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Sock Puppet Economics: The Simon-Ehrlich Wager
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Will the world eventually run out of resources? Or will human innovation and the principle of tradeoffs solve for the fact that a finite amount of resources exist to satisfy an infinite amount of desires?
In 1980, economist Julian Simon challenged biologist Paul Ehrlich, the well-known author of The Population Bomb, to a wager. Ehrlich believed that the world was heading towards overpopulation, which would create disastrous consequences for humanity, such as famine and resource wars. Simon had a more positive perspective, believing that humanity’s innovation would allow it to rise above the natural constraints of finite resources. Humans would steward what they had in a better fashion, discovering new uses for raw materials.
To determine whether or not resource scarcity was impending, the two men placed a bet on the prices of five commodities: copper, chromium, nickel, tin, and tungsten. If, after a decade, the inflation-adjusted prices were higher, Ehrlich would win because they would evidence the growing constraints humanity faced. However, if the inflation-adjusted prices dropped, Simon would win because it would show that humanity’s innovation solved for growing resource scarcity, finding ways to consume less and/or substituting into other goods.
When it came time to settle the bet Simon won, a fact that many free-market economists use to argue that free markets “solve” the problem of resource scarcity. However, there have been suggestions that if the bet had taken place during a different ten-year period, such as in the 1990s, Ehrlich would have been the winner.
Was the famous wager determined by timing (versus economics)? Or do Simon and/or Ehrlich have an enduring point to be made?
In 1980, economist Julian Simon challenged biologist Paul Ehrlich, the well-known author of The Population Bomb, to a wager. Ehrlich believed that the world was heading towards overpopulation, which would create disastrous consequences for humanity, such as famine and resource wars. Simon had a more positive perspective, believing that humanity’s innovation would allow it to rise above the natural constraints of finite resources. Humans would steward what they had in a better fashion, discovering new uses for raw materials.
To determine whether or not resource scarcity was impending, the two men placed a bet on the prices of five commodities: copper, chromium, nickel, tin, and tungsten. If, after a decade, the inflation-adjusted prices were higher, Ehrlich would win because they would evidence the growing constraints humanity faced. However, if the inflation-adjusted prices dropped, Simon would win because it would show that humanity’s innovation solved for growing resource scarcity, finding ways to consume less and/or substituting into other goods.
When it came time to settle the bet Simon won, a fact that many free-market economists use to argue that free markets “solve” the problem of resource scarcity. However, there have been suggestions that if the bet had taken place during a different ten-year period, such as in the 1990s, Ehrlich would have been the winner.
Was the famous wager determined by timing (versus economics)? Or do Simon and/or Ehrlich have an enduring point to be made?
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