The Legacy of Julian Simon and the Famous Bet with Paul Ehrlich
Many of you may be familiar with the legendary bet that took place in 1980 between Julian Simon and Paul Ehrlich. This bet was a reflection of their contrasting views on the world’s future. Ehrlich, a pessimist, believed that population growth would eventually lead to resource constraints, causing prices of various materials to skyrocket. On the other hand, Simon, an optimist, was confident that technological advancements would enable humans to produce more goods without increasing prices, and possibly even lowering them. Despite acknowledging the possibility of losing the bet, Simon emerged victorious in the end. The bet revolved around the movement of prices of five materials between 1980 and 1990.
I am currently working on a biography of Julian Simon for my Concise Encyclopedia of Economics because I believe he deserves more recognition for his contributions, which I consider more significant than those of some Nobel Prize winners.
Recently, I came across a fascinating new article that sheds more light on the famous bet. Written by Hannah Ritchie, the article titled “Who would have won the Simon-Ehrlich bet over different decades, and what do long-term prices tell us about resource scarcity?” was published on Our World in Data on January 5, 2024.
Ritchie delves into the price movements decade by decade, highlighting significant fluctuations that would have resulted in victories for both Simon and Ehrlich in different periods. However, she emphasizes that both thinkers were more concerned with the long-term outlook, which spans beyond a decade. Predicting the long-term future poses challenges, as one of the bettors may not be present to honor the bet when the time comes. This dilemma was eloquently addressed by Keynes.
Upon analyzing prices from 1900 to 2022, Ritchie reached a compelling conclusion:
The key takeaway is that, over the long run, prices have remained relatively stable. Despite substantial changes since 1900, the prices of the five metals have not seen significant variations. Chromium stands out as an exception, with recent decades showing higher average prices, although prices in 2020 mirrored those from 1900.
Ritchie further elaborates:
Remarkably, this stability in prices has persisted despite a substantial increase in global production of these materials. The chart below illustrates the surge in global production of each of the five materials since 1900.
Today, the world produces 40 times more copper annually and 250 times more nickel than it did in 1900.
The substantial increase in production alongside stable prices challenges Ehrlich’s prediction of imminent resource scarcity, aligning more closely with Simon’s optimistic perspective.
It is worth noting that in 1997, I proposed a version of the Simon/Ehrlich bet to Paul Krugman, but unfortunately, he did not respond.
The accompanying image features Julian Simon, a visionary whose insights continue to resonate in today’s world.
