Life is good & getting better all the time! #3 - Julian Simon would have won his bet with Paul Ehrlich again, of course!

Last Friday, February 8, marked ten year anniversary of the death of natural resources economist, Julian Lincoln Simon. Simon is the author of The Ultimate Resource and The Ultimate Resource II (the most important book you've never read - unless you actually have read it, of course).

George Mason University economist, Don Boudreaux, marks the anniversary of his death with his column titled, Ultimate Scholar.

Broudreaux:

"Simon's most important contribution was to crystallize and explain an insight that even the best economists before him only glimpsed -- namely, that human beings in free societies are "the ultimate resource." Nothing -- not oil, not land, not gold, not microchips, nothing -- is as valuable to the material well-being of people as is human creativity and effort."

Here is Simon's grand idea:

"More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred."

The above is repeated in virtually every chapter of the book, and Simon also points out that this idea should not be an excuse to create our own problems. Alas, government does that anyway.

Again, Broudreaux:

This conclusion is so at odds with conventional wisdom that it is difficult for many people to see its validity. Stanford University's Paul Ehrlich -- author of "The Population Bomb," foretelling disaster from population growth -- found Simon's optimism about population growth to be so absurd that he famously accepted a bet offered by Simon in 1980.
The essence of Simon's position in the bet was that, despite the population growth that was sure to occur during the 1980s, the effective supply of natural resources would increase during this decade because human beings would figure out how to find, extract and use such resources more efficiently.
And the surest measure of this increased supply would be lower inflation-adjusted prices of resources.
Convinced that higher population is a curse, Ehrlich accepted the $1,000 bet. He chose (for Simon gave Ehrlich the choice of which resources to bet on) a bundle of copper, chromium, nickel, tin and tungsten and bet Simon that the real price of this bundle of resources would be higher in 1990 than in 1980.
In 1990 the prices in September of that year were compared to the prices of these resources in September 1980. Simon won convincingly. The real price of each of these five resources had fallen over the course of that decade, indicating that their supplies had grown even though human population had also grown by more than 800 million during that same time.
Julian Simon's legacy is profound. Free people are net producers. No economist has had a greater impact upon my own way of looking at the world than has Julian Simon. After 10 years, I still miss the wisdom and genuine kindness that flowed regularly from this remarkable man.

Economist Mark Perry, writes at the Carpe Diem blog:

"Julian Simon wanted to enter into a second wager, based on either the same commodities, or a different group of commodities, but the terms of a proposed second wager were never agreed upon. Simon died in February 1998. What if the original bet had been extended for another ten-year period, from 1990-2000? Simon would have won again (see chart above), since all of the metals declined in real price except for tungsten, and the average price decline of the 5-commodity group was -19%."

It would have made a great third book...The Ultimate Resource III.