Prof Paul Erlich of Stanford University predicted starvation around the world in the 1970s and 1980s. He said was obvious that India would not be able to feed 200 million more people. But India's population of 400 million in 1960 has tripled.
Prof Julian Simon took Ehrlich on. He bet that natural resources used in industry would get cheaper over the years. He challenged Ehrlich to put up real money. In 1980 they bet $1,000 and Ehrlich got to choose the resources. He chose a group of five minerals. In 1990 when the bet was up Simon won easily. Not only was the group lower in price, but each mineral in it was cheaper.
John Tierney of the New York Times took up the mantle of Julian Simon, who died in 1998, and challenged for a bet that the price of oil would not sky rocket. Matthew R. Simmons worked in the oil industry and knew better. They made a bet to be decided on January 1, 2011, and the Malthusian lost again.
Here is John Tierney's update in NY Times:
Five years ago, Matthew R. Simmons and I bet $5,000. It was a wager about the future of energy supplies — a Malthusian pessimist versus a Cornucopian optimist — and now the day of reckoning is nigh: Jan. 1, 2011.
The bet was occasioned by a cover article in August 2005 in The New York Times Magazine titled “The Breaking Point.” It featured predictions of soaring oil prices from Mr. Simmons, who was a member of the Council on Foreign Relations, the head of a Houston investment bank specializing in the energy industry, and the author of “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.”
I called Mr. Simmons to discuss a bet. To his credit — and unlike some other Malthusians — he was eager to back his predictions with cash. He expected the price of oil, then about $65 a barrel, to more than triple in the next five years, even after adjusting for inflation. He offered to bet $5,000 that the average price of oil over the course of 2010 would be at least $200 a barrel in 2005 dollars.
I took him up on it, not because I knew much about Saudi oil production or the other “peak oil” arguments that global production was headed downward. I was just following a rule learned from a mentor and a friend, the economist Julian L. Simon. ...
... When I found a new bettor in 2005, the first person I told was Julian’s widow, Rita Simon, a public affairs professor at American University. She was so happy to see Julian’s tradition continue that she wanted to share the bet with me, so we each ended up each putting $2,500 against Mr. Simmons’s $5,000.
Just as Mr. Simmons predicted, oil prices did soar well beyond $65. With the global economy booming in the summer of 2008, the price of a barrel of oil reached $145. American foreign-policy experts called for policies to secure access to this increasingly scarce resource; environmentalists advocated crash programs to reduce dependence on fossil fuels; companies producing power from wind and other alternative energies rushed to expand capacity.
When the global recession hit in the fall of 2008, the price plummeted below $50, but at the end of that year Mr. Simmons was quoted in The Baltimore Sun sounding confident. When Jay Hancock, a Sun financial columnist, asked if he was having any second thoughts about the wager, Mr. Simmons replied: “God, no. We bet on the average price in 2010. That’s an eternity from now.”
The past year the price has rebounded, but the average for 2010 has been just under $80, which is the equivalent of about $71 in 2005 dollars — a little higher than the $65 at the time of our bet, but far below the $200 threshold set by Mr. Simmons.
What lesson do we draw from this? I’d hoped to let Mr. Simmons give his view, but I’m very sorry to report that he died in August, at the age of 67. The colleagues handling his affairs reviewed the numbers last week and declared that Mr. Simmons’s $5,000 should be awarded to me and to Rita Simon on Jan. 1 ...
2 comments:
Interesting post. It sounds like you're implying that the Earth will never run out of natural resources.
How do you run out of something that doesn't exist? There is no such thing as a natural resource. Natural things become resources when people figure out a use for them.
Two hundred years ago oil was an ugly substance that oozed out of the ground and ruined farm land and beaches - only a pollutant. Then people found a use for oil and it became a resource.
The most valuable resource is people. People are creative and figure out how to meet their needs, be it from things that are used with little processing, like vegetables or with a great deal - super computers are made of silicon, which is sand.
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