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.
