The Simon-Ehrlich bet

I’m back on the population bandwagon today, and I wanted to define a point where economists and ecologists often appear to be talking across each other (and where I disagree with both). The best way to delineate this is by revisiting the Julian Simon-Paul Ehrlich bet.

Simon and Ehrlich entered into a wager in 1980 as to whether five metals would increase or decrease in price over the next ten years. Simon, who believed that the ultimate resource is the human mind, bet that prices would decrease as substitutes and innovation made the goods effectively less scarce. The increased population would provide solutions that more than counteract their increased demand. Ehrlich, the author of The Population Bomb, considered that population growth was outstripping growth in resources and took the other side of the bet.

As history shows, Simon won. I’ve always considered that Ehrlich was poorly advised in taking this bet (and he did seek advice). While fluctuations or temporary pressures may increase prices, the long-term price trend for most resources is down. This may not always be the case – Simon lost a bet on the price of timber – but on average, it’s right. What will oil prices be like over the next five years? I’m not sure, but I guess high. What will the oil price be in 2030? I’m reasonably confident that it will be lower in real terms than it is today.

While Ehrlich should not have entered that bet, I have more sympathy for some of Ehrlich’s other points. For example, in 1995, the San Francisco Chronicle quoted Simon as having said that:

Every measure of material and environmental welfare in the United States and in the world has improved rather than deteriorated. All long-run trends point in exactly the opposite direction from the projections of the doomsayers.

“Every measure in the world”? Following Simon’s statement, Ehrlich and Stephen Schneider sought to make a second bet on 15 environmental indicators, such as carbon dioxide levels, temperature, arable land and sulfur dioxide emissions. Simon’s response was as follows (from Miele, Frank. “Living without limits: an interview with Julian Simon.” Skeptic, vol. 5, no. 1, 1997, p.57):

Let me characterize their offer as follows. I predict, and this is for real, that the average performances in the next Olympics will be better than those in the last Olympics. On average, the performances have gotten better, Olympics to Olympics, for a variety of reasons. What Ehrlich and others says is that they don’t want to bet on athletic performances, they want to bet on the conditions of the track, or the weather, or the officials, or any other such indirect measure.

While Simon’s statement is a step back from the Chronicle quote, it highlights a difference in focus between many economists and ecologists. Simon was primarily concerned with human living conditions. Will human well-being continue to increase despite what is happening to the environment? Simon would point out that the answer is always yes.

But is this to say that the track conditions do not matter? While the performances at the next Olympics will almost certainly be better than the last, good track conditions could make them even better. I don’t expect that climate change, coral reef loss, extinctions or biodiversity destruction will affect the average developed country so much that the average person is poorer in 2050 than they are today (note my use of “average”), but they will be poorer than they could be. Ecosystems provide trillions of dollars in free services. Many people care about and get intrinsic value from these ecosystems. Improving the condition of the track could improve the outcomes that Simon cares about. Do we want to maximise these outcomes, or are we simply happy if they are better?

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