In chapter 1 of The Selfish Reason to Have More Kids, I'm going to spend a little time discussing the largely imaginary problem of increasing resource scarcity. I knew the general pattern from folks like Julian Simon, but I wanted to locate the best recent scholarly articles about long-run commodity prices. Since this is a hot topic today, I thought I'd share what I found.
Main finding: The Grilli-Yang commodity price index, which includes metals, food, and non-food agricultural products, fell by about 0.8% per year in real terms between 1900 and 2003.
Bottom line: Psychologically speaking, it's hard to accept that current commodity price spikes are just a phase. I find it hard to accept myself. But the historical pattern is amazingly strong: In the long-run, commodity prices keep getting cheaper in real terms (and cheaper still compared to real income!).
Further lesson: During the century-plus of secular commodity price decline, there were multiple spikes that probably looked as scary to the people of the past as the current spikes do today. Spikes don't last - but pessimism never dies.
P.S. At lunch today, Tyler tried to convince me that a century-plus of data is pure coincidence. Looking forward, we should ignore the data and believe that arbitrage ensures that commodity prices are a trendless random walk. I think this is crazy - transactions costs and storage costs leave plenty of room for price trends that are not profitable to arbitrage away.