When writing my previous post on my own experience with stakes in betting, I couldn’t find a bet that I had thought I offered. Now I have. In a Red Herring article in June 1998, at http://www.davidrhenderson.com/articles/0698_inmemoriamjuliansimon.html, “In Memoriam: Julian Simon,” after having detailed Simon’s $100,000 bet that no one was willing to take and the various bits of evidence for Simon’s conclusions, I wrote the following:
You might think, with evidence like this, that virtually all economists would agree with Simon. Yet even so sensible an economist as Paul Krugman at the Massachusetts Institute of Technology wrote, in a 1996 article in the New York Times, that the price of minerals and oil will rise as expanding population pushes against finite resources.
To Mr. Krugman, I offer a version of the Simonian bet that I first made to him in the February 1997 Red Herring (see my article at http://www.davidrhenderson.com/articles/0297_isthereanewdigital.html “Is There a New Digital Economy of Ideas?”). I will bet him $10,000 that ten years from now, the prices of natural resources generally (he can pick any five) will be lower than they are today.
READER COMMENTS
Faré
Nov 26 2010 at 1:06pm
Price expressed in what currency?
Because with looming hyperinflation of the USD, you might be wrong just because you picked the wrong currency…
Brett
Nov 26 2010 at 1:09pm
One thing to quibble with-
We’ve relied on enhanced technological methods to increase reserves of natural resources, but how long can this continue?
Take oil, for example. As the traditional reserves have declined, there have been new additional reserves popping up in the form of deep off-shore wells, “heavy oil” like in Canada’s Tar Sands and Venezuela’s Orinoco belt, and greater extraction from shale oil.
The problem is that these sources are all horribly expensive in terms of capital and operating costs to extract from, and they require a higher price of oil to make them profitable. It’s not like there’s an easy technological path for them to become cheaper, either – in the case of shale oil, for example, you can’t really get around the use of massive amounts of heat in order to make it.
David R. Henderson
Nov 26 2010 at 2:16pm
@Brett,
Good point, but, as Julian liked to say, “That’s why it’s a bet.”
@Fare,
Check the dates. There was no large inflation between 1998 and 2008.
Henry
Nov 26 2010 at 2:33pm
@Faré
Then again, if hyperinflation stroke, $10,000 might not have been a high price to lose.
marmico
Nov 26 2010 at 3:54pm
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Charlie
Nov 26 2010 at 5:21pm
Krugman should have taken the bet in 1996. He would have won.
Hyena
Nov 27 2010 at 1:36am
I think Simon got lucky and the world unlucky. He would have lost handily had there been no socialist movement or had Hitler managed to dismantle the Soviet Union. There would have likely been much more industrialization in the third world and far fewer states relying primarily on mineral extraction. We’ve seen that reforms in China and India have steadily created much higher demand, and prices, for commodities.
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