Mining Supercycle crashes? Blame evolution and all that

Is the mining boom over?  Are we descending into another of those times when the mining industry hangs on by the skin of its teeth?  A time when miners and engineers and truck drivers loose their jobs and investors their shirts?  We have seen it all before.  In 1983 and again after that. 

It is all so eerily familiar:  every bigwig at every conference is telling you gold will go to $1,000 and $2,000 an ounce.  Every bottom feeder is telling you that there are not enough people to go around.  Every academic is telling you they need more funding to train more students.  Consultants do not return your calls, for they are too busy cooking up NI43-101s.  Intelligent magazines publish on the Supercycle that will take us to unprecedented heights of metal productivity and better living.

Then one report after another, the share price falls, the cost of gold drops, a bank fails, a few thousand starve to death, one country invades another, China fakes the Olympic opening ceremony, and they blame it all on imprudent home buyers in California. 

I have seen those parts of California where people bought homes with nothing down and blow-up mortgages.  They are ugly places and two hours drive from Los Angeles.  They left the inner city for suburbia because the Hispanics came in and bought their houses or the black gangs drove decent citizens away.  And all they got was an impossibility.  But I cannot believe that is behind the crash of metal prices and share values. 

Maybe this is just another of those bubbles that was inflated by the hype of conference talkers, ignorant magazines editors, uneducated journalists, and greedy financiers.  Maybe this is just the end of a bubble brought on by hard-working, well-intentioned, but unsophisticated exploration geologists and junior miners.  It is hard to believe it is all because China clamped down on factories to clean up the air in Beijing. 

Then maybe it is just a normal correction back to equilibrium of a system that is explained by the clear logic of supply and demand.  I do not believe that.  I suspect the mining economy,  system if you will, is like any complex system: given to chaotic behaviour, prone to excess, and vulnerable to avalanche die offs of emergent companies.  This is just economic evolution in practice.  This is just another of those periods of punctuated non-equilibrium. 

You may have to hold on as things fall.  You may have to reduce spending as income evoprates.  You may have to retire early.  Or change professions—irritating, and the stuff of sad stories in the best-left-unread newspapers.  Or you can write a blog—there will always be something strange and interesting each morning to comment on as the system changes (crumbles) and people make and loose money, livelihoods, and lives. 

Here is a bit from Stuart Kauffman that takes a deeper look at the ideas I play with above:

At a still higher level, the human economy cannot be reduced to physics. The way the diversity of the economy has grown from perhaps a hundred to a thousand goods and services fifty thousand years ago to tens of billions of goods and services today, in what I call an expanding economic web, depends on the very structure of that web, how it creates new economic niches for ever new goods and services that drive economic growth. This growth in turn drives the further expansion of the web itself by the persistent invention of still newer goods and services. Like the biosphere, the global economy is a self-consistently co-constructing, ever evolving, emergent whole. All these phenomena are beyond physics and not reducible to it.

The evolution of the universe, biosphere, the human economy, human culture, and human action is profoundly creative. It takes some detailed exploration of what are called Darwinian preadaptations to explain this clearly. The upshot is that we do not know beforehand what adaptations may arise in the evolution of the biosphere. Nor do we know beforehand many of the economic evolutions that will arise. No one foresaw the Internet in 1920. This unpredictability may exist on many levels that we can investigate. For example, we do not know beforehand what will arise even in the evolution of cosmic grains of dust that grow by aggregation and chemical reactions to form planetesimals. The wondrous diversity of life out your window evolved in ways that largely could not be foretold. So, too, has the human economy in the past fifty thousand years, as well as human culture and law. They are not only emergent but radically unpredictable. We cannot even prestate the possibilities that may arise, let alone predict the probabilities of their occurrence.

Let me pause to explain just how radical this view is. My claim is not simply that we lack sufficient knowledge or wisdom to predict the future evolution of the biosphere, economy, or human culture. It is that these things are inherently beyond prediction. Not even the most powerful computer imaginable can make a compact description in advance of the regularities of these processes. There is no such description beforehand. Thus the very concept of a natural law is inadequate for much of reality. If this radical new view is correct, it challenges what I call the Galilean spell, the belief that all in the universe unfolds under natural law.

There is a further profound implication: If the biosphere and the global economy are examples of self-consistently co-constructing wholes, and at the same time, parts of these processes are not sufficiently described by natural law, we confront something amazing. Without sufficient law, without central direction, the biosphere literally constructs itself and evolves, using sunlight and other sources of free energy, and remains a coherent whole even as it diversifies, and even as extinction events occur. The same is true of the global economy. Such a self-organized, but partially lawless, set of coupled processes stands unrecognized, and thus unseen, right before our eyes.