When I first read about the discovery of a vast new deposit of lithium in a volcanic crater along the Nevada-Oregon border, I can’t say that I was surprised. Not because I know anything about geology — but because, as an economist, I am a strong believer in the concept of elasticity of supply.
Before I get to that, it’s worth dwelling on the significance of this find, which could help limit climate change and ease geopolitical tensions. The find, estimated at between 20 million and 40 million tons, would be larger than the current largest, about 21 million tons beneath the salt flats of Bolivia. (The discovery awaits final confirmation, but at least one company says it expects to start mining this supply in 2026.) And lithium is of course a crucial ingredient in batteries for electric vehicles, demand for which is surging and which are an important part of any plan to fight climate change.
Yet US policymakers have been nervous, both because lithium is scarce and because the US did not seem to have major deposits of its own. Major lithium supplies are not commonplace, and many of the known deposits are not in North America but in Chile, Bolivia, Argentina, China and Australia. If this discovery is validated, US investment in electric vehicles will no longer be so fraught with national security concerns.
Now about elasticity of supply, in which we economists tend to have more faith than do most people. Time and again over the centuries, economists have observed that resource shortages are often remedied by discovery, innovation and conservation — all induced by market prices. To put it simply: If a resource is scarce, and there is upward pressure on its price, new supplies will usually be found.
Not surprisingly, the Lithium Americas Corporation put in a lot of the work behind the discovery. Searching for new lithium deposits has been on the rise worldwide, as large parts of the world remain understudied and, for the purposes of lithium, undersampled. Just as Adam Smith’s invisible hand metaphor would lead one to expect, that set off many new lithium-hunting investigations.
Sometimes the new supplies will be for lithium substitutes rather than for lithium itself. In the case of batteries, relevant potential substitutes include aqueous magnesium batteries, solid-state batteries, sodium-based batteries, sodium antimony telluride intermetallic anodes, sodium-sulfur batteries, seawater batteries, graphene batteries, and manganese hydrogen batteries. I’m not passing judgment on any of these particular approaches — I am just noting that there are many possible margins for innovation to succeed.