Human history is replete with apocalyptists. People who believe that the end of world is nigh and that only complete power, in their hands of course, can save the world.
A famous bet was made in September 1980 that challenged this thinking. In 1980, economist Julian Simon challenged biologist Paul Ehrlich to a bet based on their opposing views on the scarcity of natural resources.
Ehrlich was the author of the 1968 book The Population Bomb, where he warned of overpopulation and resource depletion, predicting dire consequences for humanity in the coming decades. One can easily predict the policy recommendation of Ehrlich to manage human over population.
One of the most important lessons from this bet is the power of markets which, when unbothered by the dead hand of government, can efficiently allocate resources and incentivise conservation.
Soon after Ehrlich’s book was the establishment of the Club of Rome, which in 1972 published The Limits to Growth. This book was based on computer simulations that predicted resource depletion would lead to the end of economic growth and global conflict. Peak oil and all that.
Simon, on the other hand, believed that human ingenuity would lead to technologic innovation and development. And that the market mechanism, not totalitarian government, would result in greater availability of resources and human flourishing. Norman Borlaug and dwarf wheat and all that.
Their bet was whether the inflation-adjusted price of five specific metals would be higher or lower at the end of a ten-year measurement period. The metals were copper, chromium, nickel, tin and tungsten. Simon bet that the prices would fall due to innovation and the price mechanism. Ehrlich predicted they would rise due to scarcity and depletion.
In the end, the inflation adjusted price of ALL five metals decreased. Simon won the bet, and Ehrlich sent him a cheque for the difference in the prices.
One of the most important lessons from this bet is the power of markets which, when unbothered by the dead hand of government, can efficiently allocate resources and incentivise conservation. When prices rise due to resource scarcity, it encourages producers to find alternatives or develop more efficient extraction and production methods.
Resource Depletion v Human Flourishing
More than 50 years after Ehrlich’s book and the Club of Rome, there are significantly more people on the planet than ever, and fewer starving people than ever. Humans have never lived longer and healthier lives. Meanwhile, Paul Ehrlich and his fellow travellers continue to preach that the end is nigh and that every environmental issue is an existential crisis. Ehrlich even once suggested that he “would take even money that England will not exist in the year 2000.”
As H.L. Mencken pithily wrote: “For every complex problem there is an answer that is clear, simple, and wrong.” And it is for this purpose we have governments.
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Dimitri Burshtein is a Principal at Eminency Advisory and a former government policy analyst. He is a contributor to The Australian newspaper, Spectator Australia magazine and various libertarian blogs. Dimitri has also appeared on SkyNews and 2GB radio.