Tyler has an especially edifying post on resource scarcity. Most interesting point raised:

It’s amazing how much, on this issue, some people resort to what can only be called technical analysis — inferring future price movements from past trends — when they would scoff at that approach in almost any other context.

This is an interesting point, but what it really shows is that there are plenty of markets where technical analysis is very useful. For example, we use technical analysis to predict that Chinese wages will sharply rise during the next decade. We use technical analysis to predict that real estate prices in California will fall during the next year. We use technical analysis to predict that the price level will rise over the next ten years. Etc.

Technical analysis of stocks isn’t wrong because projecting the continuation of past trends is generally wrong. It’s wrong because there is a narrow class of assets where technical analysis does not apply. Technical analysis is least useful when there are:

a. very low costs of storage,
b. very low costs of buying and selling, and
c. roughly constant costs of production during a given time period.

And even in the stock market, technical analysis has not been entirely useless. People who said that tech stocks were overvalued in the late 90s were completely right, probably because the transactions costs of repeated short-selling were too high for most of us.

Tyler’s problem is once again that he spends too much time reading the newspaper. There have been lots of large spikes in commodity markets during the last 150 years. All of them probably seemed like the end of history to the people who lived through them, but none of the spikes lasted. This one won’t last either.

P.S. Will I put my money where my mouth is? Well, I’m not betting in futures markets, because I don’t know how to do what Tyler and Arnold suggest (and I’m not convinced they know how to do it either). But I will make bets about commodity prices ten or more years in the future. For starters, I will bet $100, even odds, that the U.S. price of gas (including taxes) in the first week of January, 2018 will be $3.00 or less in 2008 dollars. Want to take my money, Tyler?

P.S. Tyler Cowen and David Balan have accepted my bet in the comments. Consider our bet on!

P.P.S. At risk of looking like an idiot to readers in 2018, I think the exchange rate alone will win the bet for me.