Julian Simon

Introduction

Simon argued that natural resources are more accurately regarded as infinite rather than finite. Finitude is a concept borrowed from mathematics, Simon noted. If the length of a line is defined by two points, the line is finite. Is it fair to assume that the earth’s boundaries make humanity’s resource line finite? No, said Simon, since that precludes the possibility of using extraterrestrial resources; therefore, the boundaries of the line are difficult to determine.

Early in his career, Simon was pessimistic about the effects of population growth. But then he read Scarcity and Growth, a 1963 book financed by Resources for the Future, a Washington, D.C., think tank. The authors, Harold J. Barnett and Chandler Morse, showed that between 1890 and 1957, costs per unit of mineral output declined “rapidly and persistently.” This trend, they noted, fundamentally contradicted the Malthusian hypothesis [see Thomas Robert Malthus] of increased scarcity. Simon referred to Scarcity and Growth as “the great book which was my tutor.” Simon set out to popularize the authors’ findings.

Simon pointed out that despite humanity’s heavy use of natural resources, known reserves have been increasing. Consider iron. (See Natural Resources.) In 1950 the world’s reserves of iron were estimated at 19 billion metric tons. Over the next 30 years, 11 billion metric tons of iron were smelted from those reserves. Presumably, 19 billion minus 11 billion leaves 8 billion remaining, yet in 1980 known iron reserves totaled 93 billion metric tons. By 2024, reserves of iron were estimated to be 200 billion tons. Simon’s explanation was that predictions of coming scarcity do not take into account the fact that the more minds there are working on an issue, the more progress there is. Technological improvements lead to more discoveries of natural resources and cheaper ways of extracting them.

George Mason University economist Donald Boudreaux summarized Simon’s insight about humanity’s connection to resources. “Usefulness is not an objective and timeless feature ordained by nature for those scarce things that we regard as resources. That is, all things that are resources become resources only after individual human beings creatively figure out how these things can be used in worthwhile ways for human betterment.”1 It is only through people’s endeavors that things (besides, perhaps, water and air) become resources. Thus, Simon concluded, the human mind is the greatest resource of all.

Simon versus the Doomsayers

Many of Simon’s arguments were responses to people he called doomsayers. One such person was Paul Ehrlich, a highly popular and influential ecologist at Stanford University. Ehrlich began his career by studying butterfly populations and later, applying his findings to humans, made dire predictions. “The battle to feed all of humanity is over,” began his bestselling 1968 book The Population Bomb. “In the 1970s and 1980s,” Ehrlich continued, “hundreds of millions of people will starve to death in spite of any crash programs embarked upon now.” In a 1969 article, Ehrlich warned that “Most of the people who are going to die in the greatest cataclysm in the history of man have already been born.”2 In his 1974 book The End of Affluence he prophesied that “Before 1985 mankind will enter a genuine age of scarcity.”3 Notably, this age of scarcity never arrived.

Consider the hundreds of millions of people that Mr. Ehrlich was sure were going to starve in the 1970s. They didn’t. In The Ultimate Resource 2, Simon pointed out that from the early 1960s to the early 1980s in China, where, if population growth caused famine, one would certainly have expected famine, average daily caloric intake increased and the death rate fell. Again, as with his observations on natural resources, Simon was following other economists. Much of his thinking on food and famine was based on the work of agricultural economists Theodore Schultz and D. Gale Johnson, both of the University of Chicago. Schultz had written in 1951 that even as population increases, agricultural productivity improves so rapidly that less and less farmland is needed to feed that population.

Simon saw humans as fundamentally different from butterflies. Humans can increase abundance through trade and the free market. Larger populations confer significant advantages to trade. For example, larger populations provide larger markets to sell in and buy from. Hedging risk becomes easier and large markets allow for more efficient distribution. Simon, as was his wont, cited reputable statistics. According to the U.N. Food and Agricultural Organization (FAO), between 1948 and 1968 worldwide average per-capita food production increased by 28 percent. Between 1968 and 2023, it increased by a further 49 percent. After covering the horrible government-made famines in the Soviet Union in the 1930s and in Mao’s China from 1958 to 1961, Simon wrote that “modern famine will take place only in a society that abolishes individual farmers and puts farms under government ownership and the control of bureaucrats.”4 This, of course, was what Stalin and Mao had done.

Simon often quoted 19th-century economist Henry George’s statement that “Both the jayhawk and the man eat chickens, but the more jayhawks, the fewer chickens, while the more men, the more chickens.” Simon believed that that quote captured the essence of his views on population.

The Famous Bet

Simon dramatized his views with a wager. In 1980 he offered to bet Ehrlich that over the next ten years, natural resources would become cheaper rather than more expensive. Simon reasoned that if natural resources were to become scarcer, their prices should rise. Ehrlich confidently took the bet. “The lure of easy money,” Ehrlich wrote in an academic journal, “can be irresistible.”

Ehrlich, with John Harte and John P. Holdren, two colleagues from the University of California at Berkeley, chose five metals—copper, chrome, nickel, tin, and tungsten—whose prices could be followed over a decade. Simon won. During those ten years, the inflation-adjusted prices of all five minerals fell: copper by 18 percent, chrome by 40 percent, nickel by 3 percent, tin by 72 percent, and tungsten by 57 percent. Ehrlich, whose word of honor was more reliable than his forecast of increasing scarcity, paid up. Ehrlich did not change his view, though, that resources would become scarcer. Instead, he made derogatory remarks about Simon’s mental capacity. A 1994 essay on Simon’s ideas written with Anne Ehrlich, his wife, was titled “Simple Simon Environmental Analysis.” The Ehrlichs wrote that “Simon is the absolute equivalent of the flat-earthers.”

Improving Airline Efficiency

In addition to his tussles with the Ehrlichs, Simon found resistance from commercial airline companies when he suggested that they give incentives to passengers to give up their seats on overbooked flights. Before Simon’s proposal, airlines randomly removed passengers from overbooked flights. Offering incentives to passengers to forgo flights is more efficient, though. Passengers who highly value getting to their destinations on schedule will retain their seats, and passengers who place a lower value on their original schedule will relinquish seats. The short-run costs incurred by the airline in offering the incentives could arguably be outweighed by the benefits of happier customers in the long-term. Another economist, Alfred Kahn, while chairman of the Civil Aeronautics Board, implemented Simon’s idea. Simon responded by sending Kahn a dozen roses. Offering incentives to airline travelers is now common practice.

Julian Simon’s Background

Julian Simon earned his B.A. from Harvard University in experimental psychology in 1953. He earned an M.B.A. in 1959 and his Ph.D. in business economics in 1961, both from the University of Chicago. He started a mail-order business, which he ran from 1961 to 1963, when he began teaching at the University of Illinois in Urbana. From 1983 until his death in 1998 he was a professor at the University of Maryland and a senior fellow at the Cato Institute.

References

1980. Julian Simon. “Resources, Population, Environment: An Oversupply of False Bad News.” Science, Vol. 208, No. 4451. (Jun. 27, 1980), pp. 1431-1437.

1983. Julian Simon. The Ultimate Resource. Princeton University Press.

1989. Julian Simon. The Economic Consequences of Immigration. Blackwell.

1996. Julian Simon. The State of Humanity. Wiley-Blackwell.

1998. Julian Simon. The Ultimate Resource 2. Princeton University Press.

Footnotes

[1] See “The Ultimate Resource,” by Don Boudreaux. Café Hayek, June 8, 2004.

[2] See Paul Erhlich’s “Eco-Catastrophe!,” Ramparts Magazine, September 1969, pp. 24-28.

[3] See Paul Ehrlich’s The End of Affluence (1974), Ballantine Books, p 33.

[4] Julian Simon 1998, p. 93.