Many of you have probably read about the famous 1980 bet between Julian Simon and Paul Ehrlich. I wrote about it here. The bet was based on their underlying view of the world. Ehrlich, the pessimist, thought that population growth would encounter limited resources, causing the prices of various materials to rise. Simon, the optimist, thought that people would advance technology so that more goods could be produced without raising or perhaps even lowering prices. In fact, Simon always admitted that it was a bet he could lose. The bet was on the price movement of five 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 there is a new article and the article is enlightening.
It’s Hannah Ritchie,’Who would have won the Simon-Ehrlich bet over the decades, and what do long-term prices tell us about resource scarcity?” Our world in dataJanuary 5, 2024.
Going from decade to decade, Ritchie points out that there were often large price swings within a decade, so that in some decades Simon would have won a similar bet and in other decades Ehrlich would have won.
But, she emphasizes, Simon and Ehrlich in particular were somewhat concerned about the long term, and ten years is certainly not the long term. The problem, of course, is that it is difficult to bet long term because at least one of the gamblers may not be around to pay or receive the winnings. Keynes had something to say about that.
So Ritchie looks at prices from 1900 to 2022 and concludes:
The most important thing for me is that prices have not changed dramatically in the long term. Much has changed since 1900, but the prices of the five metals are surprisingly not much different from those in 1900. Chrome is perhaps the only exception where average prices have been higher than before in recent decades. in the early 20th century (although prices in 2020 were exactly the same as in 1900).
She then writes:
Crucially, this is despite the fact that the world is producing a lot of more of these materials. The graph below shows the change in global production of each of the five materials since 1900.
Today the world produces 40 times as much copper and 250 times as much nickel annually as in 1900.
The fact that we are producing many more materials than in the past, while prices have hardly changed, suggests that, contrary to Ehrlich’s prediction, we will not run out of these materials anytime soon. That brings me closer to Simon’s worldview.
Besides, me Paul Krugman offered a version of the Simon/Ehrlich bet from 1997. He didn’t respond.
The photo is by Julian Simon.