Tuesday, January 11, 2011

Wagering Malthusians Continue to Lose

via Carpe Diem:

(Wikipedia on the original Julian Simon-Paul Ehrlich wager.)


The Finite World of Paul Krugman's Thinking

Paul Krugman claims that the commodity markets are telling us that we're living in an Ehrlich-like finite world of resource scarcitywhere "the rapid growth of emerging economies is placing pressure on limited supplies of raw materials, pushing up their prices."

Don Boudreaux responds:

"It’s not true that vigorous economic growth necessarily makes resources more scarce. In fact, history shows that, because of human ingenuity, the opposite is not only possible but prevalent. Since the dawn of the industrial revolution in the mid-18th century, available supplies of coal, petroleum, iron ore, and most other resources have increased significantly – and, as a result, their real prices have fallen."

#3 A New Bet ?

Don Boudreaux proposes the following wager to Professor DeLong:

"Let’s make a bet very much like the famous bet that Julian Simon and Paul Ehrlich made in September 1980. Because of inflation, I propose that the wager be larger than the Simon-Ehrlich amount. How about $2,500? And I offer to you terms similar to those that Julian offered to Ehrlich. Like Ehrlich, you can choose whichever bundle of five or more raw materials you like, and choose which (professionally respected) means to be employed for adjusting nominal prices for inflation.

The bet will be for a duration of at least ten years, but no longer than 15 years. (You choose.) If I win (fat chance, I know, given the pinto beans I have for brains) you will contribute $2,500 (tax-deductible!) to the Department of Economics at George Mason University. If – er, when – you win, I’ll mail you a check for $2,500. Shall we wager?!"

But I like best how Mark Perry sums it up here:

[T]he bigger Simonesque lesson is clear: the "ultimate resource," i.e. the human mind, human capital, human ingenuity, and human innovation, are infinitely abundant, and will meet, address and overcome any scarcity in natural resources. The bottom line as I understand Julian Simon is this: we'll never run out of the ultimate resource. And that is why limited or finite supplies of natural resources have never, and will never, result in any significant binding constraints or limits on human progress, economic growth, or the continual increases in our standard of living, wealth and abundance.

Julian Simon himself:

"Untruth is the ugliest and most dangerous pollution that humans face today. It is just about the only pollution that cannot somehow be transformed into a product of value.” (Ultimate Resource 2, pg 527)
“The common assertions that resources are growing more scarce, that environmental conditions are worsening and that the poor suffer from economic freedom are the gravest danger to the poor and the environment.” (Ultimate Resource 2, xxxvii)

Or as I summed it up in a previous post on Simon:

The finiteness of any specific physical resource is made irrelevant by the presence of the ultimate resource: human ingenuity unleashed in a free society.



garret seinen said...

Nice post Beth. Julian Simon's thoughts will always resonate with thoughtful people. Consider the shear volume of raw materials that went into making the first computers and televisions compared to today. We now us little bits of metal with some plastic ans some sand instead of many pounds of copper wire and fragile vacuum tubes.

As Mr Simon said 'we are living on a ball of resources 8000 miles thick and nothing disappears. It is all still there for us to use again

The only regrettable thing - Mr Krugman and his ilk don't seem to be a diminishing resource.

HaynesBE said...

Thanks Garret.

You may enjoy this article on Krugman: Krugman’s Posthumous Nobel

garret seinen said...

You are perceptive Beth. i did enjoy Mr Luskin's evaluation. Mr Krugman is the person who took economic training and, because he couldn't sell economic advice, carried a newspaper over the cliff of irrelevance.

As an aside, and I don't know if i can fully express what I'm thinking in a post it note, we seldom consider just how important individuals are in furthering some idea. Be it Ayn Rand or a Paul Krugman they are single individuals and their ideas only go as far as the followers will carry them. In the case of Ayn Rand every step traveled with her ideas makes the task easier. In the case of a Krugman, the ideas become ever more difficult to carry further. Hence each may gain their just reward - Ayn Rand moving mountains and Krugman not even fit to line birdcages.