Julian Simon

Last updated
Julian Lincoln Simon
Julian Simon.gif
Born(1932-02-12)February 12, 1932
DiedFebruary 8, 1998(1998-02-08) (aged 65)
NationalityAmerican
Institution University of Maryland
Cato Institute
University of Illinois at Urbana-Champaign
Field Environmental economics
School or
tradition
Chicago School of Economics
Influences David Hume, Edward Gibbon, Voltaire, Jean-Jacques Rousseau, Adam Smith, Friedrich Hayek, William James

Julian Lincoln Simon (February 12, 1932 – February 8, 1998) [1] was an American professor of business administration at the University of Maryland and a Senior Fellow at the Cato Institute at the time of his death, after previously serving as a longtime economics and business professor at the University of Illinois at Urbana-Champaign. [2]

Contents

Simon wrote many books and articles, mostly on economic subjects. He is best known for his work on population, natural resources, and immigration. Simon is sometimes associated with cornucopian views, but he denied the label. [3] Rather than focus on the abundance of nature, Simon focused lasting economic benefits from continuous population growth, even despite limited or finite physical resources, empowered primarily by human ingenuity which would create substitutes, and technological progress.

He is also known for the famous Simon–Ehrlich wager, a bet he made with ecologist Paul R. Ehrlich. Ehrlich bet that the prices for five metals would increase over a decade, while Simon took the opposite stance. Simon won the bet, as the prices for the metals sharply declined during that decade.

Theory

Simon's 1981 book The Ultimate Resource is a criticism of what was then the conventional wisdom on resource scarcity, published within the context of the cultural background created by the best-selling and highly influential book The Population Bomb in 1968 by Paul R. Ehrlich and The Limits to Growth analysis published in 1972. The Ultimate Resource challenged the conventional wisdom on population growth, raw-material scarcity and resource consumption. Simon argues that our notions of increasing resource-scarcity ignore the long-term declines in wage-adjusted raw material prices. Viewed economically, he argues, increasing wealth and technology make more resources available; although supplies may be limited physically they may be regarded as economically indefinite as old resources are recycled and new alternatives are assumed to be developed by the market. Simon challenged the notion of an impending Malthusian catastrophe—that an increase in population has negative economic consequences; that population is a drain on natural resources; and that we stand at risk of running out of resources through over-consumption. Simon argues that population is the solution to resource scarcities and environmental problems, since people and markets innovate. His ideas were praised by Nobel Laureate economists Friedrich Hayek [4] and Milton Friedman, the latter in a 1998 foreword to The Ultimate Resource II, but they have also attracted critics such as Paul R. Ehrlich, Albert Allen Bartlett and Herman Daly.

Simon examined different raw materials, especially metals and their prices in historical times. He assumed that besides temporary shortfalls, in the long run prices for raw materials remain at similar levels or even decrease. E.g. aluminium was never as expensive as before 1886 and steel used for medieval armor carried a much higher price tag in current dollars than any modern parallel. A recent discussion of commodity index long-term trends supported his positions. [5]

His 1984 book The Resourceful Earth (co-edited by Herman Kahn), is a similar criticism of the conventional wisdom on population growth and resource consumption and a direct response to the Global 2000 report. For example, it predicted that "There is no compelling reason to believe that world oil prices will rise in the coming decades. In fact, prices may well fall below current levels". Indeed, oil prices trended downward for nearly the next 2 decades, before rising above 1984 levels in about 2003 or 2004. Oil prices have subsequently risen and fallen, and risen again. In 2008, the price of crude oil reached $100 per barrel, a level last attained in the 1860s (inflation adjusted). Later in 2008, the price again sharply fell, to a low of about $40, before rising again to a high around $125. Since mid-2011, prices were slowly trending downward until the middle of 2014, but falling dramatically until the end of 2015 to ca. $30. Since then prices were relatively stable (below $50). [6]

Simon was skeptical, in 1994, of claims that human activity caused global environmental damage, notably in relation to CFCs, ozone depletion and climate change, the latter primarily because of the perceived rapid switch from fears of global cooling and a new ice age (in the mid-1970s) to the later fears of global warming. [7]

Simon also listed numerous claims about alleged environmental damage and health dangers from pollution as "definitely disproved". These included claims about lead pollution & IQ, DDT, PCBs, malathion, Agent Orange, asbestos, and the chemical contamination at Love Canal. [8] He dismissed such concerns as a mere "value judgement."

But also, to a startling degree, the decision about whether the overall effect of a child or migrant is positive or negative depends on the values of whoever is making the judgment – your preference to spend a dollar now rather than to wait for a dollar-plus-something in twenty or thirty years, your preferences for having more or fewer wild animals alive as opposed to more or fewer human beings alive, and so on. [9]

Influence

Simon was one of the founders of free-market environmentalism. An article entitled "The Doomslayer" [10] profiling Julian Simon in Wired magazine inspired Danish Bjørn Lomborg to write the book The Skeptical Environmentalist .

Simon was also the first to suggest that airlines should provide incentives for travelers to give up their seats on overbooked flights, rather than arbitrarily taking random passengers off the plane (a practice known as "bumping"). [4] Although the airline industry initially rejected it, his plan was later implemented with resounding success, as recounted by Milton Friedman in the foreword to The Ultimate Resource II. Economist James Heins said in 2009 that the practice had added $100 billion to the United States economy in the last 30 years. [11] Simon gave away his idea to federal de-regulators and never received any personal profit from his solution. [11]

Although not all of Simon's arguments were universally accepted, they contributed to a shift in opinion in the literature on demographic economics from a strongly Malthusian negative view of population growth to a more neutral view.[ not specific enough to verify ][ citation needed ] More recent theoretical developments, based on the ideas of the demographic dividend and demographic window, have contributed to another shift,[ how? ] this time away from the debate viewing population growth as either good or bad.[ citation needed ]

Simon wrote a memoir, A Life Against the Grain, which was published by his wife after his death.

Wagers with rivals

Paul R. Ehrlich – first wager

Simon challenged Paul R. Ehrlich to a wager [12] in 1980 over the price of metals a decade later; Simon had been challenging environmental scientists to the bet for some time. Ehrlich, John Harte, and John Holdren selected a basket of five metals that they thought would rise in price with increasing scarcity and depletion. Simon won the bet, with all five metals dropping in price. [12] [13]

Supporters of Ehrlich's position suggest that much of this price drop came because of an oil spike driving prices up in 1980 and a recession driving prices down in 1990, pointing out that the price of the basket of metals actually rose from 1950 to 1975. They also suggest that Ehrlich did not consider the prices of these metals to be critical indicators, and that Ehrlich took the bet with great reluctance. On the other hand, Ehrlich selected the metals to be used himself, and at the time of the bet called it an "astonishing offer" that he was accepting "before other greedy people jump in."

The total supply in three of these metals (chromium, copper and nickel) increased during this time. Prices also declined for reasons specific to each of the five:

In all of these cases, better technology allowed for either more efficient use of existing resources, or substitution with a more abundant and less expensive resource, as Simon predicted.

Paul R. Ehrlich – proposed second wager

In 1995, Simon issued a challenge for a second bet. Ehrlich declined, and proposed instead that they bet on a metric for human welfare. Ehrlich offered Simon a set of 15 metrics over 10 years, victor to be determined by scientists chosen by the president of the National Academy of Sciences in 2005. There was no meeting of minds, because Simon felt that too many of the metric's measured attributes of the world were not directly related to human welfare, e.g. the amount of nitrous oxide in the atmosphere. [14] For such indirect, supposedly bad indicators to be considered "bad", they would ultimately have to have some measurable detrimental effect on actual human welfare. Ehrlich refused to leave out measures considered by Simon to be immaterial.

Simon summarized the bet with the following analogy:

Let me characterize their [Ehrlich and Schneider's] offer as follows. I predict, and this is for real, that the average performances in the next Olympics will be better than those in the last Olympics. On average, the performances have gotten better, Olympics to Olympics, for a variety of reasons. What Ehrlich and others say is that they don't want to bet on athletic performances, they want to bet on the conditions of the track, or the weather, or the officials, or any other such indirect measure. [15]

David South

The same year as his second challenge to Ehrlich, Simon also began a wager with David South, professor of the Auburn University School of Forestry. The Simon / South wager [16] concerned timber prices. Consistent with his cornucopian analysis of this issue in The Ultimate Resource, Simon wagered that at the end of a five-year term the consumer price of pine timber would have decreased; South wagered that it would increase. Before five years had elapsed, Simon saw that market and extra-market forces were driving up the price of timber, and he paid Professor South $1,000.[ citation needed ] Simon died before the agreed-upon date of the end of the bet, by which time timber prices had risen further.

Simon's reasoning for his early exit out of the bet was due to "the far-reaching quantity and price effects of logging restrictions in the Pacific-northwest." [17] He believed this counted as interference from the U.S. government, which rendered the bet worthless according to his economic principles. Simon's bet only considered the possibility of prices being driven up by Alabama's government; he did not believe anything worthwhile was shown when U.S. logging restrictions drove the prices up.

Main statements and criticism

Jared Diamond in his book Collapse, Albert Bartlett and Garrett Hardin describe Simon as being too optimistic and some of his assumptions being not in line with natural limitations.

We now have in our hands—really, in our libraries—the technology to feed, clothe, and supply energy to an ever-growing population for the next seven billion years. (Simon along The State of Humanity: Steadily Improving 1995 [18] )

Diamond claims that a continued stable growth rate of earth's population would result in extreme over-population long before the suggested time limit. Regarding the attributed population predictions Simon did not specify that he was assuming a fixed growth rate as Diamond, Bartlett and Hardin have done. Simon argued that people do not become poorer as the population expands; increasing numbers produce what they needed to support themselves, and have and will prosper while food prices sink.

There is no reason to believe that at any given moment in the future the available quantity of any natural resource or service at present prices will be much smaller than it is now, or non-existent.

Simon in The Ultimate Resource, 1981

Diamond believes, and finds absurd, Simon implies it would be possible to produce metals, e.g. copper, from other elements. [19] For Simon, human resource needs are comparably small compared to the wealth of nature. He therefore argued physical limitations play a minor role and shortages of raw materials tend to be local and temporary. The main scarcity pointed out by Simon is the amount of human brain power (i.e. "The Ultimate Resource") which allows for the perpetuation of human activities for practically unlimited time. For example, before copper ore became scarce and prices soared due to global increasing demand for copper wires and cablings, the global data and telecommunication networks have switched to glass fiber backbone networks.

This is my long-run forecast in brief, ... The material conditions of life will continue to get better for most people, in most countries, most of the time, indefinitely. Within a century or two, all nations and most of humanity will be at or above today's Western living standards. I also speculate, however, that many people will continue to think and say that the conditions of life are getting worse. [10]

This and other quotations in Wired are supposed to be the reason for Bjørn Lomborg's The Skeptical Environmentalist . Lomborg has stated that he began his research as an attempt to counter what he saw as Simons' anti-ecological arguments but changed his mind after starting to analyze the data.

Legacy

The Institute for the Study of Labor established the annual Julian L. Simon Lecture to honor Simon's work in population economics. [20] The University of Illinois at Urbana-Champaign held a symposium discussing Simon's work on April 24, 2002. [2] The university also established the Julian Simon Memorial Faculty Scholar Endowment to fund an associate faculty member in the business school. [2] India's Liberty Institute also holds a Julian Simon Memorial Lecture. [21] The Competitive Enterprise Institute gives the Julian Simon Memorial Award annually to an economist in the vein of Simon; the first recipient was Stephen Moore, who had served as a research fellow under Simon in the 1980s. [12]

Personal life

Simon was married to Rita James Simon, who was also a longtime member of the faculty at the University of Illinois at Urbana-Champaign and later became a public affairs professor at American University. [2] Simon suffered for a long time from depression, which allowed him to work only a few productive hours in a day. He also studied psychology of depression and wrote a book [22] on overcoming it. Simon was Jewish. [23] He died of a heart attack at his home in Chevy Chase in 1998 at age 65. [1]

Education

Honors

Works

Related Research Articles

The Simon–Ehrlich wager was a 1980 scientific wager between business professor Julian L. Simon and biologist Paul Ehrlich, betting on a mutually agreed-upon measure of resource scarcity over the decade leading up to 1990. The widely-followed contest originated in the pages of Social Science Quarterly, where Simon challenged Ehrlich to put his money where his mouth was. In response to Ehrlich's published claim that "If I were a gambler, I would take even money that England will not exist in the year 2000" Simon offered to take that bet, or, more realistically, "to stake US$10,000 ... on my belief that the cost of non-government-controlled raw materials will not rise in the long run."

<i>The Population Bomb</i> 1968 book predicting worldwide famine

The Population Bomb is a 1968 book written by Stanford University Professor Paul R. Ehrlich and his wife, Anne Ehrlich. It predicted worldwide famine in the 1970s and 1980s due to overpopulation, as well as other major societal upheavals, and advocated immediate action to limit population growth. Fears of a "population explosion" existed in the 1950s and 1960s, but the book and its author brought the idea to an even wider audience.

<i>The Limits to Growth</i> 1972 book on economic & population growth

The Limits to Growth (LTG) is a 1972 report on the exponential economic and population growth with a finite supply of resources, studied by computer simulation. The study used the World3 computer model to simulate the consequence of interactions between the earth and human systems. The model was based on the work of Jay Forrester of MIT, as described in his book World Dynamics.

Economic growth Increase in the inflation-adjusted market value of the goods and services produced by an economy over time

Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy over time. Statisticians conventionally measure such growth as the percent rate of increase in the real gross domestic product, or real GDP.

Paul R. Ehrlich American biologist

Paul Ralph Ehrlich is an American biologist, best known for his warnings about the consequences of population growth and limited resources. He is the Bing Professor Emeritus of Population Studies of the Department of Biology of Stanford University and President of Stanford's Center for Conservation Biology.

A cornucopian is a futurist who believes that continued progress and provision of material items for mankind can be met by similarly continued advances in technology. Fundamentally they believe that there are enough matter and energy on the Earth to provide for the population of the world.

Hubbert peak theory One of the primary theories on peak oil

The Hubbert peak theory says that for any given geographical area, from an individual oil-producing region to the planet as a whole, the rate of petroleum production tends to follow a bell-shaped curve. It is one of the primary theories on peak oil.

A scientific wager is a wager whose outcome is settled by scientific method. They typically consist of an offer to pay a certain sum of money on the scientific proof or disproof of some currently-uncertain statement. Some wagers have specific date restrictions for collection, but many are open. Wagers occasionally exert a powerful galvanizing effect on society and the scientific community.

Optimum population

The optimum population is a concept where the human population is able to balance maintaining a maximum population size with optimal standards of living for all people.

Malthusianism Idea about population growth and food supply

Malthusianism is the idea that population growth is potentially exponential while the growth of the food supply or other resources is linear, which eventually reduces living standards to the point of triggering a population die off. This event, called a Malthusian catastrophe occurs when population growth outpaces agricultural production, causing famine or war, resulting in poverty and depopulation. Such a catastrophe inevitably has the effect of forcing the population to "correct" back to a lower, more easily sustainable level. Malthusianism has been linked to a variety of political and social movements, but almost always refers to advocates of population control.

<i>An Essay on the Principle of Population</i> Treatise by Thomas Malthus

The book An Essay on the Principle of Population was first published anonymously in 1798, but the author was soon identified as Thomas Robert Malthus. The book warned of future difficulties, on an interpretation of the population increasing in geometric progression while food production increased in an arithmetic progression, which would leave a difference resulting in the want of food and famine, unless birth rates decreased.

Human overpopulation Condition where human numbers exceed the short or long-term carrying capacity of the environment

Human overpopulation is the concept of a human population becoming too large to be sustained by its environment or resources in the long term. The idea is usually discussed in the context of world population, though it may also concern regions. Human population growth has increased in recent centuries due to medical advancements and improved agricultural productivity. Those concerned by this trend argue that it results in a level of resource consumption which exceeds the environment's carrying capacity, leading to population overshoot. The concept is often discussed in relation to other population concerns such as demographic push and depopulation, as well as in relation to resource depletion and the human impact on the environment.

<i>The Ultimate Resource</i>

The Ultimate Resource is a 1981 book written by Julian Lincoln Simon challenging the notion that humanity was running out of natural resources. It was revised in 1996 as The Ultimate Resource 2.

Peak copper Point of maximum global copper production

Peak copper is the point in time at which the maximum global copper production rate is reached. Since copper is a finite resource, at some point in the future new production from mining will diminish, and at some earlier time production will reach a maximum. When this will occur is a matter of dispute. Unlike fossil fuels, copper is scrapped and reused, and it has been estimated that at least 80% of all copper ever mined is still available.

The Simmons–Tierney bet was a wager made in August 2005 between Houston banking executive Matthew R. Simmons and New York Times columnist John Tierney. The stakes of the bet were US $10,000.00. The subject of the bet was the year-end average of the daily price-per-barrel of crude oil for the entire calendar year of 2010 adjusted for inflation, which Simmons predicted to be at least $200. The bet was to be settled on January 1, 2011.

Scarcity Fundamental problem of economics where there are limited resources to fulfill societys unlimited wants

Scarcity as an economic concept "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good." If the conditions of scarcity didn't exist and an "infinite amount of every good could be produced or human wants fully satisfied ... there would be no economic goods, i.e. goods that are relatively scarce..." Scarcity is the limited availability of a commodity, which may be in demand in the market or by the commons. Scarcity also includes an individual's lack of resources to buy commodities. The opposite of scarcity is abundance.

Natural resource economics Supply, demand and allocation of the Earths natural resources

Natural resource economics deals with the supply, demand, and allocation of the Earth's natural resources. One main objective of natural resource economics is to better understand the role of natural resources in the economy in order to develop more sustainable methods of managing those resources to ensure their availability for future generations. Resource economists study interactions between economic and natural systems, with the goal of developing a sustainable and efficient economy.

In environmental science, the concept of overshoot means demand in excess of regeneration. It can apply to animal populations and people. Environmental science studies to what extent human populations through their resource consumption have risen above the sustainable use of resources. For people, "overshoot" is that portion of their demand or ecological footprint which must be eliminated to be sustainable. Excessive demand leading to overshoot is driven by both consumption and population.

Peak minerals marks the point in time when the largest production of a mineral will occur in an area, with production declining in subsequent years. While most mineral resources will not be exhausted in the near future, global extraction and production is becoming more challenging. Miners have found ways over time to extract deeper and lower grade ores with lower production costs. More than anything else, declining average ore grades are indicative of ongoing technological shifts that have enabled inclusion of more 'complex' processing – in social and environmental terms as well as economic – and structural changes in the minerals exploration industry and these have been accompanied by significant increases in identified Mineral Reserves.

John Holdren American scientist and presidential advisor

John Paul Holdren is an American scientist who served as the senior advisor to President Barack Obama on science and technology issues through his roles as Assistant to the President for Science and Technology, Director of the White House Office of Science and Technology Policy, and Co-Chair of the President's Council of Advisors on Science and Technology (PCAST).

References

  1. 1 2 Gilpin, Kenneth N. (12 February 2019). "Julian Simon, 65, Optimistic Economist, Dies" . The New York Times . Retrieved 30 October 2019.
  2. 1 2 3 4 "Brief Notes". Inside Illinois. University of Illinois at Urbana-Champaign. Archived from the original on 2010-08-10. Retrieved 2009-09-04.
  3. Simon, Julian (1981). The Ultimate Resource. Princeton, New Jersey: Princeton University Press. p. 41. ISBN   0-691-00369-6.
  4. 1 2 Neal, Larry. "Julian Simon As Economist" (PDF). Competitive Enterprise Institute. Archived from the original (PDF) on 2004-02-15. Retrieved 2009-09-04.
  5. Perry, Mark J. "Julian Simon: Still more right than lucky in 2013". American Enterprise Institute. Retrieved 24 January 2013.
  6. "Brent Crude Oil Spot Price" . Retrieved 2016-07-17.
  7. Simon, Julian L. "Scarcity or Abundance? A Debate on the Environment – Chapter 5 – Atmospheric Issues". juliansimon.com. Archived from the original on 2008-05-12. Retrieved 2008-05-18.
  8. The Ultimate Resource 2, pp. 260–65
  9. Simon, Julian L. "Ultimate Resource: Introduction". juliansimon.com.
  10. 1 2 Regis, Ed (February 1997). "The Doomslayer". Wired (Issue 5.02). Archived from the original on 2008-05-16. Retrieved 2008-05-18.
  11. 1 2 Dennis, Jan. "Airline overbooking policy well known and so, too, should be its creator". On Our Watch. University of Illinois at Urbana-Champaign. Retrieved 2009-09-04.
  12. 1 2 3 "CEI To Honor Free Market Economist Julian Simon". Competitive Enterprise Institute. Archived from the original on 2002-09-20. Retrieved 2009-09-04.
  13. Dan Gardner (2010). Future Babble: Why Expert Predictions Fail – and Why We Believe Them Anyway. Toronto: McClelland and Stewart. p. 232.
  14. "The Population Explosion by Paul and Anne Ehrlich". DIE OFF. Archived from the original on 2008-05-15. Retrieved 2008-05-18.
  15. "Julian Simon's Bet With Paul Ehrlich". Overpopulation.com. Archived from the original on 2007-07-01. Retrieved 2008-05-13. Which cites: Miele, Frank. "Living without limits: an interview with Julian Simon." Skeptic, vol. 5, no. 1, 1997, p. 57.
  16. "The Simon-South Bet on Pine Sawtimber". School of Forestry and Wildlife Sciences. Auburn University. Archived from the original on 2008-05-10. Retrieved 2008-05-18.
  17. "A letter" (PDF). School of Forestry and Wildlife Sciences. Auburn University. Archived from the original (PDF) on 2008-05-29. Retrieved 2008-05-18.
  18. Simon, Julian L. (September–October 1995). "The State of Humanity: Steadily Improving". Cato Policy Report. Cato Institute. Archived from the original on 2008-05-18. Retrieved 2008-05-18.
  19. Diamond bases his criticism upon the fact that the transmutation of elements on a large scale is not currently possible. In theory, transmutation could allow humans to one day produce copper from other elements, but this would require significant breakthroughs in knowledge and technology in order to overcome the enormous barriers currently preventing this (i.e. the extremely large amounts of energy required to generate extremely small quantities)
  20. "Migration". Institute for the Study of Labor. Archived from the original on 2011-06-16. Retrieved 2009-09-04.
  21. "Julian L. Simon Memorial Lecture 2000". Liberty Institute. Archived from the original on 2006-12-10. Retrieved 2009-09-04.
  22. "Good Mood: The New Psychology of Overcoming Depression". Juliansimon.com. 1999-06-13. Retrieved 2012-05-20.
  23. "Julian Simon". The Economist. The Economist. Retrieved 12 March 2018.

Further reading