Norway, the Once and Future Georgist Kingdom

(Image CC BY-NC 2.0 by Christopher Michel)

In which guest blogger Lars Doucet provides a translation of the article “Den nye oljen” [The new oil] by Anne Margrethe Brigham and Jonathon W. Moses.

Translator’s Preface

Hi, my name’s Lars Doucet and I’ll be your guest blogger today here at SLIME MOLD TIME MOLD. Today is the 17th of May, Norwegian Constitution day, so I asked SMTM if I could share a fascinating paper from my motherland, publicly available in English for the first time right here. Thanks to SMTM for the venue, and to Jonathon and Anne Margrethe for letting me translate and share their work.

Norway confuses and annoys doctrinaire Capitalists and Socialists alike by pairing a dynamic market economy with an expansive social welfare state. But lurking unnoticed in the background is a third economic philosophy that has profoundly shaped this Nordic kingdom–Georgism. Georgism is a school of political economy that embraces both the free market and the private ownership of capital, while also attacking passive rent-seeking. Its chief aim is to ensure that those things which no man has created (such as land and natural resources) be put to the common benefit of all rather than monopolized by private interests. I’ve written previously on this subject over at Astral Codex TenGame Developer magazineNaavik, and the Progress & Poverty substack. You can find a curated standalone collection of my work at

In online discourse, many people’s introduction to Georgism is the tongue-in-cheek meme, “Land Value Tax would fix this.” But there’s a lot more to Georgism than LVT, and Norway is a particularly instructive and successful example of how to apply Henry George’s lessons to a different kind of “land” – natural resources. Modern Norway is an energy powerhouse whose domestic economy runs almost entirely on zero-emission sources (mostly hydro-power). At the same time, their export economy houses one of the most economically successful and technologically advanced petroleum industries in the world.

The Norwegian hydro-power management regime was explicitly set up by Norwegian Georgists in the early 20th century, based on the idea that the nation’s water was the common property of the Norwegian people. These officials realized that when access to a natural resource is limited–either naturally through physical scarcity, or artificially through government regulation–an abnormally high rate of return known as a “resource rent” arises. This super-profit arises not from a private actor’s contribution of labor or capital to the free market, but instead from the monopolistic leverage that limited access to a bounded resource naturally gives.

So who should receive these bountiful “resource rents?” The resource’s owner of course–the Norwegian people. This doesn’t mean that private companies can’t be involved, quite the opposite in fact–just so long as they keep their hands off the resource rents. Norway’s Georgist management regimes for hydro-power and petroleum aike were founded on the same principles. Their success is an empirical refutation of the theoretical claim that private companies won’t be incentivized to discover and efficiently extract resources unless they’re allowed to keep the resource rents.

Norway now sits at a crossroads. The oil will not last forever, and the country cannot remain dependent on petroleum if it wants to transition to a green economy and tackle climate change. Norwegian politicians therefore seek a “New Oil” in emerging natural resource sectors–specifically aquaculture (fish farming), wind and solar power,  and “bioprospecting,” the mining of organisms for useful new chemical compounds (think penicillin). Unfortunately, Norwegian policy makers have lost touch with their Georgist roots and have set up management regimes for these new sectors that will allow private companies to capture the entirety of any emerging resource rents. This means that even if one of these sectors becomes a “new oil,” the windfall profits will go not to the Norwegian people, but instead to literal “rent-seekers” passively extracting monopoly profits at public expensive.

The authors of “Den nye oljen” persuasively argue that Norway must learn from its own successful tradition of Georgist resource management policy in order to chart a sustainable path to the prosperous future it deserves.

The original Norwegian text can be found here:

If you find this article interesting, please look for the authors’ upcoming book, The Natural Dividend: Just Management of Our Natural Resources (Forthcoming, 2023, Agenda Press), which expands this argument to apply to the entire world, not just Norway, using case studies from around the globe.

The New Oil

Anne Margrethe Brigham (Senior Researcher, Ruralis)
Jonathon W. Moses (Professor, Department of Sociology and Political Science, Norwegian University of Science and Technology, NTNU)
English translation by Lars Andreas Doucet (independent researcher)

Copyright © 2021 Author(s). This is an open access article distributed under the terms of the Creative Commons CC-BY-NC 4.0 License (


Norway’s future economy will depend less on petroleum. There are at least two reasons for this: petroleum is a nonrenewable resource, and the need to limit climate change. For these reasons, the Norwegian authorities are seeking out greener opportunities in the fields of bioeconomy and renewable energy. This article considers how the management of key natural resources affects the opportunities available for funding Norway’s welfare state in the future. To do this, we compare the regime used to manage petroleum with those used on wind and hydropower, aquaculture and bioprospecting. The different management regimes play a decisive role in determining the size and scope for taxation of the resource rent that these resources produce. Our analysis shows a break in the Norwegian management tradition for natural resources. The government has opted out of the successful management regimes for hydropower and petroleum and replaced them with regimes that can neither ensure public control nor taxation of the resource rent from wind power, aquaculture and bioprospecting. We conclude that the current management regimes in these sectors cannot contribute to a level of public wealth that can match the one that Norway has become accustomed to from oil.

Resource rent, renewable energy, aquaculture, bioprospecting, natural resources


Norway has begun to accept a sobering truth: in the future our economy must become less dependent on petroleum; not only because it is a non-renewable resource, but also because of increasing political pressure to reduce our nation’s contributions to climate change. This will not be easy, as we are dependent on the petroleum sector for both jobs and government revenue. Political authorities (and others) have therefore begun to actively seek a new, greener, economic foundation upon which Norway’s future may be built. Many hope to have found this alternative foundation in the so-called “bio-economy”, which, roughly speaking, can be understood as value creation based on the production and exploitation of renewable biological resources (NFD, 2016, p.13),[1] and renewable energy sources.

[1] In the government’s Bioeconomy strategy (NFD, 2016, p.13), bioeconomy is defined as “sustainable, efficient, and profitable production, extraction, and utilization of renewable biological resources for food, (animal) feed, ingredients, health products, energy, materials, chemicals, paper, textiles, and other products. Use of enabling technologies such as biotechnology, nanotechnology and IKT [information and communication technology] are, in addition to conventional disciplines like chemistry, central to development in modern biotechnology

Within the bio-economy and renewable energy fields, there are three sectors in particular that are often put forward as potential “green” replacements for oil and gas in Norway: aquaculture, wind- and hydro-power, and bio-prospecting. The optimism for these sectors is based on the country’s absolute advantages in terms of  “clean” natural resources. In the first sector, aquaculture, Norwegian companies are already world leaders in salmon farming – see e.g. NFD (2015). In the second sector (renewable energy) Norway has a long tradition of exploiting its hydro-power potential, and now is turning its technical expertise to wind power. The third sector, bio-prospecting, is less well-known, but seems to have captured the attention of politicians who hope to encourage research and investment that will allow Norway to play a vital role in this sector in the future (NFD, 2016 and 2017). The government has prepared a strategy to encourage business growth in the bio-economy (see NFD 2016), in order to contribute to job growth as well as the financing of Norway’s comprehensive public welfare system.

Many people trust that Norway’s high standard of living can be maintained by a well-managed transition from a petroleum-based economy to one based on renewable resources. Aquaculture, renewable energy, and bioprospecting alike provide hope for an attractive economic future, because we can expect the demand for renewable resources to increase going forward. The potential for “resource rents” from Norwegian renewable resources have been brought forward in at least two recent NOU’s: NOU 2019:16 (concerning hydropower) and NOU 2019:18 (concerning aquaculture) [TRANSLATOR’S NOTE: “NOU” stands for “Norges Offentlige Utredninger”, meaning “Norwegian Public Reports,” where the government or a ministry creates a committee or working groups to report on different aspects of society.]

The Norwegian government’s ability to consistently collect resource rents has been crucial to harvesting public benefits for all the Norwegian people. The collection of new resource rents ought to be a vital part of the motivation in shifting to an economy based on “green” natural resources (sooner than shifting to e.g. industrial production or a service economy). This raises an important question, which is the motivation behind this article. Is it reasonable to expect that these new sectors will be able to bring forth tax revenue from resource rents in line with what Norway has generated from the oil business?

It is not easy to answer this question, since resource rents are shaped by the economic value of the resource (which can change significantly over time from market fluctuations) and the underlying management regime. Even if it is not possible to predict the future economic value of a natural resource, we can still consider whether the management regime is able to recognize and ensure a potential resource rent, should it arise. This article addresses this issue precisely, by comparing the management regime used in the petroleum sector with the regime used in aquaculture, wind- and hydropower, and bioprospecting. This involves us acknowledging that the management regime for petroleum has been a success. We therefore consider the degree to which this regime has been transferred to the management of alternate resources that many hope can contribute to the financing of our future welfare state. In other words, this is a survey of whether the Norwegian people’s economic interests are properly secured in these four sectors.

In this article we show that the present method for managing these renewable resources is very different from the one used for petroleum. Even if the commercial value of these renewable resources today is low compared to petroleum, it is likely that their relative worth will grow in the future. Since the potential for resource rents changes significantly over time, in line with changing market conditions and ongoing technological progress, we will not attempt to estimate the precise size of future resource rents in these sectors. Nevertheless, it can be reasonable to expect that these natural resources will be even more valuable in the future, and that the potential resource rent will grow, even if it would go too far to say that their worth would be close to what the oil sector gives us today. It is therefore important to discover whether the authorities have the ability to collect this value on behalf of the community. We find that the authorities have traded away the successful management regime typical of the oil sector, and replaced it with regimes that can secure neither commensurate public control nor similar tax revenue from the wind-power, aquaculture, or bioprospecting sectors. It is only in the hydro-power sector that (a portion of) the resource rents are reclaimed by the community.

For over a century the authorities have protected public ownership of the community’s natural resources, and collected the resulting resource rents from private companies. We feel it is remarkable that the authorities now abandon this system for our renewable resources, and in its stead have introduced a number of competing management regimes that focus primarily on increased efficiency. As a consequence, there is a real chance that private investors (both Norwegian and foreign) will be allowed to capture the full resource rents that are created by Norway’s management of natural resources.

The argument that follows has five parts. In the first part we define what we mean by “resource rents,” and how they can be measured and obtained on the basis of the work of Henry George (1886). This makes up the theoretical foundation for the survey that follows. In the second part we give a short description of the method we have used. In the third part we document Norway’s present dependence on the resource rents of petroleum, and the economic benefits that Norway has harvested from the oil business over time. The fourth part of the article gives an overview of the management regimes in the three renewable “candidate resources” that Norway hopes can replace petroleum in the future: aquaculture, renewable energy production (wind and water) and bioprospecting.

The fifth part concludes that Norway’s “new oil” must be managed in a manner that looks beyond the successful management regime of “the old oil.” When we compare the potential for public value creation across the old and new resource sectors, it is clear that our “new oil” cannot generate a public fortune (or be subject to public control) in a way comparable to what we have been used to. This is because any eventual resource rent, regardless of its size, will not be collected for the benefit of the public, but instead will be captured by the private sector.

On Resource Rent

Resource rent is an extra-ordinary value derived from the use of a natural resource, and it is measured by subtracting all costs, as well as a normal-sized profit, from revenue (see figure 1). The reason that natural resources can produce resource rent is that they are limited by nature and/or politics. They are limited by nature in that there are only a certain amount of them (with variations in quality and productivity), while they are limited by politics when the authorities regulate their exploitation and access. When it is not free for just anyone to invest in the exploitation of natural resources that produce positive returns, a sort of monopoly is formed which in turn contributes to an artificially high profit for the “chosen” producers. As Greaker and Lindhold (2019, p. 1) write, it means “…that one can achieve positive profit on the basis of a natural resource over a longer period of time, without new providers wanting to establish themselves. In other words, the limited access hinders the free establishment that otherwise would have pushed down the profit from the operation towards a normal return on capital.” Which is to say, the regulation itself causes the profit to be greater because the market prices will become higher than they otherwise would have been (see Skonhoft, 2020).

Figure 1: Schematic representation of resource rent. Source: Moses and Letnes (2017: 92)

The potential for resource rent is also determined by market forces. Not all natural resources are capable of bringing forth notable amounts of resource rent: sometimes it is simply too expensive to gain access to or produce the resource, relative to the price it fetches in the market. Other times the way in which the resource is managed causes its exploitation to be too expensive or lead to overexploitation (i.e. the tragedy of the commons) [3]. Therefore it is difficult to separate resource rent from the method the community uses to regulate access to its resources [4]. Speaking very generally, political authorities have two main tools for achieving their management goals: ownership, and collection/taxation.

[2] If there was free competition in the market for natural resources, companies/actors engaged in that market would not be able to harvest an abnormally large return. The fact that international oil companies are among the most profitable companies in the world, is in and of itself an indication that there is not free competition in the petroleum markets. Similar cases of disproportionally large incomes are emerging in the aquaculture sector.

[3] See for example, Brox (1987), where Norwegian wild fishery resources and agriculture yielded negative resource rents.

[4] Given our broad definition of resource rent, above. In The Condition of Labor, George (1982 [1893], p.13-15) distinguishes between “monopoly ground rent” and “natural ground rent”–where the latter gives birth to unusually large profits which simply stem from location. See Giles (2017, p. 68). Others distinguish between the ground rent and the regulation rent. See, for example, Skonhoft (2020). [TRANSLATOR’S NOTE: in the original Norwegian, the authors use the term ‘grunnrente’ throughout this piece, which I have consistently rendered (at their indication) as ‘resource rent’. This is what the term effectively means in Norwegian, but it also corresponds perfectly to what Henry George meant by the term ‘ground rent.’]


The first tool is used on property rights, and concerns various forms of contracts (for example, licensing agreements, production sharing agreements, licenses, and patents). These tools limit access to resources and help to establish resource rents. While the actual motivation for limiting access to a resource can be to protect it from over-exploitation (for example), the regulation can nevertheless create a resource rent.

It is important to underscore that natural resources are owned by the people. Public ownership of natural resources are anchored in Norwegian laws (and customs) more than a hundred years old, in addition to international agreements such as the UN’s resolution from 1962 concerning permanent sovereignty over natural resources and Article 1 of the International Convention of Civil and Political Rights (UN General Assembly, 1962; 1966). This was clarified in a supreme court decision from 2013, which stated that (wild)fisheries belong to the Norwegian people. For this reason the state has a responsibility to ensure that the people it represents get to enjoy the benefits of the value created from the resources that they own. In order to discover and produce these resources, as well as deliver them to market, the state often gives private business actors with expertise in the given sector (for example petroleum, fisheries, energy) permission to do it on their behalf. These companies receive in these situations a license (often called a “concession”) that ensures their access to use a limited amount of resources on behalf of the community of people who own them.

These licenses/concessions will naturally vary somewhat according to the resource’s characteristics. Some resources are renewable (e.g. waterfalls), while others are not (e.g. petroleum). Some resources are easy to recover, monitor, and control (e.g. aquaculture), while others are more volatile (e.g. wind and solar). Access to the more volatile resources like wind and solar can also be limited, something sailboat racers and sunbathers can attest to. As more and more of our common resources are transformed into market goods, it is important that the community asserts its rightful ownership of them before they are effectively privatized.

In order to attract relevant producers with the proper skills, the licenses/concessions must be generous enough to provide a basis for a healthy return on investment and labor. If they are sufficiently easy enough to obtain that they attract many producers in the market, the resulting (market) value of the licensed resource will be relatively low. This value, like the market value of anything else, is roughly determined by the supply of the resource available on the market, for any given level of demand. By limiting access to these resources the state is able to increase and stabilize their value, and in reality creates a monopoly situation. In this way even the harvesting of sea salt can secure a significant resource rent when the state restricts access [5]. Under such conditions where production is limited, the expected profit will be far higher than what is required to attract competent market actors. In other words, it is the licensing scheme that produces the “resource rent”, as George (1886, p.169) [6] simply described as, “the price of monopoly. It arises from individual ownership of the natural elements — which human exertion can neither produce nor increase.”

[5] Take for example Mahatma Gandhi’s salt march (Salt satyagraha) from 1930.

[6] George was of course not the only modern economist who was concerned with resource rents. He was also not the first (see, Anderson, 1777). He shared this interest with among others David Ricardo (1817), Nassau Senior (1850), and Karl Marx (1981 [1865], Vol 3, p. 882-813), but George was alone in making the taxation of land a central element in a political campaign for the redistribution of public wealth. See for example O’Donnell (2015).

Collection and Taxation

The second tool is used to secure the public a share of this resource rent, since it belongs to the community: “It is the taking by the community, for the use of the
community, of that value which is the creation of the community.” (George, 1886, p.431). To ensure that the licensed company is not left with the entire resource rent (which belongs to the community), the state must collect a portion of it [7]. This must be done in a way that undermines neither the incentive for private companies to do the job of extracting the resource (i.e., their profit), nor competitiveness in the international market. This can be done in several ways. One is to ensure that access to the limited resource (e.g. licenses) is evenly distributed across a number of small producers, and/or to require that local workers, technology, and subcontractors must be employed. Another way is to use purely economic means in the form of fees, royalties, and taxes.

Last, but not least, it is important that the size and structure of the instruments which secure the community’s portion of the resource rents can change over time. It is therefore important for political authorities to implement a licensing and taxation system that is flexible enough to adapt to changing circumstances, and gives the possibility for updates (Moses and Letnes, 2017a, pp. 64-5). By spreading the awarding of licenses over time, and by giving shorter license periods (but long enough for investors to secure their legitimate returns and establish efficient production routines), the political authorities can ensure that the resource rents accrue to the community [8].

[7] This is especially important when the resource is non-renewable, as with petroleum. In these situations it is important to protect revenue from the sale of resources, and build up an alternative fortune when the one on the sea floor is reduced.

[8] Here we can give a little warning. Affected investors constantly insist that a resource rent tax threatens their ability to secure an acceptable return on their invested capital, hinders necessary investments, or provokes capital flight. See, for example, the statements from Geir Ove Ystmark, administrative director of Norwegian Seafood in Widerstrøm (2019). These threats, and active lobbying (see Kristiansen and Wiederstrøm 2019), reflect a general ignorance of the nature of resource rents and property rights (or a willingness to pull the wool over the public’s eyes). The authorities can secure a fair share of the resource rents in many different ways, and almost all of these are sensitive to the need to ensure investors and workers a fair return on labor, time and money, as the resource rent (by definition) comes on top of the normal return.

As we will see below, much of Norway’s success in the oil sector can be ascribed to a management regime that generated a resource rent, which has been taxed and used to finance the Norwegian welfare state. In contrast to many other countries, the Norwegian authorities recognize that the majority of (if not all) of the resource rents should return to the community, who own the underlying resource. (e.g.: Finansdepartementet, 2018a; see also NOU 2019:18, p. 9). What many are not clear about, is that the resource rent regime in the oil sector builds upon the licensing and taxation system from hydropower:

Norway’s petroleum resources are the Norwegian people’s property and shall be for the benefit of the whole society. This was the starting point for the management of petroleum resources over the last 50 years. The licensing legislation from 1909 concerns the regulation of hydropower, but has also been relevant for the oil business. The legislation provided for the right of restitution, emphasized that it is the Norwegian people who own the water resources, and that the resource rent should accrue to the community. The same principles have been followed in the management of petroleum resources. (OED, 2011, p. 5)

The politicians who developed this system over 100 years ago, relied on the American economist Henry George [9]. The acceptance for the collection/taxation of resource rents can weaken if the underlying understanding of natural resources as the property of the community is lost. In this respect it is noteworthy that the recent reports on the taxation of hydropower (NOU 2019: 16) and aquaculture (NOU 2019: 18) clearly did not have a mandate that included a reflection on the political and moral justifications for ensuring that the resource rents accrue to the community as a whole.

[9] It is not perfectly clear how large of an influence George had, since most of the discussion around the original licensing law concerned the right of restitution and to what degree it was in line with the constitution’s protection of private property rights, but we know that George’s works were translated by the prominent leftist Viggo Ullmann, and that Ullman was the first leader of the “Henry George movement” that published the magazine Retfærd. Tidsskrift for den norske Henry George bevegælse [Justice. Journal of the Norwegian Henry George movement]. Other well-known and influential people in this movement were Arne Garborg and Johan Castberg. For more about the Georgists’ impact on Norway’s hydro-power regime, see Thue (2003, chapter 3).


We are interested in finding out to what degree politicians have tried to transfer the management regime in the petroleum sector to the bio-economy and renewable energy sectors. Given the success Norway has had with its petroleum management, and the explicit desire to finance future public spending with revenues from the bio-economy and renewable energy sectors, we should believe that the Norwegian authorities will want to use the most important instruments from the petroleum management system in the “New Oil” sectors. After all, it was exactly this which happened in the 1960’s and 70’s, when the fifty-year old licensing regime concerning hydropower was taken and used for the new petroleum sector.

We have chosen three cases studies from the bio-economy and renewable energy sector: aquaculture, hydro- and wind-power, and biotechnology. This does not mean that they are the only relevant cases, and we had initially thought to include a number of other sectors (such as agriculture, forestry, solar energy, and fisheries). We landed nevertheless on the above, not only because they are renewable, but because they have been emphasized by the authorities as especially important for Norway’s future, and because the growth potential of each of them is dependent on innovation in both technological and legal developments.

We compare and contrast the existing management regimes in these sectors with regards to the two tools for capturing resource rents that we described in the theoretical review above, namely ownership and collection/taxation. We look at four specific aspects of management:

  1. Is public ownership of the resource explicitly recognized?
  2. Do the authorities control access to the resource, and if so, how?
  3. Have they introduced tax rules that enable the collection of eventual resource rents?
  4. Have they actually collected any resource rents that have appeared?

Points three and four are not only important in sectors where it has already been established that resource rents exist, but also in sectors that today have relatively poor profitability. This is because it will give public officials the authority to collect (parts of) the resource rents if market conditions change such that these sectors also begin to generate disproportionately large profits (so-called “super-profit”). Our focus is therefore not on the current size of the resource rent, but on the state’s abilities to recognize a resource rent as it arises, and its right to reclaim it from private to public hands.

The analysis is supported by three kinds of sources. The information about the petroleum management sector is largely based on the authors’ prior research [10]. When it comes to the other sectors, we have relied on available literature and interviews with relevant private, public, and political actors in the autumn of 2019 [11]. In addition to collecting information such as we could use indirectly in our analysis of the management regimes, we used interviews (and follow-up conversations) to map out further relevant primary sources and documents within each sector (see the list of references). Next, we analyzed this documentation with regards to ownership and collection/taxation, in order to assess the regime’s potential for capturing resource rents. It soon became clear to us that there was a large amount of secondary literature around the regulatory processes, but that this literature for the most part dealt with the environmental (and sometimes moral)[12] consequences of the management regimes. Even though this literature is important, it is not directly relevant to our purpose, so to avoid diluting our argument we have not referred to this particular literature to any significant degree.

[10] See for example Pereira et al. (2020); Moses (2010 and 2020); Moses and Letnes (2017a and 2017b); and Edigheji et al. (2012).

[11] After conducting a literature review and acquainting ourselves with the relevant documents, articles, and books, we wished to collect information from key people in Norwegian natural resource management that could elaborate on what we found in this literature. We therefore created a list of 13 experts who had extensive experience and knowledge related to regime management in aquaculture, renewable energy, and bio-prospecting. This expertise was based on factors such as their official role, professional competence, education, or experience. From this pool of thirteen, six experts were ultimately interviewed (either personally, via video conference, and one person by e-mail). Thereafter we used the snowball method to include a larger cross-section of experts in each of the three sectors, which we contacted with less formal inquiries (see, e.g., Van Audenhove, 2007; Bogner et al., 2009; Meuser and Nagel, 2009). The information that was obtained was used to identify additional literature, and as a backdrop for understanding it. The interviewees were promised anonymity in accordance with permission from NSD, and we therefore do not quote them, and we have not seen the need to include anonymized statements. The formal NSD permit and interview guides are available, upon request, from the authors.

[12] See for example Sagelie et al. (2020).

Norway’s oil dependence

When it comes to the collection of resource rents, Norway’s petroleum management has not changed significantly over time [13]. The management regime is still based on a system of allocation of licenses for offshore exploration and production which is intended to limit the number of actors and the amount of oil and gas that is recovered from the seabed. In the early years, when the authorities were unsure whether they were even going to find any significant oil reserves, the government was eager to allocate many blocks and offered very lucrative terms (e.g., low taxes). The intention at the time was not to secure the resource rents (which were still quite uncertain), but to try to attract the necessary international expertise to find and recover any resources. At this time, most of the state’s oil revenues came from royalties (in addition to ordinary corporate taxes).

[13] This part builds upon Moses and Letnes (2017a) to a large degree.

After it became clear that there were significant amounts of oil and gas on the Norwegian continental shelf, the power relationship between the Norwegian authorities and the foreign oil companies changed. The authorities could now be more strategic and make greater demands with respect to the allocation of licenses. This resulted in, for example, fewer blocks being laid out at once, and the most promising licenses/concessions being given to Norwegian companies. In short, the conditions changed to benefit Norwegian producers, Norwegian authorities, and the Norwegian people. This was completely in line with Norway’s “10 oil commandments” (OED, 2011, p.8) that laid the foundation for the development of Norwegian oil expertise (and capital), and made possible the establishment of Statoil (now Equinor).

Today the petroleum management system is not as explicitly political, but it has retained a good deal of its original building blocks. In order to secure itself a part of the resource rents that are created within the licensing system, the authorities use a variety of taxes and fees, although the content and scope have changed significantly. Today the oil companies that operates in Norway must pay the ordinary corporate tax (which is 22%, but has a generous depreciation scheme to incentivize further development). Additionally, after a so-called “lift” is subtracted from income (as an incentive towards investment), the remaining tax base is subject to a petroleum resource rent tax of 56% (see Moses and Letnes, 2017a, p. 104; Deloitte, 2014, p.16). In reality the petroleum producers in Norway are effectively subject to a tax rate of 78% (OED, 2019). This high tax rate is used to ensure that the resource rent, which is a consequence of Norwegian petroleum management, is returned back to the community which owns the underlying resource [14]. Oil companies still receive a significant return on their investments; the oil workers are still able to secure favorable wages and safe working conditions; and the environment is still protected–but private companies are not allowed to retain the entire resource rent.

[14] While the majority of Norway’s oil revenue comes from these taxes, a significant portion (around 30-40%) come from direct (co-)ownership of licenses that have already been granted (so-called SDØE). For an overview of the sources of Norway’s petroleum revenues, see Moses and Letnes (2017a, p. 101, figure 5.4)

It is important to note that the Norwegian authorities have used the licensing system–the power to give certain chosen actors exclusive access to a limited resource–as a tool to achieve a variety of political goals. A few examples of such goals are requirements to use Norwegian workers and subcontractors, protections for the environment and workplace safety standards, investments in Norwegian research and development (R&D), as well as to ensure that portions of the resource rent from petroleum accrue to the Norwegian people. Over time many of these explicitly political goals have faded, among other reasons because Norwegian companies no longer need special conditions or protections in order to compete with larger international actors, but the way in which Norway collects resource rents from petroleum extraction has not changed significantly since the 1970’s.

The result is that Norway has become an affluent country, and much of the oil fortune stems directly from the tax on resource rents. Because this is affected by the global price of oil, it varies significantly from year to year. In a survey of Norway’s resource rents from petroleum extraction, Greaker and Lindholt (2019) estimate the resource rents for 2018 to be nearly 360 billion kroner [~38 billion USD], down from a peak of over 630 billion kroner [~67 billion USD] in 2008 (see figure 2).

Figure 2: Resource rent: Extraction of crude oil and natural gas. Millions of Norwegian Kroner, 2018. Source: based on Greaker and Lindholt (2019: 26, table A3)

Now, it is not the case that the entirety of the resource rent accrues to the state; some of it remains in private hands in the form of profits to the oil companies. The part that has accrued to the community, however, has been transferred to the GPFG [The Government Pension Fund, Global or Statens Pensjonsfond Utland], or the “oil fund” as it is commonly known. As we can see in Figure 3, the value of this fund has increased every year until 2017, both in terms of number of kroner and as a percent of GDP. We can also see that the fund began relatively modestly in 1996, and has since seen formidable growth, even in the middle of the financial crisis which began in 2008. The fund is now growing as much from returns on investments as it is from new receipts from petroleum activity in Norway (which are declining, but still large).

Figure 3: Value of the GPFG, 1996-2018. Source: NPD (2019b)

The GPFG is the world’s largest sovereign wealth fund. In 2017 the value increased to over 1 billion dollars USD (equivalent to 8,488 billion NOK in Figure 3) (NBIM, 2017), and the investments amount to approximately 1.3% of total investment in all the world’s listed companies (Moses and Letnes, 2017a, p.135). Before the Coronavirus pandemic (COVID-19), it was estimated that the government’s total net cash flow from the petroleum industry would be approximately 238 billion NOK in 2019, increasing to 245 billion NOK in 2020 (OED, 2020).

Alternatives to Oil

In this part we compare and contrast resource management in three relevant sectors in the emerging fields of bio-economy and renewable energy: aquaculture, wind- and water-power, and bioprospecting. We wish to investigate to what degree the practices and principles of the petroleum resource management regime have been transferred to these sectors. In each sector we therefore consider:

a) forms of licensing/concessions
b) applicable means to tax the sector, and
c) potential resource rents (in 2018)

What we find is that the “new” natural resources are being managed in a manner different from the old ones, and that the new regimes do not aim to capture (nor even acknowledge the existence of) the resource rents that can arise as a result of the manner in which access to the natural resources are regulated. While the resource rents in some of these sectors are relatively modest (or even non-existent) as of today, they may grow and become significant in the future (which is what happened with petroleum).

Renewable Energy

Hydro-power has traditionally been an important source of renewable energy in Norway, while wind power both on land and offshore are still emerging. Norway’s licensing system in hydro-power was developed in the first years after the country’s independence from Sweden, and was originally designed to limit foreign ownership over Norwegian waterfalls, but quickly developed into an important method for ensuring public control over, and effective use over, resources. The most unique aspect of this licensing system was “hjemfallsretten,” the right of restitution, which built on the recognition that the Norwegian people give private individuals access to use natural resources (through a license) for a limited time period, and that “ownership” of the waterfalls and means of production should return to the state after e.g. 60 to 80 years [15].

In other words, private companies received permission to set up the necessary structures and equipment (such as dams and power stations) around waterfalls, but these would be turned over to the state in good condition once the license expires. There was an expectation that the companies would have good opportunities to cover their costs of investment over the course of the license period, in addition to securing a reasonable return on invested capital. This right of restitution ensured that the state could update the licensing terms in line with the varying resource rents, and eventually periodic updates to the terms of the license also ensured better technology and environmental protections. This general framework remains in place for regulating hydro-power production, even if the regulations have become more complex [16].

[15] For more on the development of the Norwegian power regime, see Thue (2003).

[16] Small hydro-power plants must seek a license in accordance with the Water Resources Act. Larger hydro-power plants (over 40 GWh) receive licenses in accordance with the Watercourse Regulation Act. Procurement of larger waterfalls requires a license under the Waterfall Rights Act. Electrical installations such as wind turbines, hydro-power generators, transformer stations and power lines all require a license in accordance with the Energy Act (NOU 2019: 16, p.33).

After a court challenge from the EFTA’s overseeing agency (ESA), the right of restitution for hydro-power has fallen away, but it has been replaced by an even stronger requirement for public ownership over these installations and resources.  [TRANSLATOR’S NOTE: Norway is not part of the European Union, but is a member of the EFTA (the European Free Trade Association). Norway’s relationship to the EU is governed by the European Economic Agreement (EØS in Norwegian), between EFTA and EU member states]. In the legal process and following legislation, the Norwegian government clarified that public ownership of natural resources (especially petroleum and hydro-power) remains a central part of Norway’s resource management strategy. In response to changes in the Norwegian regulatory framework, which are necessitated by the ESA-challenge, the Storting [Norwegian Parliament]’s Energy- and Business committee highlighted:

The majority places emphasizes that resource politics, resource management, and public ownership of natural resources are not affected by the EØS-agreement, neither the petroleum nor the hydro-power sector, and that the main lines of the current licensing policy can be maintained (Energi- og industrikomiteen [Energy and Industry committee], 1992, p.6)

Today’s licensing awards are therefore still based on the Industrial Act of 1917 (NVE, 2010), and:

The basic gist of the law from 1917 is that a license is required from the authorities in order to acquire waterfalls or power plants. Furthermore, the law is based on a founding principle that hydropower resources are the property of the community, and therefore in principle ought to be publicly owned. To the extent private interests are given access to acquire waterfalls or power plants after section 2 of the Act, in these cases the law only allows the authorities to grant time-limited licenses with conditions of restitution to the state at the end of the licensing period. In this sense, the purpose of the law since the beginning has been to secure future public ownership. (OED, 2008, p. 13, emphasis ours)

Even if the concessions for wind power production are given by the same authorities (Norwegian Watercourse and Energy Directorate, or NVE) and deals with many of the same problems, the underlying licenses can still be very different. First of all, time limits are still used for wind power licenses, typically 25-30 years (NVE, 2019c). In wind power, “the area must be returned to the original state of nature as much as is possible” (NVE, 2019c) when the license period expires. The technical installations are not required to be returned to the state (in good condition), as with the restitution rules for hydro-power, but when the “tenancy” expires after the end of the licensing period, the installations must be removed and the area where the installations stand must be returned to the public sector “in good condition” (even if it is still too early to know how this will actually play out in practice). In addition, the regimes are different in that they use differing tax rules, and there is no explicit recognition of who actually owns the underlying wind-resource, even if the energy that is produced stems from wind, wind being a natural resource from the commons in the same way as waterfalls.

Licenses in wind power are chiefly regulated by two laws: the Energy Act (1990, no. 50) and the Planning and Building Act (2008, no. 71). The aim of the Energy Act is to “ensure that the production, transformation, transmission, turnover, distribution, and use of energy take place in a socially rational way, hereunder with regard to both public and private interests that are affected” (§ 2). In this law we find the legal basis for the state to grant licenses through a process dominated by NVE and the Oil-and Energy Department (OED) (Fauchald, 2018, p.1). The other legal basis concerns the planning of land use via the Planning and Building Act, which has as an explicit goal, “promoting sustainable development for the good of the individual, the community, and future generations”, to “coordinate national, regional, and municipal tasks and provide a basis for decisions about use and protection of resources”, along with “ensuring openness, predictability, and participation for all affected interests and authorities” (§ 1-1). None of these laws discuss or even recognize that the wind/air are a public resource, owned by the people. The resource is just there – apparently freely available for exploitation.

In other words, the authorities are chiefly concerned with making sure the licenses are awarded in a fair, safe, and “socially rational” way, in accordance with local laws and regulations, through which to minimize the danger of conflicts of interests (Saglie et al, 2020). In order to accomplish this, the authorities have subsidized wind power development via a certificate system. There is apparently a wish to encourage the production of renewable energy to cover society’s energy demand (and to provide exports), and an implicit recognition that the licenses can produce local revenues and jobs–but the idea that those who own the particular resource (the wind) should get back (a part of) the resource rents, is completely absent from the NVE report on “Licensing of Wind Power Development” (NVE, 2019b).

The rules for taxation of wind power are also very different from those that apply to hydro-power (and petroleum). In hydro-power there is an explicit understanding that the resource is owned by the people, and the taxation regime is designed to capture (the eventual) resource rent (see Table 1). Hydro-power is currently subject to a number of specific taxes which stem from the fact that the industry makes use of a natural resource from the commons. In addition to the usual corporation tax, an additional resource rent tax of 37% of net income is imposed, a licensing fee that is based on hydro-power’s maximum capacity, and a natural resource tax based on the amount of power produced. Furthermore, hydro-power plants must sell up to ten percent of maximum capacity at a reduced price to the municipalities they are located in, and the property tax includes–unlike in most other industries–a tax on production equipment (NOU 2019: 16, p. 10, 50, 60, 70, and 72) [17].

When it comes to wind-power, however, there is no recognition of public ownership in the underlying resource, and the resulting tax regime has no means of collecting all or even part of the resource rents if and when they should arise. Additionally, the tax burden on wind power is much lighter: it is not subject to special natural resource taxes, licensing powers, or licensing costs. Wind power companies pay only one corporate (income) tax, and a local property tax where applicable (NOU 2019: 16, p. 147). Nevertheless, this tax regime can be changed in the future as the public committee that looked at the taxation of hydro-power recommended that the government consider introducing a tax on the resource rents generated in wind power (NOU: 2019:16, p.155) [18].

[17] In 2018, a public committee was appointed to review the current tax regime for the hydro-power industry. The committee recommends (in NOU 2019:16, p. 154-55) to abolish the license fee and the sale of power at a reduced rate to counties, as well as removing the property tax on production equipment, as they believe these types of taxes can lead to lower investments in new production capacity. They further recommend keeping the natural resource tax, and increasing the tax on resource rents by two percent, to 39 percent of net income.

[18] It bears mentioning that the industry and the wind power municipalities prefer a natural resource tax rather than a resource rent tax. As with the taxation of aquaculture, there is controversy over the question of whether the tax revenue should go to the local or the national authorities. See LNVK (2018). In general, a resource rent tax should be profit-dependent, while a natural resource tax is profit-independent.

Even if the management regime for wind- and hydro-power are quite different, the resource rents from these renewable resources can be high. As we see in figure 4, the resource rents from hydro- and wind-power vary considerably over time, such that in some years there is zero or even negative resource rents (e.g. 1988 and 1994), while in other years (when energy prices are very high) they can be significant (whether it comes from wind or from water). When we look at these two sources of energy together, we see that highest resource rent to date was 30 billion NOK in 2018 [19].

The electrical power that comes from wind and waterfalls is in demand, and this makes them valuable resources, but it is the state’s issuance of (time-limited) licenses that creates the resource rent. In hydro-power most of these resources and resource rents remain in public hands due to Norway’s long-standing licensing regime. When it comes to wind, however, a large portion of the licenses are granted to companies with significant foreign ownership interests, and regardless of the resource rents generated by the licensing process, these remain in the hands of private companies [20].

Figure 4: (Water- and wind-) power production, resource rents, 1984-2018. Source: Greaker and Lindholdt (2019: 25, table A1)

[19] Figure 4 is reproduced from the data in the appendices of Greaker and Lindholt (2019), who are the first to estimate a measure of resource rents in the power sector that only includes wind and hydro-power (combined). “Previous SSB-studies of resource rents have published figures for the whole group ‘electricity-, gas-, and hot water supply’, but this is the first study that has separated power production (hydro-power and wind power)” (ibid., p.3). More specifically, they take basic value for hydro- and wind-power and deduct costs related to wages, capital, etc. See Greaker and Lindholt (2019) for details. It is not possible to distinguish between resource rents from hydro-power and from wind power in this figure, and we have also not been able to find any studies where this separation has been conducted.

[20] 93.3% of Norwegian hydro-power production is owned by the public (NOU 2019:16, p.32). In the wind power sector, by contrast, a majority of production (56.5%) lies in private hands, and 49.2% of the private share is owned by foreigners (NOU 2019:16, p.33).


In Norway there are many places that are particularly suitable for fish farming, and several official reports boast of our unique conditions for aquaculture:

Norway has natural advantages for farming salmon and trout in the sea, and Norway is the world’s greatest producer and exporter of Atlantic salmon (Finance Department 2018b)


There are only a few places in the world where sea temperatures, currents, and more enable the efficient production of salmon at sea. Chile is the next largest producing nation, followed by Great Britain (NFD, 2015, p. 24)

These favorable conditions are found in Norwegian fjords and along the Norwegian coast, and are owned by the people and the community.

Fish farming is not open to just anyone. Permission for this is given by the Norwegian authorities, following input from a number of different government agencies. Compared with the other sectors the process is fairly easy, and it is described by the Directorate of Fisheries (2017a) as being “two-stepped”[21]. In the first step the directorate decides which applications are qualified to receive licenses. This step does not include permission to actually farm. Then comes the next step, where a number of government agencies headed by the county municipality makes the actual decision about locations, and which companies will receive access [22]. The resulting license gives a limit on production, measured in the form of the maximum permitted biomass (MPB) at two levels: the company level and the site level (NFD, 2015, p.29-30). In contrast to the licenses for petroleum and power production, there is no time limit on these licenses. Furthermore, a few are awarded at market price via auction (where pre-approved actors may participate), but most of them are awarded in a “neutral way” through a lottery system (see FKD, 2005, p.34). There is little recognition of public ownership over either the underlying resource, or the resource rent generated by the licensing process [23].

Figure 5: Aquaculture, resource rent, 1984-2018. Source: Greaker and Lindholt (2019: 25, table A2)

From figure 5 we can see that a significant resource rent has been created in aquaculture in the past few years. Because the government does not tax this resource rent, it remains in the hands of private individuals and companies, instead of being returned back to the authorities that have facilitated these extraordinary profits by restricting access to the exploitation of the underlying natural resource, and ultimately to the society who actually owns it [24]. Today, the aquaculture industry pays only an ordinary corporation tax on profits, even though so-called “floating farms” can fall under the local (municipal) property tax. They also pay a “market fee” and a “research fee” when the fish or the fish products are exported, but there is currently no attempt to collect any part of the resource rent.

[22] Actual commercial actors send an application to the Fishery Directorate’s regional office; these are afterwards sent out for closer handling and commentary by a number of agencies (The County Governor, the Norwegian Food Safety Authority, the Norwegian Coastal Administration, the County and NVE) and on the basis of this feedback, the application is either approved or rejected.

[23] The current system requires that existing license holders pay an application fee, while new applicants are included in an auction for licenses. Prior to 2002 the licenses were awarded free of charge, but from 2002 to 2012 the applicants had to pay “a relatively modest fee” (Ministry of Finance, 2018b). After 2016, it was decided that the tax revenues from the aquaculture industry should be distributed to counties and municipalities via the Aquaculture Fund. Of these funds 87.5% goes to the municipalities and 12.5% to the counties. Before 2016 the counties’ share was lower, and before 2013 nothing went to the municipality nor to the county.

[24] “Thus, the ground rent from aquaculture has mainly accrued to the owners of aquaculture permits. Over time the ownership in aquaculture licenses have been concentrated in fewer, larger, companies” (NOU 2019:18, p.9) and further: “Several companies have also a significant element of international funds on the owners’ side. The majority of the circa 100 Norwegian fish farming companies are, however, companies with majority Norwegian ownership with a few main shareholders. About 50 percent of the total production capacity is owned by four companies, which in turn are dominated by four ownership environments” (NOU 2019:18, p.10).


Bioprospecting can be defined as intentional and systematic exploration for components, bio-active compounds, or genes in organisms. The purpose is to discover components that can be used in products or processes with commercial or socially beneficial value, for example in medicine, food, or animal feed, as well as bio-fuel, oil and gas (FKD, 2009, p.8, 13). Bio-prospecting is an important building block of the new bio-economy that is now starting to emerge as the future’s alternative to today’s petroleum-based economy.

Norway is considered to have large and relatively unique biological resources, especially in marine regions in the north. While much of the bioprospecting until now has taken place in the temperate and tropical regions, we are now seeing a shift in focus over to biological components that can be found in cold, northern areas. Furthermore, especially high expectations are attached to both marine resources and to resources that can be found in undersea oil reserves in the north. The Norwegian government wishes therefore to focus on marine bioprospecting to lay the foundation for business development in the marine sector (especially in the northern regions) and a viable national economy “after oil” (FKD, 2009, p.14, 8).

The government sees marine bioprospecting as a central area for developing Norway in the direction of an important nation in bio-economy and a means of developing knowledge-based jobs related to the traditional sectors like aquaculture, agriculture, and forestry (FKD, 2009, p.14)

The management regime in bio-prospecting differs considerably from those in petroleum, hydro- and wind-power, as well as aquaculture, in that the Norwegian authorities are focusing on making the natural resources used in bio-prospecting as easily accessible as possible, for as many as possible. The only thing that is demanded of private actors who want to harvest biological material, is that they report this activity to the Directorate of Fisheries. The most significant part of this is that the authorities finance a system for harvesting, describing, and to some extent screening, of the biological organisms, and that the results are stored in public bio-banks. Norwegian and foreign researchers can thereafter access these descriptions virtually free of charge, in order to try to find scientific evidence for a desired effect. This entails relatively large costs for the public sector regarding, for example, research vessels, analysts, laboratory equipment, public education of researchers, etc. By providing the information free of charge to commercial actors, the authorities actually subsidize the industry, and the virtually free access can be seen as a form of non-monetary benefit sharing [25], with parallels to the “local content” policy which ensured the development of the Norwegian petroleum industry. Instead of introducing monetary benefit sharing by affirming the community’s ownership of the resource and obtaining a resource rent (as with petroleum), the authorities focus only on facilitating (subsidizing) value creation where all profits – including any resource rent – accrue to private business actors.

[25] This is a reference to the “benefit-sharing” mandates in the Convention on Biological Diversity (1994).

It was not a given that Norway would follow this management regime for bio-prospecting. Both the Biodiversity Act and the Marine Resources Act (both from 2009) confirm that genetic material from nature is a natural resource that belongs to the community at large and should be managed by the state (just like oil, waterfalls, wind, or coastal waters), and further emphasis is put on there being a rational and fair distribution of the benefits from the use of such material (KDF, 2009, p. 17). Furthermore, two very different “bio-prospecting regulations” have been sent out for consultation over the last six years. The first, which came in 2013, focused on the community’s ownership of biological resources, and provided for the taxation of any resource rent. After many critical inputs in the consultation round, there came a new proposal for regulations in 2017, where the desire for resource rent taxation had been completely abandoned. In this draft no spotlight is put on public ownership of the underlying natural resources (which is in line with the state of wind and aquaculture), but it is offered freely for private use. In hindsight the work on such a regulation has been put on ice, and the authorities are following an “open access”-line for the bio-prospecting industry.

It looks like the authorities think of this relatively new industry as a regular commercial industry, and not as one that belongs in the natural resource sector. Instead of emphasizing that the biological material (the underlying resource that is exploited via bioprospecting) belongs to the community, the government believes that “Commercialization of research results related to marine bio-prospecting does not differ significantly from commercialization of other research results. The breadth of market opportunities for the marine bioprospecting makes it appropriate to use general [regulatory] tools on the commercialization side” (FKD, 2009, p.8).

There are a number of characteristics of the bio-prospecting industry that may explain why the authorities, instead of restricting access to the natural resource through licenses and concessions, instead attempt to give as many people as possible access to it by subsidizing the harvesting, description, and (parts of) the analysis. First, only a few specimens of a species are required in order to describe the relevant compounds, enzymes, and genes that it contains. Once this description is available, the component can be reproduced synthetically, which is to say that one does not need further natural specimens in order to mass produce the gene or the enzyme. There is therefore neither a concern that the industry will deplete a limited resource (as in the petroleum industry) or degrade the environment through the extraction of the resource (as in hydro- and wind-power and aquaculture). Furthermore, no “monopoly” is created as a foundation for extraordinary profit by the authorities giving access to the resource only to a relatively small number of actors, while other actors are locked out. On the contrary, access to the resource is subsidized so that as many as possible will have access to it. In addition, the technology develops within the industry in such a way as to complicate both the collection of an eventual resource rent as well as the legal basis for sharing out the benefit (among other things, challenges regarding the digital description of the biological materials, traceability given that genes are one of many input factors, and foreign patents).

A challenge with this management regime is that the subsidization of bio-prospecting often does not lead to industrial jobs or income in Norway, because the lucrative research results are patented and sold to foreign companies that generate income and profits outside of the country. Once again, potentially great values are created through monopoly power, but the monopoly is created by patents based on the extraction of a common resource, and not by restricting access to the underlying resource. Since the market for products and processes built from bio-prospecting often are global, these patents are filed in the countries with the largest markets, and not where the original resource was found. In such cases the “people”, who own the original source of inspiration (nature), lose control of the subsequent usage of it, along with any resource rent.

As with wind power there is little recognition of the potential for resource rent. nature is made freely available for utilization in the hope that it will create jobs and revenue, while much of the income goes abroad. There is no target for resource rents here, because it arises as a result of patent rights, which are often registered abroad. Any resulting resource rent is privatized, and it is the Norwegian and foreign authorities’ issuance of patents that creates the monopoly, while the resource itself, which is the basis for the patent, is offered free of charge with no preconditions.


Norway’s current wealth is built on a management regime tradition that explicitly recognizes the public ownership and control over our natural resources and ensures that the resource rents they produce are returned to the community. When Norway tries to move to an economy based on biological resources and renewable energy, we could expect that these well-proven traditions will lay a foundation for the country’s future management of these resources. It is remarkable that this does not seem to be the case. It seems that today’s politicians and officials do not see natural resources as part of the community’s inheritance, but as a mere means of production that can almost be given away.

Of the natural resources we have discussed in this article, it is only in hydro-power and petroleum that the authorities have explicit control over the public resource, and therefore the ability to collect resource rents. There is surprisingly great variation in the way private actors gain access to use the various natural resources that are owned by the community. One would expect a more consistent approach that protects the public interest–as the resource management regime for petroleum does.

We are not aware of any calculations of resource rents in the field of bio-prospecting. This is a sensational fact in itself. When it comes to the other resources, the current resource rents in hydro- and wind-power and aquaculture are modest when compared to petroleum (see Figure 6). We can add that these ground rents may become considerably higher in the future as the bio-economy replaces the petroleum economy both nationally and globally.

Figure 6: Resource rents in various industries. Source: Greaker and Lindholt (2019, various pages)

The challenge is that the current management regimes do not give us the opportunity to ensure that the people will get a share of these resource rents (and future resource rents, if, when, and where they should arise). Instead private actors receive licenses that give them a disproportionately large return on their investments.

If Norway were to introduce consistent regimes inspired by hydro-power and petroleum, it would first have to recognize public ownership and establish a management regime that can capture the resource rent when it arises. When resource rents are secured, one can discuss how they should be shared out politically, economically, and geographically.

This is relatively easy with wind-power and aquaculture, but political will is lacking. Bio-prospecting is a more challenge case, so the authorities here must follow two parallel tracks. The first is to search for solutions for how the resource rent from the exploitation of our common biological building blocks can be returned to the Norwegian people. This may, for example, concern stricter requirements for registration when harvesting from nature and withdrawals from public bio-banks, and forming contracts that contain an obligation for the sharing of monetary benefits, and routines for tracking the path from biological inspiration to finished product (through description, screening, patenting, and commercialization). If this should be shown to be too complicated to handle in practice, it would become even more important to ensure that more of the bio-prospecting value chain (and revenue) remains domestic. This tracking would entail an expansion of the so-called “local content” policy such that in addition to encouraging Norwegian research and development in the early stages of industry, it would include to a much greater degree measures that contribute to Norwegian ownership, production, and commercialization of the results of bio-prospecting. In this way, the community can at least get some of the value creation that is based on our resources, through jobs and ordinary personal and corporate taxes.

We would like to thank Eirik Magnus Fuglestad, Espen Moe, Anders Skonhoft, and to anonymous colleagues for helpful comments.


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NFD. (2017). Forslag til forskrift om uttak og utnytting av genetisk materiale (bioprospekteringsforskriften). Høringsfrist 3.okt 2017. Oslo: Nærings- og fiskeridepartementet. Online at: horingsnotat-med-forskrift-og-merknader.pdf.

NOU 2019:16. (2019). Skattlegging av vannkraftverk. Oslo: Finansdepartementet.

NOU 2019:18. (2019). Skattlegging av havbruksvirksomhet. Oslo: Finansdepartementet.

NVE [Noregs vassdrags- og energidirektorat]. 2010. «Konsesjonshandsaming av vasskraftsaker. Rettleiar for utarbeiding av meldingar, konsekvensutgreiingar og søknader». Veileder 3/2010.

NVE. (2019a). Større vannkraftsaker. Oppdatert 23. april. Online at: konsesjonssaker/konsesjonsbehandling-av-vannkraft/storre-vannkraftsaker/.

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NVE. (2019c). Trinn 6 – Oppfølging av innvilget konsesjon. Oppdatert 28. november. Online at: oppfolging-av-innvilget-konsesjon/. O’Donnell, E.T. (2015). Henry George and the Crisis of Inequality. New York: Columbia University Press.

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Pereira, E., Spencer, R. and Moses, J. (Ed.) (2021). Experiences of Managing Wealth, CSR and Local Content Policy: Sustainable Development of Extractive Resources Industries. Sveits: Springer International.

Ricardo, D. (1817). The Works and Correspondence of David Ricardo, Vol. 1: Principles of Political Economy and Taxation. Online Library of Liberty. Online at: ricardo-the-works-and-correspondence-of-david-ricardo-11-vols-sraffa-ed.

Saglie, I.-L., Inderberg, T.H. and Rognstad, H. (2020). What shapes municipalities’ perceptions of fairness in windpower developments? Local Environment, 25(2), 147-61. DOI: 10.1080/13549839.2020.1712342 Senior, N. (1850). Political Economy. Third Edition. London og Glasgow: Richard Griffin and Company.

Skonhoft, A. (2020). Lønnsomhet og rente i oppdrettsnæringen. Samfunnsøkonomen, 1, 12-14. Online at: Thue, L. (2003). For egen kraft: kraftkommunene og det norske kraftregimet 1887-2003. Oslo: Abstrakt.

UN General Assembly. (1962). UN Resolution on Permanent Sovereignty over Natural Resources. Online at:

UN General Assembly. (1966). International Covenant on Civil and Political Rights. Adopted and opened for signature, ratification and accession by General Assembly resolution 2200A (XXI) of 16 December 1966 entry into force 23 March 1976, in accordance with Article 49. Online at:

Van Audenhove, L. (2007). Expert interviews and interview techniques for policy analysis. Vrije University, Brussel. 9. mai utkast. Online at: VanAudenhove.pdf.

Vormedal, I., Larsen, M.L. and Flåm, K.H. (2019). Grønn vekst i blå næring? Miljørettet innovasjon i norsk lakseoppdrett. FNI Report 3/2019. Fridtjof Nansens Institutt. Wiederstrøm, G. (2019, 1. november). Vil skatte storfiskane. Klassekampen, s. 12.

Higher than the Shoulders of Giants; Or, a Scientist’s History of Drugs


The United States used to introduce new constitutional amendments all the time. But after the 26th Amendment in 1971, we stopped coming up with new amendments and haven’t added any since. (The 27th Amendment doesn’t really count — while it was ratified in 1992, it was proposed all the way back in 1789. It’s also only one sentence long and really boring.)

Global GDP used to grow faster and faster all the time — the time it took the global economy to double in size showed a pretty clear linear trend. This was the rule until about 1960-1980, when economic growth suddenly stagnated. Global GDP is still going up, but it’s now growing at a more or less constant rate, instead of accelerating. 

Productivity and hourly wages used to be tightly linked — if you’re creating more value for your employer, they will be willing to pay you more. However, around 1970, these two trends suddenly decoupled. You may have seen graphs like this: 

There used to be less than 1 lawyer per 1000 Americans, though that number was slowly increasing. That is, until about 1971, when it suddenly shot up. Now there are about 4 lawyers for every 1000 Americans. In some parts of the country, the ratio can be as high as 10 per 1000. This is (unsurprisingly) true in New York but also unexpectedly true in our home state of Vermont, which has 5.8 lawyers per 1000 people. It’s ok though, I hear they can’t enter your home unless you invite them in. 

It used to be that about 100 out of every 100,000 people in the population were in prison. That is, until about 1971, when that rate started climbing. Now about 700 out of every 100,000 Americans are incarcerated.

There are even signs that scientific progress has been slowing down since — you guessed it! — about 1970 (see also this paper). 

This is only a small selection of the many things that seem to have gone terribly wrong since about 1970. For a more complete picture, check out the excellent Wake Up, You’ve Been Asleep for 50 Years and WTF Happened In 1971?, which are our sources for most of the trends described above. 

So yeah, what the F did happen in the early 1970s? When dozens of unexplained trends all seem to start in the same year, it seems like more than coincidence — you start wondering if there might be a monocausal event

“The break point in America is exactly 1973,” says economist Tyler Cowen, “and we don’t know why this is the case.” One possible culprit is the 1973 oil embargo, because many of these trends have to do with energy. But Cowen doesn’t think this holds water. “Since that time, the price of oil in real terms has fallen a great deal,” he says, “and productivity has not bounded back.” 

Another possible culprit is the US going off the gold standard in 1971, part of the set of measures known as the Nixon shock (also the name of our new Heavy Metal band). This makes some sense because many of these trends have to do with the economy. But it’s not clear if this is a good explanation either, as many of these trends seem to be global, and most of the world is not on the US dollar. The US is admittedly a pretty big deal, but we’re not the only economy in the world.

But it’s also possible that all this comes from a different policy that Nixon signed into law the year before: the 1970 Controlled Substances Act.


The early history of coffee is shrouded in mystery. Legends of its discovery date as far back as the 9th century CE, but whenever it was discovered, it’s clear that it came from Africa and had reached the Middle East by 1400. The first coffeehouse in Istanbul opened around 1554, and word of coffee began reaching Europe in the middle 1500s. Even so, it took Europeans about a hundred more years to really take note — the first coffeehouse in Christendom didn’t open until 1645, when one popped up in Venice.

Only five years later, in 1650, the first coffeehouse in England opened in Oxford. There is nothing new under the sun, so unsurprisingly it was very popular with students and intellectuals. Early patrons included Christopher Wren and John Evelyn, and later additions included Hans Sloane, Edmund Halley, and Isaac Newton, who according to some stories, “are said to have dissected a dolphin on a table in the coffeehouse before an amazed audience.” Coffee is a hell of a drug. 

The first coffeehouse in London opened in 1652 in St. Michael’s Alley in Cornhill, operated by a Greek or Armenian (“a Ragusan youth”) man named Pasqua Rosée. The coffee house seems to have been named after Roseé as well, and used him as its logo — one friend who wrote him a poem addressed the verses, “To Pasqua Rosée, at the Sign of his own Head and half his Body in St. Michael’s Alley, next the first Coffee-Tent in London.”

The Royal Society, the oldest national scientific institution in the world, was founded in London on 28 November 1660. The founding took place at the original site of Gresham College, which as far as we can tell from Google Maps, was a mere three blocks from Rosée’s coffeehouse. Some accounts say that their preferred coffeehouse was in Devereux Court, though, which is strange as that is quite a bit further away. But this may be because Rosée’s coffeehouse was destroyed in the Great Fire of 1666.

In 1661, Robert Boyle published The Sceptical Chymist, which argues that matter is made up of tiny corpuscules, providing the foundations of modern chemistry. In 1665, Robert Hooke published Micrographia, full of spectacularly detailed illustrations of insects and plants as viewed through a microscope, which was the first scientific best-seller and invented the biological term cell. By 1675, there were more than 3,000 coffeehouses in England. In 1687, Newton published his Principia

As the popular 1667 broadside News from the Coffe House put it: 

So great a Universitie

I think there ne’re was any;

In which you may a Schoolar be

For spending of a Penny.

This trend continued into the following centuries. As just one example, Voltaire (1694-1778) reportedly consumed a huge amount of coffee per day. No, REALLY huge. Most sources seem to suggest 40 to 50 cups, but The New York Times has it as “more than 50 cups a day.” Perhaps the cups were very small. Wikipedia says “50-72 times per day”, but we can’t tell where they got these numbers. I ask you, what kind of drugs would this man be on, if he were alive today?

Do we really think this mild stimulant could be responsible for the Scientific Revolution? Well to be entirely clear, we aren’t the first ones to make this argument. Here’s a Huffington Post article reviewing several books and essays on the same idea, including one by Malcolm Gladwell. And in Weinberg and Bealer’s The World of Caffeine, the authors tell us that the members of the Royal Society, “had something in common with Timothy Leary, the Harvard professor who experimented with LSD, in that they were dabbling in the use of a new and powerful drug unlike anything their countrymen had ever seen. Surviving recorded accounts confirm that the heavily reboiled sediment-ridden coffee of the day was not enjoyed for its taste, but was consumed exclusively for its pharmacological benefits.”

Today we tend to take coffee in stride, but this stimulant didn’t seem so mild at the time. In 1675, King Charles II briefly banned coffeehouses in London, claiming they had “very evil and dangerous effects.” We don’t know the exact details of the public response, but it was so negative that the king changed his mind after only eleven days! Ten years later, coffee houses were yielding so much tax revenue to the crown that banning them became totally out of the question. 

Merchants panicked over an imagined danger to the economy, one writing, “The growth of coffee-houses has greatly hindered the sale of oats, malt, wheat, and other home products. Our farmers are being ruined because they cannot sell their grain; and with them the landowners, because they can no longer collect their rents.” The owner of the second coffeehouse in London, James Farr, was prosecuted by his neighbors in 1657, “for making and selling a sort of liquor called coffe, as a great nuisance and prejudice to the neighborhood, etc.”

On the less official side of things, the 1674 anonymous WOMEN’S PETITION AGAINST COFFEE REPRESENTING TO PUBLICK CONSIDERATION THE Grand INCONVENIENCIES accruing to their SEX from the Excessive Use of that Drying, Enfeebling LIQUOR (which possibly deserves to be read in full, if only for the 1674 use of “cuckol’d” and “dildo’s”) declared, among other things:

Never did Men wear greater Breeches, or carry less in them of any Mettle whatsoever. There was a glorious Dispensation (’twas surely in the Golden Age) when Lusty Ladds of seven or eight hundred years old, Got Sons and Daughters; and we have read, how a Prince of Spain was forced to make a Law, that Men should not Repeat the Grand Kindness to their Wives, above NINE times in a night … the Excessive Use of that Newfangled, Abominable, Heathenish Liquor called COFFEE …has…Eunucht our Husbands, and Crippled our more kind Gallants, that they are become as Impotent, as Age, and as unfruitful as those Desarts [sic] whence that unhappy Berry is said to be brought.

It’s not like these concerns disappeared as people got used to it. As late as the early 1900s, physicians were still raving about the dangers of this terrible drug. As the wonderful (and sadly defunct) site History House reports:

In the spectacularly titled Morphinism and Narcomanias from Other Drugs (1902), one T. D. Crothers, M.D. tells a few tales of delirium induced by coffee consumption. He also remarks, not unlike analogies to marijuana made by current drug crusaders, that, “Often coffee drinkers, finding the drug to be unpleasant, turn to other narcotics, of which opium and alcohol are the most common.” Similarly, in A System of Medicine (1909), edited by the comically degreed Sir T. Clifford Allbutt (K.C.B., M.A., M.D., LL.D., D. Se., F.R.C.P., F.R.S., F.L.S., F.S.A., Regius Professor of Physic [Internal medicine] in the University of Cambridge), some contributors announce their distaste for caffeine: “We have seen several well-marked cases of coffee excess… the sufferer is tremulous, and loses his self-command… the speech may become vague and weak. By miseries such as these, the best years of life may be Spoilt.”

High doses of caffeine cause odd behavior in test animals. Rats will bite themselves enough to die from blood loss, prompting Consumers Union to observe, “Some readers may here be moved to protest that the bizarre behavior of rats fed massive doses of caffeine is irrelevant to the problems of human coffee drinkers, who are not very likely to bite themselves to death.”

Neither did the science-coffee connection disappear with Newton and Hooke. Researchers still consume more coffee than any other profession. The mathematician Alfréd Rényi quipped, “A mathematician is a machine for turning coffee into theorems,” and he and his colleagues, including Paul Erdős, drank copious amounts. At one point, when trying to explain why Hungary produces so many mathematicians, one of the reasons Erdős gave was, “in Hungary, many mathematicians drink strong coffee … At the mathematical institute they make particularly good coffee.” 

The first webcam, great ancestor to all those Zoom calls you’ve been having, was developed by University of Cambridge computer scientists so they could watch the coffee pot without having to leave their desks.  

And while it’s very popular, coffee isn’t the only way to get your sweet, sweet caffeine fix. Consider the connection between Tea and the British Empire. [cue Rule, Britannia!

Hey Jared we have a piping hot tip for you

Caffeine in one form or another continued to be the stimulant of choice until the middle of the 19th century, when the Germans made an even more exciting discovery.


When the Spanish arrived in South America, they noticed that some of the natives had the refreshing habit of chewing on the leaves of a local plant, “which make them go as they were out of their wittes.” At first the Spaniards were concerned but then they realized it was pretty great, and started using it themselves — for medicinal purposes, of course. 

Even so, chemistry was not fully developed in the 1600s (they needed to wait for the coffee to hit), so despite many attempts it took until 1855 for the active ingredient to be purified from coca leaves. This feat was accomplished by a German named Friedrich Georg Carl Gaedcke. With this success, another German chemist (Friedrich Wöhler) asked a German doctor who happened to be going on a round-the-world trip (Carl Scherzer) to bring him back more of these wonderful leaves. The doctor came back a few years later with a trunk full of them, which the second chemist passed on to yet a third German chemist, Albert Niemann, who developed a better way of purifying the new substance, which he published as his dissertation. (Sadly he never got to enjoy the substance himself, as he discovered mustard gas the same year and died the year after that, probably from working too closely with mustard gas.)

And with this series of developments, pure cocaine was injected directly into the German nervous system.

A typical example of the effects of cocaine on the German scientific body can be found in a man you might have heard of — Sigmund Freud, who has the same birthday as one of the authors. Having recently moved on from his earlier interest in trying to find the testicles and/or ovaries of eels (don’t laugh, it was a major scientific question of the day!), he found himself VERY EXCITED by the possibilities of this new treatment, which had just become available to physicians.

“Woe to you, my Princess, when I come,” wrote Sigmund Freud to his future wife, Martha Bernays, on June 2, 1884. “I will kiss you quite red and feed you till you are plump. And if you are forward, you shall see who is the stronger, a gentle little girl who doesn’t eat enough, or a big wild man who has cocaine in his body. In my last serious depression I took cocaine again and a small dose lifted me to the heights in a wonderful fashion. I am just now collecting the literature for a song of praise to this magical substance.”

He didn’t just use cocaine to intimidate (???) his fiancée, though. Freud also found that it had professional applications. “So I gave my lecture yesterday,” he wrote in a letter a few months earlier, “Despite lack of preparation, I spoke quite well and without hesitation, which I ascribe to the cocaine I had taken beforehand. I told about my discoveries in brain anatomy, all very difficult things that the audience certainly didn’t understand, but all that matters is that they get the impression that I understand it.” We see that not much has changed since the 1880s. 

Freud wasn’t the only one who was excited by this new discovery, of course. Only two years later, a bedridden Robert Louis Stevenson wrote The Strange Case of Dr Jekyll and Mr Hyde, a 30,000-word novella that he completed in about three days. Many accounts suggest that Stevenson was high on cocaine during this brief, incredibly productive period, possibly recreationally, or possibly because it was simply part of the medicine he was taking. This claim is somewhat contested, but we’re inclined to believe it — you try writing 30,000 words in three days, by hand, while bedridden, without the help of a rather good stimulant.

One Italian, Paolo Mantegazza, was so enthusiastic about the new substance that he actually developed a purification process of his own in 1859. Over the next several decades, he founded the first Museum of Anthropology in Italy, served in the Italian parliament, published a 1,200-page volume of his philosophical and social views, at least three novels, and several scientific books and papers (this paper from 2008 claims that he founded the field of sexual medicine), including one in which he wrote:

“I sneered at the poor mortals condemned to live in this valley of tears while I, carried on the wings of two leaves of coca, went flying through the spaces of 77,438 words, each one more splendid than the one before. An hour later, I was sufficiently calm to write these words in a steady hand: God is unjust because he made man incapable of sustaining the effect of coca all lifelong. I would rather have a life span of ten years with coca than one of 10,000,000,000,000,000,000,000 centuries without coca.”

We should note that while Mantegazza was very productive in these decades, he was also a vivisectionist and a racist. Clearly not everyone should have access to cocaine of this quality.

A different Italian looked at cocaine and saw not poor mortals condemned to live in the valley of tears, but economic opportunity. He happened to read a paper by Mantegazza on the substance, and was inspired. This man was Angelo Mariani, and in 1863 he “invented” cocawine, by which we mean he put cocaine in wine and then sold it. 

Apparently this was more than just a good idea., a reputable source if ever we’ve seen one, tells us, “If cocaine is consumed on its own, it yields two principal metabolites, ecgonine methyl ester and benzoyleconine. Neither compound has any discernible psychoactive effect. Cocaine co-administered with alcohol, however, yields a potent psychoactive metabolite, cocaethylene. Cocaethylene is very rewarding agent in its own right. Cocaethylene is formed in the liver by the replacement of the methyl ester of cocaine by the ethyl ester. It blocks the dopamine transporter and induces euphoria. Hence coca wine drinkers are effectively consuming three reinforcing drugs rather than one.”

Mariani is notable less for taking cocaine himself, and more for being possibly the most influential drug pusher of all time. His enticing product, called Vin Mariani, soon became a favorite of the rich, powerful, and highly productive, unleashing the creative potential of cocaine on the world.


A good catalogue of its influence can be found in the literally thousands of celebrity endorsements it received, and which were proudly displayed in its ads. “Testimonials from eminent personages were so numerous that Mariani, as great a public relations man as he was a chemist, published them in handsome leather-bound volumes—replete with portraits and biographical sketches of the endorsers.” Many of these names and endorsements seem to have been lost to time, but here are a few you might recognize. 

Presumably you have heard of the Pope. Pope Leo XIII and Pope Pius X both enjoyed Vin Mariani, and Pope Leo XIII liked it so much that he often carried a hip flask of the wine. He even awarded Mariani a Vatican Gold Medal, “to testify again in a special manner his gratitude.” He also appeared on a poster advertisement endorsing the wine, and later called Mariani a “benefactor of humanity”. AP news reports that the chief rabbi of France liked it too. 

Sarah Bernhardt, famous actress and subject of the most entertaining Wikipedia entry of all time, said, “My health and vitality I owe to Vin Mariani. When at times unable to proceed, a few drops give me new life.” Jules Verne, one of the fathers of science fiction, wrote, “Vin Mariani, the wonderful tonic wine, has the effect of prolonging life.” Frédéric Auguste Bartholdi, who you will know as the sculptor of the Statue of Liberty, wrote, “this precious wine will give me the strength to carry out certain other projects already formed.” Alexander Dumas is said to have enjoyed it as well, but we can’t find a quote. 

In 1892, Thomas Edison contributed the almost maddeningly vague note, “Monsieur Mariani, I take pleasure in sending you one of my photographs for publication in your album.” Edison was already quite famous by this point, and it’s not clear how long he had been enjoying the effects of Vin Mariani, but we can make an educated guess. 

Vin Mariani was invented in 1863, and we know that by 1868, Edison had a reputation for working “at all hours, night or day”. His famous Menlo Park lab was built in 1876, and soon began producing inventions at a steady rate — the phonograph in 1877, his work on electric lights about 1880, motion picture devices in 1891, and so on. 

In 1887, one writer noted, “he scarcely sleeps at all, and is equally as irregular concerning his eating”. The same account quotes a “co-laborer” of Edison’s as saying, “he averaged eighteen hours [of work] a day. … I have worked with him for three consecutive months, all day and all night, except catching a little sleep between six and nine o’clock in the morning.” In 1889, when he was 42, he told Scientific American that he slept no more than four hours a night. Given that we know he enjoyed Vin Mariani, we think this is good evidence of just how much he must have been drinking. 

Mariani claimed to have collected over four thousand such endorsements from various celebrities. It’s only natural that he also collected endorsements from physicians. In one of his ads, he trots out the following: “In cases of morphinomania, Dr. Dujardin-Beaumetz has pointed out the advantage to be obtained with the Vin Mariani, and following him, Dr. Palmer, of Louisville, and Dr. Sigmaux Treaux [sic] of Vienna, have obtained excellent results with this therapeutic agent.” Yes, you saw that right — that last name there is a botched attempt to spell “Dr. Sigmund Freud”. Maybe Mariani was high on his own supply after all.

While Mariani deserves credit as the man who got cocaine to the masses, the Germans were the ones who first purified the cocaine, and the ones who undoubtedly put it to the best scientific and medical use.

[content warning for the next several paragraphs: descriptions of 19th-century medical experimentation]

It’s easy for a modern person to miss the fact that aside from alcohol and getting held down by surgical assistants, there were few anaesthetics at this point in history. Laughing gas (nitrous oxide) was discovered in 1776, but the Americans took a long time to figure out that it could be used for anything other than killing animals and getting high, and were still struggling with the idea that it might have medical applications. 

Furthermore, laughing gas is a general anaesthetic, not a local anaesthetic, and a weak one at that. It was totally unsuitable for delicate operations like eye surgery. 

People had already noticed that a dose of cocaine will numb your nose, lips, or tongue. Even so, it took the combined powers of Sigmaux Treaux Sigmund Freud and his friend Karl Koller, an ophthalmology intern, to make this breakthrough. Koller was interested in finding a local anaesthetic for eye surgery, and he had already tried putting various chemicals, including morphine, into the eyes of laboratory animals, with no success. Separately, Freud was convinced that cocaine had many undiscovered uses. So in 1884, when Freud left to go pay a visit to Martha, he left Koller some cocaine and encouraged him to experiment with it. 

While Freud was away, Koller made his discovery. Amazingly, in his papers Koller describes the exact moment when he made the connection:

Upon one occasion another colleague of mine, Dr. Engel, partook of some (cocaine) with me from the point of his penknife and remarked, “How that numbs the tongue.” I said, “Yes, that has been noticed by everyone that has eaten it.” And in the moment it flashed upon me that I was carrying in my pocket the local anesthetic for which I had searched some years earlier.

Dr. Gaertner, an assistant in the lab where Koller worked, continues the story in more detail:

One summer day in 1884, Dr. Koller, at that time a very young man … stepped into Professor Strickers laboratory, drew a small flask in which there was a trace of white powder from his pocket, and addressed me … in approximately the following words: “I hope, indeed I expect that this powder will anesthetize the eye.” 

“We’ll find out that right away”, I replied. A few grains of the substance were thereupon dissolved in a small quantity of distilled water, a large, lively frog was selected from the aquarium and held immobile in a cloth, and now a drop of the solution was trickled into one of the protruding eyes. At intervals of a few seconds the reflex of the cornea was tested by touching the eye with a needle… After about a minute came the great historic moment, I do not hesitate to designate it as such. The frog permitted his cornea to be touched and even injured without a trace of reflex action or attempt to protect himself, whereas the other eye responded with the usual reflex action to the slightest touch. The same tests were performed on a rabbit and a dog with equally good results. … 

Now it was necessary to go one step further and to repeat the experiment upon a human being. We trickled the solution under the upraised lids of each other’s eyes. Then we put a mirror before us, took a pin in hand, and tried to touch the cornea with its head. Almost simultaneously we could joyously assure ourselves, “I can’t feel a thing.” We could make a dent in the cornea without the slightest awareness of the touch, let alone any unpleasant sensation or reaction. With that the discovery of local anesthesia was completed. I rejoice that I was the first to congratulate Dr. Koller as a benefactor of mankind.

The final proof came on August 11, 1884, when Koller performed the first successful cocaine-aided cataract surgery. Koller was only 25 when he made this discovery, a Jewish medical student so poor that he had to ask a friend to present the findings for him, since he could not afford the train fare to go to the ophthalmology conference in Heidelberg that year. 

The finding was received with worldwide amazement and enthusiasm. “Within three months of this date,” says one paper, “every conceivable eye operation had been attempted using cocaine, in every part of the world.” The idea spread “not just into ophthalmology, but wherever mucous membranes required surgery—in gynecology, proctology, urology, and otolaryngology.”  Encyclopedia Britannica says that this finding “inaugurated the modern era of local anesthesia.”

In fact, cocaine got such an amazing reputation as a local anaesthetic that the suffix -”caine” was back-formed from the name, and was used form names of new local anaesthetics as they were discovered, like amylocaine, lidocaine, bupivacaine, prilocaine, and procaine (aka novocaine).

[content warning: more descriptions of 19th-century medical experimentation]

As the technique developed further, people started using cocaine as an anaesthetic in spinal operations. The first was an American named James Leonard Corning, who also happened to be a big fan of Vin Mariani. In 1885, he performed a spinal injection of cocaine on a dog (why?), and found that this left the dog temporarily unable to use its legs. 

Encouraged by this finding, he soon decided to give a similar injection to a patient who had recently been referred to him for “addiction to masturbation”. Corning gave the man cocaine as a spinal injection of some sort (there is scholarly debate over what sort!). After 20 minutes, he noticed that “application of [a wire brush] to the penis and scrotum caused neither pain nor reflex contraction.” Whether this was a successful treatment for the unfortunate patient is not recorded.

A German surgeon named August Bier independently came up with the idea in 1898. He and his assistant August Hildebrandt performed the procedure on several patients as part of routine surgeries, until one day in August 1898, when for reasons that remain unclear, they decided to experiment on each other.

“Hildebrandt was not a surgeon and his ham-fisted attempts to push the large needle through Bier’s dura proved very painful,” begins one account, not at all what you would expect from the rather dry-sounding volume Regional Anaesthesia, Stimulation, and Ultrasound Techniques. It continues, “The syringe of cocaine and needle did not fit well together and a large volume of Bier’s cerebrospinal fluid leaked out and he started to suffer a headache shortly after the procedure.” Probably because of the flawed injection, Bier was not anaesthetized at all.

Bier of course was a surgeon, and so when it was his turn to give Hildebrandt the injection, he performed it flawlessly. Soon Hildebrandt was very anaesthetized. To test it, reports Regional Anaesthesia, “Bier pinched Hildebrandt with his fingernails, hit his legs with a hammer, stubbed out a burning cigar on him, pulled out his pubic hair, and then firmly squeezed his testicles,” all to no effect. In a different account, this last step was described as “strong pressure and traction to the testicles”. They also pushed a large needle “in down to the thighbone without causing the slightest pain”, and tried “strong pinching of the nipples”, which could hardly be felt. They were thrilled. With apparently no bad blood over this series of trials, the two gentlemen celebrated that evening with wine and cigars, and woke up the next morning with the world’s biggest pair of headaches, which confined them to bed for 4 and 9 days, respectively. You can read the account in its thrilling original German here.

(Why genital flagellation has such a central role in the climax of both of these stories is anyone’s guess.)

Despite the wild tale of the discovery, this represented a major medical advancement, which made many new techniques and treatments a possibility. Spinal anaesthesia is now a common technique, used in everything from hip surgery to Caesarean sections. Soon Bier and others had developed various forms of regional anaesthesia, which made it safe to perform new and more delicate operations on the arms and legs.

A more prosaic discovery, but no less important, was made by Richard Willstätter in 1898. At the time there was some academic debate about the chemical structure of cocaine, and there were a couple competing theories. Willstätter proved that they were both wrong, came up with the correct structure, and demonstrated that he was correct by synthesizing cocaine in the lab. This was not only the first artificial synthesis of cocaine, but the first synthesis of an organic structure that we’re aware of.  

We’re tempted to wink and ask why he was so motivated to develop a synthetic cocaine, but we’ve looked through Willstätter’s autobiography, and he very clearly states at one point, “although I always possessed cocaine from my youth on, I never knew the temptation to experience its peculiar effects myself.” Maybe this was because by 1894 they had discovered that cocaine had some side effects (even the diehard Freud was off it by 1904), or maybe because he was a nice Jewish boy who wouldn’t mess around with that sort of thing (though Dr. Karl “pins-in-the-eyes” Koller was also Jewish). In any case, his early fame was closely related to the rise of cocaine, and he went on to win the 1915 Nobel Prize for Chemistry.

Just like England was the center of learning in the enlightenment, Germany was the center of scientific advancement in the second half of the 19th century, especially in the natural sciences. Anyone who wanted to study biology, chemistry, or physics had to learn German, because that’s the language all the best volumes and journals were printed in. 

Around 1897, the great Spanish neuroscientist Santiago Ramón y Cajal wrote, “it must be admitted that Germany alone produces more new data than all the other nations combined when it comes to biology. … A knowledge of German is so essential that today there is probably not a single Italian, English, French, Russian, or Swedish investigator who is unable to read monographs published in it. And because the German work comes from a nation that may be viewed as the center of scientific production, it has the priceless advantage of containing extensive and timely historical and bibliographic information.”

“We can only speculate as to how twentieth century history would be different if the Germans had discovered marijuana instead of cocaine,” writes History House (they wrote about the history of drugs a lot, ok?).

This persisted until the two World Wars, when German scientific dominance ended. In a footnote to the 1923 edition of his book, Ramón y Cajal notes that other countries had begun, “competing with, and in many cases surpassing, the work of German universities, which for decades was incomparable.” 

One explanation is the obvious one: that the wars destroyed Germany’s ability to do good science. (Also they kicked out all the scientists who were Jewish, gay, communists, etc.) But another explanation is that America began to discover new drugs of her own. 


There were other drugs of course, to fill the gap between German scientific dominance and the third drug revolution of the 1950s and ’60s. Cocaine had already become illegal in the United States in 1914, so people were on the lookout for alternative highs.

In contrast to his rival Edison, Nikola Tesla doesn’t drink cocaine wine. Tesla didn’t smoke — he didn’t even take tea or coffee. “I myself eschew all stimulants,” he once told Liberty magazine in 1935. “I am convinced that within a century coffee, tea, and tobacco will be no longer in vogue.” Perhaps this was because of his amazing, and apparently substance-unaided, ability to visualize designs in his mind’s eye. Tesla said elsewhere that when he first designed a device, he would let it run in his head for a few weeks to see which parts would begin to wear out first.

Tesla did, however, LOVE to drink. “Alcohol … will still be used,” he said. “It is not a stimulant but a veritable elixir of life.” When Prohibition came around in the United States, Tesla did break the habit, but he wrote that the law would, “subject a citizen to suffering, danger and possible loss of life,” and suggested that damages from the resulting lawsuits against the government would soon exhaust the treasury. 

(And what was the worst of these vices according to Tesla, the one more dangerous than rum, tobacco, or coffee? Nothing less than chewing gum, “which, by exhaustion of the salivary glands, puts many a foolish victim into an early grave.”)

Obviously Tesla was wrong about the cost of reparations from Prohibition. But is it a coincidence that Prohibition was the law of the land for the decade running up to the Great Depression? Was it a coincidence that the Great Depression began to turn around in March 1933, the same month that President Roosevelt signed the first law beginning the reversal of Prohibition? Probably it is, but you have to admit, it fits our case surprisingly well. 

While Alcohol is a depressant, perhaps it stimulates the curious spirit in some number of our fellow creatures, as it seems to have done for Tesla. Again from History House:

Washington’s taste for Madeira wine shows up [in his accounts] with mindnumbing regularity: from September 1775 to March 1776, Washington spent over six thousand dollars on booze. … Revolutionary War-era persons drank a phenomenal amount. We have here an account of a gentleman’s average consumption: “Given cider and punch for lunch; rum and brandy before dinner; punch, Madeira, port and sherry at dinner; punch and liqueurs with the ladies; and wine, spirit and punch till bedtime, all in punchbowls big enough for a goose to swim in.”

The other drug as old as time has also been associated with scientific productivity. One contributor to the 1971 book Marihuana Reconsidered, who wrote under the pseudonym “Mr. X”, said that he often enjoyed cannabis, found that it improved his appreciation for art, and even made him a better scientist. In the late ‘90s, after his death, Mr. X was revealed to be Carl Sagan. On the topic of his professional skills, he said: 

What about my own scientific work? While I find a curious disinclination to think of my professional concerns when high – the attractive intellectual adventures always seem to be in every other area – I have made a conscious effort to think of a few particularly difficult current problems in my field when high. It works, at least to a degree. I find I can bring to bear, for example, a range of relevant experimental facts which appear to be mutually inconsistent. So far, so good. At least the recall works. Then in trying to conceive of a way of reconciling the disparate facts, I was able to come up with a very bizarre possibility, one that I’m sure I would never have thought of down. I’ve written a paper which mentions this idea in passing. I think it’s very unlikely to be true, but it has consequences which are experimentally testable, which is the hallmark of an acceptable theory.

Marijuana doesn’t help everyone be a better scientist — some people just get paranoid, or just fall asleep. But it’s especially interesting that Sagan found it hallucinogenic, because the third drug revolution was all about hallucinogens. 

The history of hallucinogens is pretty weird, even by the standards of how weird drug history normally is. Hallucinogens are relatively common, and in theory we could have discovered them at any point in the past several thousand years. But aside from occasional mishaps involving ergot poisoning, hallucinogens didn’t play much of a role in human history until the middle of the 20th century. 

Like the coca plant, Psilocybin mushrooms (“shrooms”) grow in the dirt and have been around forever. Unlike the coca plant, they grow all over the world, and have always been readily available. Indigenous groups around the world have used them in ceremonies and rituals, but they weren’t used as a recreational drug until 1955

Europeans certainly had access to these shrooms for thousands of years, but the first well-documented report of psilocybin consumption in Europe was a case described in the London Medical and Physical Journal in 1799, of a man who picked Psilocybe semilanceata (“liberty cap”) mushrooms in London’s Green Park and had them for breakfast with his four children. First the youngest child, “was attacked with fits of immoderate laughter, nor could the threats of his father or mother refrain him.” Then the father, “was attacked with vertigo, and complained that every thing appeared black, then wholly disappeared.” Soon all of them were affected. The doctor who made the report didn’t see this as a potential good time, or a way to expand the mind — he refers to the effect as “deleterious”.

While it has been enjoyed by many people, we can’t find much evidence of mercantile, economic, or scientific discoveries associated with the use of shrooms. This may not be the drug’s fault, since it was banned so soon after being brought to popular attention. 

But there is one major cultural development linked to psilocybin. In his book Mycelium Running: How Mushrooms Can Help Save the World, Paul Stamets describes a discussion he had with Frank Herbert, author of Dune, in the 1980s. Herbert showed him a new method he had developed for growing mushrooms on newly-planted trees, which at the time everyone thought was impossible. They kept talking, and:

Frank went on to tell me that much of the premise of Dune — the magic spice (spores) that allowed the bending of space (tripping), the giant worms (maggots digesting mushrooms), the eyes of the Freman (the cerulean blue of Psilocybe mushrooms), the mysticism of the female spiritual warriors, the Bene Gesserits (influenced by tales of Maria Sabina and the sacred mushroom cults of Mexico) — came from his perception of the fungal life cycle, and his imagination was stimulated through his experiences with the use of magic mushrooms.

Dune is the best-selling science fiction novel of all time, winner of the Hugo and the very first Nebula award, and one of my personal favorites. Even if this were the only thing shrooms had inspired, it would be a pretty big deal.

The other major naturally-occurring hallucinogen seems to have had a wider impact, and has a laundry list of famous users and associated creations. This drug is mescaline, the active ingredient in peyote cactus. As with cocaine, the Germans were the first to discover mescaline, but unlike cocaine, they didn’t seem to do anything with it. Possibly this was because they thought of it as a poison. The chemist who first isolated it wrote, “mescaline is exclusively responsible for the major symptoms of peyote (mescal) poisoning.” Well, he was almost right.

The first recreational use of the drug we found was from Jean-Paul Sartre, who took mescaline in 1929 while attending the École Normale Supérieure. He had a bad trip, during which he hallucinated various sea creatures. When he came down, he found that the hallucinations persisted, though he didn’t seem to be very worried by this:

Yeah, after I took mescaline, I started seeing crabs around me all the time. They followed me in the streets, into class. I got used to them. I would wake up in the morning and say, “Good morning, my little ones, how did you sleep?” I would talk to them all the time. I would say, “O.K., guys, we’re going into class now, so we have to be still and quiet,” and they would be there, around my desk, absolutely still, until the bell rang.

[Interviewer asks: A lot of them?]

Actually, no, just three or four.

He eventually ended up getting treated for this by Jacques Lacan, who suggested the crabs represented loneliness. When he was feeling depressed, Sartre would instead get the “recurrent feeling, the delusion, that he was being pursued by a giant lobster, always just out of sight… perpetually about to arrive.”

This experience seems to have influenced Sartre’s work — for example, in his play “The Condemned of Altona,” one of the characters claims to communicate with people from the thirtieth century, who have become a race of crabs that sit in judgment of humanity. Is this a precursor to the Carcinization Meme?

are you feeling it now mr krabs

Other authors have had similar experiences, except more positive, and without the crustaceans. Aldous Huxley took mescaline in 1953, and wrote his book The Doors of Perception about the experience. From then on he was a proponent of psychedelics, and they came to influence his final book, Island, published in 1962. Sadly the mescaline cannot be responsible for his most famous novel, Brave New World, because it was published decades earlier, in 1932. It also can’t be held responsible for his 1940 screenplay adaptation of Pride and Prejudice.

But mescaline clearly deserves some credit for Ken Kesey’s 1962 book, One Flew Over the Cuckoo’s Nest, and for Ken Kesey in general. Kesey was working as an orderly at a psych hospital and decided to make some money on the side by testing drugs for the CIA as part of project MKUltra, who gave him both mescaline and LSD (we’ll get to this drug in a second, don’t you worry). The combination of these drugs and his job as an orderly led him to write One Flew Over the Cuckoo’s Nest, which was an instant smash hit — there was a play the next year, with Gene Wilder in a major role, and the film adaptation in 1975 won five Oscars. 

Ken Kesey went on to basically invent modern drug culture, hippie culture, and Bay Area California. Ken Kesey and his drugs were also largely responsible for Jerry Garcia and the Grateful Dead, and thus indirectly responsible for the Ben & Jerry’s flavor Cherry Garcia, “the first ice cream named for a rock legend”.

Mescaline was also a force behind Philip K. Dick’s 1974 Hugo- and Nebula-nominated novel, Flow My Tears, The Policeman Said. In a letter that is more than a little reminiscent of the cocaine-driven Robert Louis Stevenson, he says:

At one point in the writing I wrote 140 pages in 48 hours. I have high hopes for this. It is the first really new thing I’ve done since EYE IN THE SKY. The change is due to a change that overtook me from having taken mescalin [sic], a very large dose that completely unhinged me. I had enormous insights behind the drug, all having to do with those whom I loved. Love. Will love.

If you want to REALLY understand this story, you probably have to read Dick’s undelivered speech, How to Build a Universe That Doesn’t Fall Apart Two Days Later. It doesn’t mention the mescaline but it certainly captures… something. 

Most of his other famous works — The Man in the High Castle, Do Androids Dream of Electric Sheep? (aka Blade Runner), We Can Remember It for You Wholesale (aka Total Recall), Minority Report, etc. — were written before this, and so probably were not affected by mescaline. That’s ok though, because we know that up to 1970 Dick was on amphetamines nearly full-time.

And finally of course there is the great king of the psychedelics, LSD, which started to become prominent around the same time. LSD was actually invented some decades earlier. It was first synthesized in 1938 by Swiss (but notably, German-speaking) chemist Albert Hofmann. He was looking for a new respiratory and circulatory stimulant, but when he tested the new chemical in lab animals, it showed none of the desired effect — though the animals did become “restless” — and was abandoned for five years. 

But Hofmann had a “peculiar presentiment” that there might be more to LSD than met the eye, and so in 1943 he synthesized some more. On April 19th, he arranged to take what he thought would be a tiny dose, in case the substance was poisonous, a mere 250 micrograms. Instead, he went on the mother of all trips, and had his famous bicycle ride home. Subsequent tests showed that a fifth of that original dose was sufficient to produce strong trips in lab assistants — LSD had arrived.

The inventor had no question about what his discovery meant, or what it was for. In a speech on his 100th (!!!) birthday, Hofmann said, “I think that in human evolution it has never been as necessary to have this substance LSD. It is just a tool to turn us into what we are supposed to be.” Okie dokie.

For a drug that got only a couple decades in the sun, LSD has a pretty impressive track record. Francis Crick, one of the people who discovered the structure of DNA, probably took LSD and may have been tripping when he was doing some of his DNA work, though this isn’t well-attested. Douglas Englebart, inventor of the mouse and the guy who did The Mother of All Demos, took LSD some time in the early 60’s. Time magazine wrote approvingly of LSD’s ability to treat mental illnesses as early as 1955.

The Beatles were already extremely popular before they first took acid in 1965, but it clearly influenced their music from then on. This in turn influenced much of the music made in the second half of the 20th century. You may be surprised to learn that they took it for the first time by accident; to be more precise, someone dosed them without their consent. You see…

In the spring of 1965, John Lennon and George Harrison, along with their wives Cynthia Lennon and Patti Boyd, were having dinner over their dentist’s house when they were first “dosed” with LSD.

Dentist John Riley and his girlfriend, Cyndy Bury, had just served the group a great meal, and urged their distinguished guests to stay for coffee, which they reluctantly did…

Riley wanted to be the first person to turn on the Beatles to acid, so the couples finished their coffee, and then Riley told Lennon that the sugar cubes they used contained LSD, a powerful new drug with incredible hallucinogenic effects.

Lennon said, “How dare you fucking do this to us!”

As George remembered, “The dentist said something to John, and John turned to me and said, ‘We’ve had LSD.’ I just thought, ‘Well, what’s that? So what? Let’s go!'”

Eventually they escaped their dentist and ended up at George’s house. John “was beginning to reconsider his attitude toward acid,” in part because he was excited that “George’s house seemed to be just like a big submarine.”

Once they came down, John and George decided the other two Beatles needed to try LSD as well. “John and I had decided that Paul and Ringo had to have acid,” said George Harrison, “because we couldn’t relate to them any more. Not just on the one level, we couldn’t relate to them on any level, because acid had changed us so much.” 

This was easier said than done — Paul didn’t want to try it — but they threw a big house party with Peter Fonda, David Crosby, and various others where they all (except Paul) dropped acid, George fell in the swimming pool, they watched Cat Ballou (with a laugh track), they all got in the shower and passed around a guitar, normal party stuff. Paul didn’t take LSD that night but he took it shortly after, at which point he said it “explained the mystery of life.” The resulting insights helped form their next albums: Revolver, and of course, Sgt. Pepper’s Lonely Hearts Club Band.

The Beatles are just one example, of course. Pink Floyd, the Doors, Jefferson Airplane, and many other bands were all trying out LSD at around the same time. Bob Dylan took LSD (“Who smokes pot any more?” he asked in 1965) and he went on to win a Nobel Prize. The new drug influenced culture in many ways. The real question here is, who has dinner at their dentist’s house?

Another question is, why didn’t we discover how to use psychedelics earlier? Shrooms, at least, have been available for a long time. Why weren’t Leibniz, Galileo, and Shakespeare all tripping out of their minds?

We think there might be two reasons. Unlike stimulants, which have a pretty reliable effect, hallucinogens often have different effects on different people. And also unlike stimulants, it seems you often have to use hallucinogens in just the right way in order to unlock their creative potential. Coffee or cocaine make you more focused and more productive, even more creative, in the moment. But it’s very rare to be able to produce anything while high on psychedelics. 

In an interview in 1960, Aldous Huxley said:

But you see (and this is the most significant thing about the experience), during the experience you’re really not interested in doing anything practical — even writing lyric poetry. If you were having a love affair with a woman, would you be interested in writing about it? Of course not. And during the experience you’re not particularly in words, because the experience transcends words and is quite inexpressible in terms of words. So the whole notion of conceptualizing what is happening seems very silly. After the event, it seems to me quite possible that it might be of great assistance: people would see the universe around them in a very different way and would be inspired, possibly, to write about it.

The same insight was discovered by the Beatles. “We found out very early,” said Ringo Starr, “that if you play it stoned or derelict in any way, it was really shitty music, so we would have the experiences and then bring that into the music later.”

LSD helped Doug Englebart come up with the idea of the computer mouse, but he had the idea when he was down — the only thing he invented while actively tripping seems to have been a potty training tool.

Even CNN Business, the most unlikely of sources, says: “The last thing [a programmer should do] is take LSD and then code. It’s more subtle: ‘if you have issues in your life or anything, you’re going to think about them [while high], and think about them in a different perspective.’”

So much, so usual, right? “Drugs help you be creative” — you’ve heard this one before. By itself, it’s not very original as a thesis.


… and what can we say, but that science and the economy never recovered? 

The 1970 Controlled Substances Act invented five “schedules” or categories for regulating drugs. The most extreme level of regulation was Schedule I, for drugs that the feds decided had high potential for abuse, no accepted medical uses, and that were “not safe to use, even under medical supervision”. Into Schedule I went LSD, marijuana, mescaline, psilocybin, and many others. 

The next level of regulation was Schedule II, for drugs that the feds felt also had high potential for abuse, limited medical uses, and high risk of addiction. Into Schedule II went cocaine and amphetamines. 

Less exciting (for the most part) drugs went into Schedules III, IV, and V. 

Leaving out caffeine and alcohol was the only thing that spared us from total economic collapse. Small amounts of progress still trickle through; drugs continue to inspire humanity. This mostly happens with LSD, it seems, probably because the potential of that drug has not been as exhausted as the potential of cocaine and coffee. 

Steve Jobs famously took LSD in the early 70’s, just after the crackdown was revving up. “Taking LSD was a profound experience, one of the most important things in my life,” he said. “LSD shows you that there’s another side to the coin, and you can’t remember it when it wears off, but you know it. It reinforced my sense of what was important — creating great things instead of making money, putting things back into the stream of history and of human consciousness as much as I could.” 

Bill Gates has been more coy about his relationship with acid, but when an interviewer for Playboy asked him, “ever take LSD?” he pretty much admitted it. “My errant youth ended a long time ago,” he said in response to the question. “There were things I did under the age of 25 that I ended up not doing subsequently.”

So it seems like LSD had a small role in the lead-up to both Apple and Microsoft. These aren’t just two large companies — these are the two largest publicly-traded companies in the world. Apple is so big it accounts for almost 10% of the GDP of the United States (!!!), and about 7% of the value of the S&P 500. That is very big.

Economic growth is not objectively good by itself. But part of the question here is, “what happened to economic growth around 1970?” When the companies in the global #1 and #2 positions were both founded by people who used LSD, it makes you want to pay attention. It makes you wonder what Jeff Bezos, Larry Page, and Sergey Brin might have tried (though it might not be LSD).

It isn’t just the guys at the top, of course. In 2006, Cisco engineer Kevin Herbert told WIRED magazine that he “solved his toughest technical problems while tripping to drum solos by the Grateful Dead.” According to WIRED, Herbert had enough influence at Cisco that he was able to keep them from drug testing their employees. “When I’m on LSD and hearing something that’s pure rhythm,” says Herbert, “it takes me to another world and into another brain state where I’ve stopped thinking and started knowing.” We’re not sure where he is now, but he was still giving interviews advocating for LSD in 2008.

This is all business, but the impacts are not strictly economic. The big scientific breakthrough made on LSD after the drugs shutdown of 1970 is perhaps the most important one of all, Kary Mullis’s invention of polymerase chain reaction (PCR) in 1983.

PCR is basically the foundational method of all modern biochemistry/biomedicine. The New York Times called it, “highly original and significant, virtually dividing biology into the two epochs of before PCR and after PCR.” The scientific community agrees, and Mullis was awarded the Nobel Prize in Chemistry in 1993 for his invention, only seven years after he originally demonstrated the procedure.

Everyone knew that Mullis was big into psychedelics. “I knew he was a good chemist because he’d been synthesizing hallucinogenic drugs at Berkeley,” said one of his colleagues. And Mullis himself makes it pretty clear that LSD deserves a lot of the credit for his discovery. “Would I have invented PCR if I hadn’t taken LSD? I seriously doubt it,” said Mullis. “I could sit on a DNA molecule and watch the polymers go by. I learnt that partly on psychedelic drugs.” If this is even partially true, most progress in bioscience in the past 40 years was made possible by LSD. It may also have inspired Jurassic Park

(We also want to mention that Mullis was really weird. In addition to being a psychology and sociology denialist, HIV/AIDS denialist, and global warming denialist, he also claims he was visited by a fluorescent “standard extraterrestrial raccoon”, which spoke to him and called him “doctor”. Maybe this is because the first time he took acid, he took a dose of 1,000 micrograms, four times Hofmann’s original monster dose of 250 micrograms and about 10-20 times a normal dose. It really is possible to take too much LSD.)

Drugs continue to influence culture as well, of course, but none of those impacts seem to be as big as the Beatles. Michael Cera is a good actor, but we don’t know if his taking mescaline on-camera for the film Crystal Fairy & the Magical Cactus counts as a major discovery. We do appreciate that they included a crab, however. 


Some accounts of scientific progress suggest that it happens based on foundational technologies, sometimes called “General Purpose Technologies”. For example, Tyler Cowen and Ben Southwood say: 

A General Purpose Technology (GPT), quite simply, is a technological breakthrough that many other subsequent breakthroughs can build upon. So for instance one perspective sees “fossil fuels,” or perhaps “fossil fuels plus powerful machines,” as the core breakthroughs behind the Industrial Revolution. Earlier GPTs may have been language, fire, mathematics, and the printing press. Following the introduction of a GPT, there may be a period of radical growth and further additional innovations, as for instance fossil fuels lead to electrification, the automobile, radio and television, and so on. After some point, however, the potential novel applications of the new GPT may decline, and growth rates may decline too. After America electrified virtually all of the nation, for instance, the next advance in heating and lighting probably won’t be as significant. Airplanes were a big advance, but over the last several decades commercial airliners have not been improving very much.

… [An] alternate perspective sees general technological improvement, even in such minor ways as ‘tinkering’, as more fundamental to the Industrial Revolution – and progress since then – as more important than any individual ‘general purpose’ breakthroughs. Or, if you like, the General Purpose Technology was not coal, but innovation itself.

So the foundational technologies driving innovation can be either literal technologies, new techniques and discoveries, or even perspectives like “innovation.”

When we cut off the supply and discovery of new drugs, it’s like outlawing the electric motor or the idea of a randomized controlled trial. Without drugs, modern people have stopped making scientific and economic progress. It’s not a dead stop, more like an awful crawl. You can get partway there by mixing redbull, alcohol, and sleep deprivation, but that only gets you so far.

There have been a few discoveries since 1970. But when we do develop new drugs, they get memory-holed. MDMA was originally discovered in 1912, but it didn’t start being used recreationally until about the mid-1970s. Because of this, it originally escaped the attention of the DEA, and for a while it was still legal. By 1985, the DEA made sure it was criminalized. 

Of course, people do still do drugs. But the question is who can do drugs, and who has access to them. When coffee was introduced, any student or lowlife in London could get a cup. Cocaine was more expensive, but doctors seem to have had relatively easy access, and Vin Mariani made the substance available to the masses. LSD has always been pretty cheap, and otherwise broke grad students seem to have had no trouble getting their hands on literally mindbending amounts. For a while, the CIA was paying people to take it!

Now that drugs are illegal, only a small percentage of the population really has reliable access to them — the rich and powerful. This is a problem because drugs only seem to unlock a great creative potential in a small number of people. “I don’t think there is any generalization one can make on this,” said Aldous Huxley. “Experience has shown that there’s an enormous variation in the way people respond to lysergic acid. Some people probably could get direct aesthetic inspiration for painting or poetry out of it. Others I don’t think could.” If we want drugs to help drive our economy and our scientific discovery, we need to make them widely available to everyone, so anyone who wants to can give them a try.

Not everyone needs drugs to have great breakthroughs. “I do not do drugs,” said Salvador Dalí, “I am drugs.” (Though Freud was one of his major influences, so drugs were in his lineage nonetheless.) Einstein doesn’t seem to have done drugs either, but like Dalí, he probably was drugs. 

But right now, we are losing the talent of people in whom drugs would unlock genius. A small number are still rich enough and privileged enough to both take drugs and get away with it. Anyone who has that potential, but who is currently too poor or too marginalized, will never get access to the drugs they need to change the world. Even the rich and well-connected may not be able to get the amount of drugs they need, or get them often enough, to finish their great works. Not everyone is Kary Mullis, able to synthesize their own LSD. Who knows what discoveries we have missed over the last 50 years.

We’ve heard a lot of moral and social arguments for legalizing drugs. Where are the scientific and economic arguments? Drugs are linked with great scientific productivity. Genome sequencing is the last big thing to happen in science, and it happened courtesy of LSD.

Drugs are also an enormous market. Commodity trading in drugs was so important to the origin of modern investing that today the ceiling of the New York Stock Exchange is decorated with gold tobacco leaves. Right now the markets for illegal drugs are not only unregulated, they’re untaxed. They’re probably immensely inefficient as well. We can more or less guarantee that your new cocawine startup will have a hard time getting VC backing. 

“It’s very hard for a small person to go into the drug importing business because our interdiction efforts essentially make it enormously costly,” said conservative economist Milton Friedman in 1991. “So, the only people who can survive in that business are these large Medellin cartel kind of people who have enough money so they can have fleets of airplanes, so they can have sophisticated methods, and so on. In addition to which, by keeping goods out and by arresting, let’s say, local marijuana growers, the government keeps the price of these products high. What more could a monopolist want? He’s got a government who makes it very hard for all his competitors and who keeps the price of his products high. It’s absolutely heaven.”

We’ll also note that America’s legal system is infamously slow and backed up. It’s easy to imagine that this is because the legal system is choking itself, trying to swallow all these drug cases, leaving no room to deal with anything else. In 1965, annual marijuana arrest rates were about 18,000. By 1970 they had increased tenfold, to 180,000. By 2000 the number was about 730,000 annually. As a result, we no longer have a functioning legal system. 

So maybe things began to crawl in 1970, when we began to take the steam out of our engine of progress. The first big shock was the Controlled Substances Act, but it wasn’t the last. 


Above, we quoted economist Tyler Cowen on foundational technologies. “The break point in America is exactly 1973,” he says elsewhere, “and we don’t know why this is the case.” Well, we may not know for sure, but we have a pretty good guess: The Drug Enforcement Administration, or DEA, was founded on July 1, 1973.

Before the DEA, enforcement of drug laws was sort of jumbled. According to the DEA’s own history of the period, “Previous efforts had been fragmented by competing priorities, lack of communication, multiple authority, and limited resources.” Nixon called for “a more coordinated effort,” and a few years later the DEA was born. Now there was a central authority enforcing the new laws, so perhaps it is not surprising that 1973, rather than 1970, was the break point. 

What about other countries? The trends since 1970 are global, not limited to the US. It’s not like the DEA is running around the rest of the world enforcing our drug laws on other countries, right? Well, first of all, the DEA is running around the rest of the world enforcing our drug laws on other countries.

Perfectly normal US law enforcement agents in… Afghanistan

Second, the rest of the world has largely followed the United States in criminalizing recreational drug use. This is regulated by a number of United Nations treaties. As a result of these treaties, most of the drugs that are illegal in the US are also illegal in most members of the United Nations.

Cocaine is illegal in most countries, including Canada, New Zealand, China, India, Japan, and Thailand. In Saudi Arabia, you can be executed for it. In Singapore, importing or exporting many drugs carries a mandatory death sentence.  

Friendly Singapore warning card about the death penalty for drug traffickers!

LSD was made illegal by the 1971 UN Convention on Psychotropic Substances, and it remains illegal in all 184 states that are party to the convention. 

The Netherlands has a reputation for being very drug-friendly, but this is largely undeserved. While they do tolerate some drugs (a policy known as gedoogbeleid), most drugs technically remain illegal. “Soft drugs” like marijuana, hash, and “magic truffles” (NOT shrooms — apparently these are different) are tolerated. Note the exact wording from this government website, though: “Although the sale of soft drugs is a criminal offence, coffee shops selling small quantities of soft drugs will not be prosecuted.” 

“Hard drugs”, including cocaine, magic mushrooms, and LSD are still very much illegal. Even for soft drugs like marijuana, however, you can’t possess more than a small amount for personal use. Producing any amount of any drug — including marijuana! — remains illegal. So even in this notorious drug haven, most drugs are still illegal and heavily restricted.

Any country that broke from this pact and really legalized drugs would see an explosion in their economy, and soon we expect, breakthroughs in their arts and sciences. But the UN wouldn’t like that, and you might wake up to find the DEA burning product in your backyard. So for now, with a small number of exceptions, these substances remain illegal. 


We hear a lot of talk these days about decriminalizing marijuana. This is the right thing to do, but it won’t be enough. Legalizing marijuana is not going to cut it.

Legalizing other drugs is more like it. When asked how he thought America would change if drugs were legalized, Milton Friedman said:

I see America with half the number of prisons, half the number of prisoners, ten thousand fewer homicides a year, inner cities in which there’s a chance for these poor people to live without being afraid for their lives, citizens who might be respectable who are now addicts not being subject to becoming criminals in order to get their drug, being able to get drugs for which they’re sure of the quality. …

I have estimated statistically that the prohibition of drugs produces, on the average, ten thousand homicides a year. It’s a moral problem that the government is going around killing ten thousand people. It’s a moral problem that the government is making into criminals people, who may be doing something you and I don’t approve of, but who are doing something that hurts nobody else. 

Friedman was a conservative’s conservative. He was an advisor to Reagan and to Thatcher. You can hardly get more impeccable conservative credentials than that! But when he looks at drug prohibition, he literally calls it socialism.

Everyone knows that hippies love drugs and want to legalize them. That much is not surprising. What is surprising is that conservatives are so firmly against drugs. It just doesn’t make any sense. Judge Juan Torruella of the First Circuit U.S. Court of Appeals was appointed by Ronald Reagan in 1984. In 1996, he said:

Prohibition’s enforcement has had a devastating impact on the rights of the individual citizen. The control costs are seriously threatening the preservation of values that are central to our form of government. The war on drugs has contributed to the distortion of the Fourth Amendment wholly inconsistent with its basic purposes. …

I detect considerable public apathy regarding the upholding of rights which have been cherished since this land became a constitutional Republic, when it comes to those accused of drug violations. Now I will grant you that people that sell drugs to children and the like are not very nice people, and I do not stand here or anywhere in defense of such heinous conduct. However, we must remember that we do not, and cannot, have one constitution for the good guys and another for the bad ones.

Paul Craig Roberts, an economist who served as Assistant Secretary of the Treasury for Economic Policy under Reagan, said in The Washington Times in 2001:

The conservatives’ war on drugs is an example of good intentions that have had unfortunate consequences. As often happens with noble causes, the end justifies the means, and the means of the drug war are inconsistent with the U.S. Constitution and our civil liberties.

Think about it. In the name of what other cause would conservatives support unconstitutional property confiscations, unconstitutional searches, and Orwellian Big Brother invasions of privacy? …

It is a personal tragedy for a person to ruin his life with alcohol, drugs, gambling or any other vice. But it is a public tragedy when government ruins the lives of millions of its citizens simply because it disapproves of a product they consume.

The “war on drugs” is, in truth, a war on the Constitution, civil liberties, privacy, property, freedom and common sense. It must be stopped.

Legalizing drugs is the right thing to do — from a moral point of view, from an economic point of view, from a scientific point of view. But legalizing drugs won’t be enough. We need new drugs. We need to taste drugs that no one has ever heard of, mysterious new combinations of drugs that no one’s ever tried before. Scientific and economic progress — great discoveries and major companies — comes on the heels of drug discovery. 

Is the Controlled Substances Act really responsible for the general decline since 1970? We’re not sure, but what is clear is that drugs are foundational technologies, like the motor, combustion engine, semiconductor, or the concept of an experiment. New drugs lead to scientific revolutions. Some of those drugs, like coffee, continue to fuel fields like mathematics and computer science, even some hundreds of years later. With apologies to Newton, “If I seem higher than other men, it is because I am standing on the shoulders of giants.”