What is Cornucopia? Boudreaux vs. DeLong
By David Henderson
Blogger and GMU economics professor Don Boudreaux has challenged blogger and Berkeley economics professor Brad Delong to a bet. Brad has turned down the bet and proposed his own bet, a bet that Don has not accepted. It seems to turn on the issue of what “cornucopia” means.
It started out when DeLong, in his January 2 blog post, nominated Don, Mark Perry, and John Tierney for DeLong’s “Stupidest Man Alive” award. This is a typical DeLong attack. Parenthetically, I don’t think this is a good way to educate, to put it mildly. I haven’t ever tried calling my students or colleagues stupid when I think they make mistakes, but hey, what do I know?
Tierney had written a piece in the New York Times arguing that there was an energy cornucopia and DeLong disputed this. He quoted from a James Hamilton post in which Hamilton pointed out that the increase in world oil supplies in the last few years was more than matched by simply the increase in demand by oil users in China. Of course, if this were the end of the oil story, there would be no basis for expecting oil prices to fall. But given that all DeLong did, other than add a snarky comment or two, was paste in Hamilton’s analysis, you might think that DeLong was simply saying that he didn’t expect oil prices to fall. I’m guessing that’s what Don Boudreaux thought DeLong was saying also. So Boudreaux offered DeLong a version of the famous Simon-Ehrlich bet, with it being DeLong’s option of which five or more raw materials prices to choose. At the time, I thought this offer overly broad, as DeLong was discussing oil prices, not raw materials prices in general. It would have been reasonable for DeLong to counter with a proposed bet on the future price of oil. If, inflation-adjusted, it is higher in x years, DeLong wins and if it’s lower, Boudreaux wins.
That’s not what DeLong did. Instead, he moved the goal posts. He claimed, in “Betting on an Energy Cornucopia,” that a cornucopia in oil means that the price of oil will fall to $20 a barrel. He gave first-rate analysis to explain why such a fall in price is unlikely but he didn’t give a particularly good basis for thinking that cornucopia means $20 oil. Not that he gave no analysis. He pointed to the post-World War II era when oil prices, adjusted for inflation, were $20 a barrel.
So what is cornucopia? Does it mean that prices will be as low as they were just after World War II? To assess this, let’s go back to an author who wrote a wonderful article in 2000 on cornucopia. In it he wrote:
Comparing the prices charged in the Montgomery Ward catalog with prices today–both expressed as a multiple of the average hourly wage–provides an index of how much our productivity in making the goods consumed back in 1895 has multiplied.
He showed an illuminating table giving the number of hours a worker had to work at the average wage in 1895 and in 2000 to buy a bicycle, a set of the Encyclopedia Britannica, a chair, etc. For all the items he listed but one, the number of hours in 2000 was a fraction of the number in 1895. This seemed, given the title of the author’s paper, to be “Cornucopia.” It seems like a reasonable standard. We’ll never have cornucopia in the literal sense of no scarcity: TANSTAAFL. But it seems reasonable that the number of labor hours required to purchase a barrel of oil will fall. So I propose that Boudreaux and DeLong vote on that. If DeLong accepts, I will bet him also.
Oh, yes, I neglected to say that the author of the excellent article on cornucopia was . . . Brad DeLong.
NOTE: If you wish to comment on this post, pro or con, please follow standard rules of decorum even if you dislike, and have strong grounds to dislike, one particular party in this dispute. Insults are cheap and, unless very clever, show intellectual shallowness.
Update: Thanks to Bob Murphy for pointing out that my link to DeLong’s January 2 post was mistakenly a link to his January 5 post. It’s fixed.