Many of you have probably read about the famous bet in 1980 between Julian Simon and Paul Ehrlich. I wrote about it here. The bet was based on their underlying views of the world. Ehrlich, the pessimist, thought population growth would run up against resource constraints, driving the prices of various materials higher. Simon, the optimist, thought that humans would advance technology so that more goods could be produced without increasing prices and maybe even dropping them. Simon, by the way, always admitted that it was a bet he could lose. The bet was about the movement of prices of 5 materials between 1980 and 1990.
He won.
I’m writing a biography of Julian Simon for my Concise Encyclopedia of Economics because I think more people should know about him and that he was more important than some Nobel Prize winners.
As I’ve been writing, I’ve been paying more attention to the literature on the bet. It turns out that there’s a new article and the article is illuminating.
It’s Hannah Ritchie, “Who would have won the Simon-Ehrlich bet over different decades, and what do long-term prices tell us about resource scarcity?” Our World in Data, January 5, 2024.
Ritchie goes decade by decade, pointing out that within a decade there were often big swings in prices so that in some decades Simon would have won a similar bet and in other decades Ehrlich would have won.
But, she points out, Simon especially and Ehrlich somewhat were concerned about the long run and 10 years is hardly the long run. The problem, of course, is that it’s hard to make bets about the long run because at least one of the bettors might not be around to pay up or receive the winnings. Keynes had something to say about that.
So Ritchie looks at prices from 1900 to 2022 and concludes:
The key takeaway for me is that, over the long run, prices didn’t change dramatically. A lot has changed since 1900, but the prices of the five metals are, surprisingly, not much different from what they were in 1900. Chromium is, perhaps, the one exception where average prices in the last few decades have been higher than they were in the early 20th century (although prices in 2020 were exactly the same as they were in 1900).
She then writes:
Crucially, this is despite the fact that the world produces much more of these materials. The chart below shows the change in global production of each of the five materials since 1900.
Today, the world produces 40 times as much copper annually and 250 times as much nickel as it did in 1900.
The fact that we produce far more materials than we did in the past, yet prices have barely changed, suggests that contrary to Ehrlich’s prediction, we’re not close to running out of these materials any time soon. That is what brings me closer to Simon’s worldview.
By the way, I offered Paul Krugman a version of the Simon/Ehrlich bet in 1997. He didn’t respond.
The pic is of Julian Simon.
READER COMMENTS
robc
Jan 8 2025 at 6:00pm
This is why I like to say that we never left the gold standard.
While there are lots of jiggles, metal resource are pretty constant long term. In terms of gold or silver or copper or chromium, things cost the same as they always have.
I am not some kind of goldbug, I would totally be fine with the dollar being on some sort of mixed-metal standard. Maybe the 5 from the bet plus gold, silver, platinum, palladium. Then one of them going wonky has less effect on the value of the dollar.
Jon Murphy
Jan 9 2025 at 8:38am
Pierre Desrochers, Vincent Geloso, and Joanna Szurmak also have a long, 2-part paper on the bet (link to both parts here). It’s been a while since I have read it, but my memory is they found a similar outcome. In the long run and looking at indicators more relevant to Ehrlich’s claims, Simon is vindicated.
David Henderson
Jan 9 2025 at 10:53am
Thanks. I’ll check it out.
Classical Liberal
Jan 9 2025 at 9:18am
It’s a good thing for you that he didn’t. Over the 1997-2007 period you would have gotten crushed!!! 🙂
David Henderson
Jan 9 2025 at 6:16pm
It would have depended on what Paul chose as the items. But if oil had been one of them, you’re probably right.
Alan Goldhammer
Jan 9 2025 at 1:23pm
I’m old enough to have lived during a period when regular gas was about 20 cents a gallon. I also remember the first OPEC oil crisis along with cries we, the US, was running out of oil. While oil prices are set via international markets and the oil countries of the Middle East will likely be low cost producers going forward, the US has done quite well since the gloom and doom days of the 1970s. Technology will continue to advance, and novel ways will be discovered to produce the goods and services that society needs.
I resigned my membership in ‘The Club of Rome’ some years ago.
John David Galt
Jan 9 2025 at 6:39pm
The great danger now is that the WEF’s “Great Reset” will occur, leading to control of most resources by either vastly expanded states or their NGO counterparts who will order a stop, or at least dramatic decreases, in most kinds of production. If I made one of these bets today I would want an escape clause should such a takeover occur.
I would also be very interested in strategies to prevent it.
Felix
Jan 9 2025 at 8:15pm
I saw some post, backed by some figures which meant little to me, that the cost in gold to outfit a Roman soldier was surprisingly close to outfitting a modern soldier. I believe it included training from raw recruit.
Mike Burnson
Jan 10 2025 at 1:26pm
It seems to me that very important details are missing from this price-only analysis. Price-only is too narrow to capture the whole picture.
1) There is no apparent linkage to global incomes during this period. Standards of living globally have improved immensely, such that the per capita costs of each metal are far less as a percentage of income. In this regard, prices have plummeted, favoring Simon’s perspective. That is, while prices have increased nominally, affordability has improved perhaps fifty-fold.
2) A major factor in increasing prices is government regulation, which exploded in the US due to EPA regulation. Some of this was reasonable – industry itself had demanded reasonable regulations twenty years ahead of the formation of the EPA. Much of regulation, however, fails any sort of rational cost-benefit analysis. The glaringly obvious high-cost/zero-benefit example is the “climate change” fraud (human activity is 0.3% of so-called greenhouse gases). Artificial demand and restricted supply due to government is a primary factor in commodity pricing.
3) The nature of demand has changed greatly. Chromium and nickel demands have increased from a time when stainless steel didn’t exist. Electronics have increased demand for tin and precious metals. HVAC has increased demand for copper. Demand has increased faster than supply, and increases in wealth have rendered any such increases insignificant.