env eco

The Green Blog: An Environmental Bet

Sep 11, 2013 • Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Environment, Financial Markets, Innovation, Macroeconomic Measurement, Regulation, Thinking Economically • 295 Views    1 Comment

33 years ago, an environmentalist and a economist made a $1000 bet. In The Population Bomb (1968), Paul Ehrlich predicted global ecological calamity. Disagreeing, Julian Simon said that free markets would solve environmental problems.

The bet involved the prices of five commodities –chromium, copper, nickel, tin and tungsten. Ehrlich said prices would rise during the next ten years because of shortages. With population growing and resource abuse, prices had to spike. Simon said, “No.” He believed that whenever a shortage appeared imminent, capitalist ingenuity would kick in. New technology and a switch to substitutes would keep a lid on prices. The market would take care of it.

Simon won. While world population had risen from 4.5 to 5.3 billion, adjusting for inflation, the average prices of the 5 minerals declined by 50%. In 1990, Paul Ehrlich mailed Julian Simon  a check for $576.07, the total decrease in price.

But, it is not over until it is over…

A TED speaker, Paul Kedrosky, returned to “The Most Important Bet in History” to see how each would have fared more recently. The results? It all depends on the starting year. With starting dates during the 1980s, Simon wins most of the time. Using starting dates during the 1990s, then Ehrlich wins. Between 1900 and 2008, using simulations for every 10 year permutation, Ehrlich would have won 63% of the time (p.187, the Big Bet).

In 2011, The Economist looked at a history of metal prices:

From The Economist September 2011

From The Economist September 2011

For us though, I prefer Yale historian Paul Sabin’s conclusion in his book, The Bet. “Neither biology nor economics can substitute for the deeper ethical question: What kind of world do we desire?”

Sources and resources: Engaging, Paul Sabin’s The Bet is a good read that goes beyond the whole story of the Simon/Ehrlich bet. He even tells us Jimmy Carter kept the White House so warm during the summer that National Security Advisor  Zbigniew Brzezinski used a lamp near his thermostat so the heat would trick his thermostat into starting the AC. Insightfully, Sabin concludes with each man’s contribution to a constructive future debate. For a discussion of the bet in a more academic framework, you will enjoy this NBER paper. And here is Paul Kedrosky’s summary of the debate.

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  • stevenearlsalmony

    The Ehrlich-Simon bet

    The gambling that occurred between a scientist and an economist was idiotic. Even though the scientist has been proven to be correct in many respects, the scientist lost the bet. Perversions of science such as those by economists have served to distract, mislead and set back the science of human population dynamics and overpopulation for too long. Similarly, a widely shared and consensually validated, preter-natural demographic transition theory (DTT) promulgated by demographers served a common purpose. This theoretical perversion of science ignored, avoided and denied apparently unforeseen and admittedly unwelcome research related to the diminishing prospects for future human wellbeing and environmental health on a planet with the size, composition and ecology of a finite and frangible planet like Earth.

    On our watch many too many people listen to and act upon what the economists and demographers say because their pseudoscience is politically convenient, economically expedient, legally rationalized, socially accepted, religiously tolerated and culturally syntonic. Their fabrications and optical delusions have acquired the imprimatur of science at least in large part because too many people with scientific knowledge refuse to stand up and speak out in affirmation of the best available scientific evidence. Too many scientists will not speak truth, according to the lights and science they possess, to those with the great wealth and power.

    All that is actively and wrongheadedly being done by those who are few in number to massively extirpate global biodiversity, to recklessly dissipate finite resources, to relentlessly degrade the environment and to threaten the future of children everywhere is bad enough. The elective mutism perpetrated by so many knowledgeable people is even worse. The masters of the universe along with their sycophants and minions, all of whom act as if “greed is good” and money rules the world, are but a few; those with ‘feet of clay’ are many. Thank you to everyone here and elsewhere with feet of clay for speaking out as if you are a million voices. By so doing we educate one another to what science discloses to all of us about the placement of the human species within the order of living things on Earth and the way the blessed world we inhabit works. Otherwise, the silence of so many and the greedmongering of so few kill the world.

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