Make your bets in the commodity market any way you want, but never bet against people . Simon’s critics said that due to inflation and monetary instability during the 1970s, commodity prices were at a high point in 1980. They said Simon got lucky. I say, bullshit. And subsequent research backs me up (or rather, backs Simon up). The Cato Institute, a libertarian think tank, has a project called HumanProgress.org. To put the Human Progress’ mission in Cato’s own words: Evidence from individual scholars, academic institutions, and international organizations shows dramatic improvements in human well-being population grew by 800 million and global living standards rose, but the prices of the selected commodities declined anyway. Tin sank 72%. Even copper – during this advent of the “wired” era – went down by 3.5%. In October 1990, Simon got a check in the mail from Ehrlich for $576.07. But the check came with no apology or concession of defeat. Ehrlich picked chromium, copper, nickel, tin, and tungsten. (It’s interesting that, starvation- obsessed as he was, Ehrlich didn’t choose any food commodities.) Between 1980 and 1990, the world’s
In 1981, Simon published his book, The Ultimate Resource , rebutting Ehrlich’s The Population Bomb . (These intellectual arguments move slowly – Ehrlich’s sequel, The Population Explosion , rebutting Simon, was published in 1990.) The thesis of The Ultimate Resource (backed by many facts and much clear thinking) is that there’s no such thing as an exhausted resource. When a resource becomes scarce, its price goes up. The higher price causes people to use the resource more efficiently, find a new way to obtain the resource, or invent a substitute. For example, whale oil was once a valuable natural resource – used for the oil lamps that lit most homes and as the main ingredient in soap. Whale oil was so valuable that whales were hunted almost to extinction. And yet, we never ran out of whale oil. That is, we never noticed that we ran out of whale oil – because cheaper and more useful (and less fishy-smelling) vegetable and petroleum oils were replacing whale oil even before it became scarce. The “ultimate resource” isn’t a thing... It’s the amazing creativity of human beings. Meanwhile, in 1980, Simon and Ehrlich made “The Bet.” Simon proposed that Ehrlich should select $10,000 worth of any five publicly traded commodities that did not have government price controls ($2,000 worth of each). Then after 10 years, they would calculate the price of those commodities in inflation-adjusted dollars. If the price of the commodities rose above $10,000, Simon would pay Ehrlich the difference. If the price fell below $10,000, vice versa.
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January 2019
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