David R. Henderson  

The Gist of Julian Simon

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In a comment on Bryan Caplan's post today, Steve asks:

Could someone please provide a distillation of Simon's work? The link is to his website, where all I can find is a list of published papers.

I gave such a distillation in my tribute to Simon (http://www.davidrhenderson.com/articles/0698_inmemoriamjuliansimon.html) in June 1998, four months after his death. One important thought, which he never claimed as original with him, but that he did more than anyone else to popularize, is that as population grew, resource prices would fall, not rise. As I said in the article:

But Simon saw humans as fundamentally different from animals. He liked to quote the 19th-century American economist Henry George: "Both the jayhawk and the man eat chickens, but the more jayhawks, the fewer chickens, while the more men, the more chickens."

And:

In Scarcity and Growth, a 1963 book financed by Resources for the Future, a Washington, D.C., think tank devoted to the study of natural resources, the economists Harold J. Barnett and Chandler Morse showed that between 1890 and 1957, costs per unit of mineral output declined "rapidly and persistently." This trend, they noted, fundamentally contradicted the Malthusian hypothesis of increased scarcity. Simon referred to Scarcity and Growth as "the great book which was my tutor." Simon made it his mission to popularize the findings of its authors so that people could see an alternative to the views of alarmists like Mr. Ehrlich.

Simon is still famous for his wager with Paul Ehrlich, a wager that he won. I tell the details in http://www.davidrhenderson.com/articles/0698_inmemoriamjuliansimon.html .


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COMMENTS (16 to date)
SydB writes:

To me it's somewhat pathetic when the highlight of a person's career and ideas is a wager. Right winder in particular think they prove something by frequently pointing to that bet. It would be like someone saying the high point of someone's life was a coin flip. It's pretty meaningless all things considered.

RL writes:

There's a saying, SydB: If it's a sure thing, it's not gambling...

Simon knew enough economics to know a sure thing when he saw it. Here's hoping your accomplishments are as great when the time comes...

VH writes:

SydB: If Simon would have lost his wager I bet you'd be singing a less bitter tune.

SydB writes:

I think David Henderson said it best up above, though he said it for a specific issue. Simon as far as I can tell was a popularizer and advertiser. I've not studied him in depth so will always stand corrected, but I tend to think of him in the same vein as George Gilder--proselytizer, not a deep thinker.

Crawdad writes:

SydB,

To me it's totally pathetic that people like Erlich, his wife and hosts of others continue to recieve respect in academic and scientific circles when they have been proven wrong so many times. And it's not meaningless that they have been able to carry out these sham careers while working on the taxpayers' dime.

Marcus writes:

"It would be like someone saying the high point of someone's life was a coin flip." -- SydB

Ehrlich and Simon had too opposing theories on how the world works and they put the two theories to the test: Which theory would better predict the price of commodities 10 years down the road?

Unless you believe commodity prices are entirely random, that is nothing like a coin flip.

floccina writes:

Julian Simon was one of greatest economists of the late 20th century. IMO he deserves more recognition than he gets he was a paradigm breaker.

floccina writes:

SydB most of Simon's writing is available free on the web, you should read some of it.

Steve writes:

Thank you, David!

David R. Henderson writes:

You're welcome, Steve.
As for how to rate Simon, I think, if I'm to use SydB's terms, that he was a deep-thinking proselytizer.

Colin K writes:

In your linked article from 1998, you write,

"To Mr. Krugman, I offer a version of the Simonian bet that I first made to him in the February 1997 Red Herring (see my article "Is There a New Digital Economy of Ideas?"). I will bet him $10,000 that ten years from now, the prices of natural resources generally (he can pick any five) will be lower than they are today."

Glancing at the data from http://www.indexmundi.com/commodities/ for 6/98-6/08 prices, I get:

Crude Oil: 12.48 131.52
Maize: 101 287
Rubber: 31 147
Copper: 1656 8292
Tin: 5967 22,133

To control for USD inflation, I recalculated these as ratios to the average 98/08 prices of gold:

Crude Oil: .042 .150
Maize: .343 .329
Rubber: .105 .168
Copper: 5.62 9.51
Tin: 20.3 25.4

Granted, 1998-2008 is possibly the worst timeframe you could have picked, so I tried 1995-2005, which were possibly the best years for your side of the bet:

Crude Oil: .045 .113
Maize: .313 .218
Rubber: .182 .148
Copper: 7.78 7.88
Tin: 17.3 17.0

How do you feel about this bet and what it means in hindsight?

Bucket of Fried writes:

I noticed in Henderson's article he offered a wager similar to Simon's, but the starting point would have been 1998.

David, did anyone take you up? If not, it would be interesting to see how it would have turned out given the commodity boom of the mid to late aughts. Gold, steel, copper all seemed to increase in value rather rapidly, but that is an observation without any numerical backing. Since the basket of metals was not specified, maybe using Simon's basket would be the fairest.

Floccina writes:

What Simon often pointed out was that he was somewhat lucky on the bet because all his work was really saying that term effective resource use would become more affordable for more people over the long run.

So:

1. Rather than the price of gasoline what is important is how far at a given level of comfort one can go for the compensation one gets from one unit of effort/work. We do not buy gasoline for its own good we buy it move around. NOTE: ICE engines have grow 1% more efficient per year (not to mention hybrids and the fact that diesel has gotten much much cleaner).

2. Even if transportation at a given level of comfort has gotten less affordable for Americans in has gotten far more affordable to people in China and India.

David R. Henderson writes:

Colin K,
Thanks for providing that data. I was pretty sure, when I reread my article, that I would have lost that bet. Krugman would have been $10K richer, which is rounding error on his net worth and I would have been $10K poorer, which is also rounding error, but a bigger error, on mine.
What it means in hindsight is that I was irrationally exuberant or, at least, ignorantly exuberant.
Those are my thoughts. But you asked how I feel. One word: relieved.
Bucket of Fried,
No, fortunately no one took me up on it.
Best,
David

Douglass Holmes writes:

David, thanks for reminding us of Julian Simon. I certainly glad he pulled you out of the street.

David R. Henderson writes:

Douglass,
What a nice thought! Thank you and Happy New Year.
Best,
David

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