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Demand destruction in human capital

Demand destruction is a concept popularized by peak oil theorists. Basically, imagine we run out of oil. The economy would have to adapt to this, maybe by favoring denser cities, electric cars, or simply less mobility overall. It’s worth noting that although this looks like an Elon Musk utopia, these changes are actually extremely costly, reflecting a “push” away from oil rather than a “pull” towards better alternatives.

Now imagine that somehow we discover deep reserves of oil, bring the price of oil back down. For quite a while, there won’t be a lot of demand for the oil, because the economy has routed around the absence of oil and is no longer set up to simply turbocharge itself based on cheap oil. Oil therefore stays cheap, and to an unsophisticated observer, it looks like we outgrew the need for oil, when in fact we did a lot of unpleasant and costly changes that made us no longer able to accept the oil as an input.

Now, imagine you had a society that was setup to run on natural aristocrat generalists, and around the turn of the century you had a cataclysmic change to education that choked off the supply of natural aristocrats…