Look at what has happened to the scarcity of industrial diamonds over the past 100 years.
The top chart adjusts nominal diamond prices to account for the general rise in prices since 1900 using a measure of the CPI’s broad inflation index. The bottom chart takes a different approach to adjust the diamond data. It looks at the hourly wage of a typical manufacturing worker and asks how many hours would a typical worker need to work in order to secure a unit of diamonds.
(note, I imputed the hourly wages for 1915-1918). Diamond data from USGS, CPI data from BLS and wage data from Historical Statistics of the United States and BLS.
By any metric, the scarcity of diamonds is no higher today (in fact, it is much lower) than it was over 100 years ago, even as human consumption of diamonds has rocketed with economic growth and population growth. In real terms, diamond prices have fallen by 99.86% since 1900 from $729 million per metric ton to $1 million per metric ton today. In 1900, it took a typical manufacturing worker 132 million work hours to secure himself a ton of diamonds. Today, a similar worker would only have to work 52,000 hours to get it – a decrease of over 99.9 percent over the course of the century. And as I will show you, these are lower bounds for just how scarce diamonds really have become. Diamond prices would have to rise to $2.6 billion per metric ton to make it just as hard for a typical worker to get it today as it was in 1900. Alternately, if diamond prices remain unchanged, the typical worker would have his pay slashed to just under 0.8 cents per hour in order to be in a position that his 1900 counterpart was in.
The US government famously spent millions of dollars strategically stockpiling industrial diamonds for fears that we would run out. They also did this for roughly 90 metals starting in the post-war era. Guess how all that worked out?
But this is just diamonds, right?
I certainly hope those are free-range diamonds! 😉
Speedmaster gets the golden Holstein wintercow award.
[…] January 6, 2010 by Aaron Rochester Economics Professor Micheal Rizzo, who’s blog shares our affinity for Hayekian humility, had an excellent series of posts over the holidays. In the spirit of the Twelve Days of Christmas, he examined what the last century has shown us about the interaction of scarcity and productivity, and the effects on the cost of twelve resources, from salt and tin to cobalt and diamonds. […]
Is this another repeat of Mmmm.Bacon’s sentence fragment? Or is it the first? I’d like to know what MmmmBacon thinks of Hayekian humility. Let’s say it! Let’s have an epistemeological food fight! Examinig the last century, the record does not speak well of Hegel and the progressives. When you respond, kindly use sentences.
[…] this is just antimony, right? Here is the previous entry in the […]