking/E Pluribus Unum Films
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