Thursday, July 08, 2004

How Economics Invented the Modern Mine

Economics is everywhere. According to the History Channel, 90% of all gold discovered in the world was discovered after 1848. Considering that people have been looking for gold since civilization began, I asked why has so much of it been found within the last 150 years? And more importantly, can we learn something about entrepreneurship and innovation in the process?

When one hundred thousand prospectors stormed California in 1849, they quickly swallowed up all the surface gold in just two years. Thereafter, corporations, armed with new techniques and technologies as well as large sacks of cash, were able to get at gold no single person could get. Companies like Comstock mined at such a large scale, methods of squeezing out as much gold as possible from ore were profitable. Starting in the 1850s and never stopping, technology turned gold from an exotic wonder to an expensive commodity. Some of these technologies were hydraulic mining (using pressurized water to tear away soil), deep tunnel mining (using timbers to create the now-familiar “square” pattern that reinforces the mines), dynamite and a compressed air drill, saving the miners from back-breaking work. And while each of these new creations had their flaws and dangers, they were quickly replaced with safer, more effective technologies. For example, the compressed air drill was known as the widow-maker—because it spat back dust that often resulted in lung disease of the operator. The nickname became less accurate when a safer drill was introduced only a decade later.

In 1968, the federal government stopped regulating the price of gold ($35 an ounce), which skyrocketed shorter there after. In response to the deregulation, the technological surge was even more so, spawning new technologies in everything from computer programming to air-conditioning to non-verbal signals to new drills.

I pose this brief tangent into mining as just another example of the wonders of technology and free markets. Motivated by no one but themselves and prices, individual, autonomous people raised the living standard of everyone but not just adding new technologies that enhance our lives but by providing a valuable commodity that nations once started wars over. And for anyone that still considers corporations to be heartless entities living off the life blood of the worker and Mother Earth, consider this: as far back at the late 1800s—before OSHA, mind you—these big heartless corporations forced their workers to take breaks because the heat in the deep tunnels was so severe. How's that for the miracle of the free market?

1 comment:

Erin said...

Have you started/finished Lee Kuan Yew's book yet?
And congrats for those miners getting to sit down and rest.