Running Out of Everything

The Bet

In The Bet, Paul Sabin, a historian at Yale University, sets out to “tackle a huge issue: the future of humankind.” The book deals with the history of ideas and, as its subtitle indicates, is built around a famous bet that Julian Simon made with Paul Ehrlich in 1980. This wager, as well as the long and acrimonious debate between the two men, provides a paradigm for the environmental and political debates of the last five decades.

The 1960s and 1970s marked the triumph of environmentalist and interventionist ideas. Paul Ehrlich, a professor of biology at Stanford University, epitomizes that era for, as Sabin says, he “embraced environmentalism as a secular religion.” In his 1968 book The Population Bomb, Ehrlich warned, à la Malthus, that the population explosion was hitting resource constraints. He predicted that within a decade, food and water scarcity would result in a billion or more people starving to death. Governments should work toward an optimal world population of 1.5 billion. He opposed immigration, since the United States was already above its 150 million population limit. He talked about the imminent “disintegration of an unstable world” and said, “If I were a gambler, I would take even money that England will not exist in the year 2000.”

Other environmentalists of the period were not exactly more enlightened. In 1965, the New Republic announced that the “world population has passed food supply,” that “the famine had started,” and that world hunger would be “the single most important fact in the final third of the 20th Century.” The “freedom to breed is intolerable,” Garrett Hardin pontificated. Some anti-population environmentalists were influenced by eugenics, the quest for “genetic soundness,” and asserted that the “deterioration of the species” must be halted.

The state had to intervene massively to control population and save mankind. Commenting on the 1972 The Limits to Growth by the Club of Rome, a catastrophist monument by itself, zoology professor Bertram Murray said that “collapse is inevitable,” and that a new economic system was needed, “highly regulated,” and “managed by an international team of planners.” In 1973, an issue of Newsweek warned on its cover: “Running Out of Everything.” Ehrlich floated, without openly endorsing it, the idea of mandatory sterilization. He tried to avoid admitting that population control would require coercion, but it was not easy. He regretted the defeat of a California bill banning internal combustion automobiles.

Until the early 1980s, everybody who was anybody seemed to side with Ehrlich, and there wasn’t much of a debate. Richard Nixon described the global population explosion as a “rush toward a Malthusian nightmare,” and created the Environmental Protection Agency. Overcoming the looming “national catastrophe,” said Jimmy Carter, was “the moral equivalent of war.” The Global 2000 Report to the President, published by the Carter White House, recycled Ehrlich’s milder predictions: by year 2000, food and energy prices would more than double, poverty and hunger would be rampant in the world.

In the 1970s, Julian Simon was a little-known economist at the University of Illinois. He initially sided with Ehrlich in considering population growth an economic threat, but his research rapidly changed his mind. He challenged the environmental orthodoxy with a few articles, and then published an iconoclastic book that gained him considerable attention, The Ultimate Resource (1981). There was no resource limitation, Simon argued. Bumping against limits would increase the price of any resource in short supply, leading ingenious humans to find new supply sources or substitutes. Physical and human capital can partly substitute for natural resources. Man’s brain, ingenuity, and entrepreneurship are the ultimate resource; and this resource is infinite.

Another way to see this is that a newborn individual is more than just another mouth to feed: he also brings his mind to help solve problems that a growing population can generate. The coming of age of a new individual means one more person with whom to exchange and, thus, the creation of new benefits from exchange.

Professor Simon was as convinced of his position as the Malthusians were of theirs, so in 1980, he proposed to Paul Ehrlich that the two of them put their convictions to the test. If population pressure was straining resource availability, Simon reasoned, this would have to translate into increasing resource prices. He invited Ehrlich to choose five raw materials—Ehrlich chose tin, copper, tungsten, chromium, and nickel—and proposed to track how $200 worth of each metal at the time of the bet would be valued 10 years hence (after correcting for general inflation). If in 1990 the price of the same quantity of any of the five metals was less than $200, Ehrlich would pay the difference to Simon; if the price was more than $200, Simon would cough up the difference.

This was a much riskier proposition for Simon than for Ehrlich. Simon had a theoretically infinite exposure, while Ehrlich’s potential loss was limited to $1,000 (if all prices dropped to zero). Ehrlich was happy to take Simon’s “astonishing offer before other greedy people jump[ed] in.”

Ten years later, the price of all the metals had dropped, by more than 50 percent on average. Ehrlich sent Simon a check for $576.07. No comment or note was included.

It could be argued that the bet was a thin win. The decade of the 1980s was a time when these metals went from an unusual peak to a temporary trough. It has been calculated that, taking all possible 10-year periods from 1900 to 2008, Ehrlich would have won the same bet 63 percent of the time. Yet, it is still remarkable that, despite wild swings, the price of these raw materials remained more or less constant in real terms over the last hundred years. Simon had made his point.

Even so, the bet did not settle the debate. Paul Ehrlich continued to be adulated by the liberal philanthropists and the scientific establishment, winning a series of professional awards and prizes. Julian Simon remained on the sidelines of the economic and political establishment. Ehrlich’s tone did not mellow. “If Simon disappeared from the face of the Earth,” he wrote in 1995, “that would be great for humanity.” (Gaia, alas, obliged in 1998, when Simon died of a heart attack.) Now in his eighties, Ehrlich has not changed his mind, although he has partly recycled himself into “climate change.”

The environmental movement swept the political class. “I am an environmentalist,” said Ronald Reagan, even if he did not buy the Ehrlich vulgate. In the end, his administration did little to change the government’s orientation toward costly and dubious planet-saving policies. George H.W. Bush said he wanted to be the “environmental president.” John Holdren, who had been influenced by eugenic thinking and was one of Ehrlich’s early compagnons d’armes, later became, and still is, a senior science and technology advisor in the Obama administration.

Ehrlich and Simon represent two different ways to look at human affairs. Ehrlich exemplifies what Friedrich Hayek called scientism, the blind application of physical or biological sciences to the study of society. He and his colleagues model society with simple physical models, which ignore two centuries of economic analysis. Simon exemplifies the economic approach, which postulates that man is a rational animal who uses his reason to respond to incentives, solve problems, and improve his welfare.

Economists, who know about incentives and prices, naturally sided with Simon. Similarly, when the “peak oil” scare appeared, the skeptics were mainly found among economists. An investment banker, Matthew Simmons, lost a $5,000 bet with Julian Simon’s widow, Rita. Fracking has now dealt the latest blow to the simplistic “peak oil” theory. It seems that the lesson is never learned.

Following Simon, the author of The Bet suggests that the disagreement between environmentalists and economists may be due to a divergence in values. People in Ehrlich’s camp believe that values can exist outside human minds and claim priority over human values. Although Sabin does not go there, the practical implication is that people in Ehrlich’s camp feel justified in imposing their ideal society on those who don’t share their values, which they disguise under the mantle of science. Hence the environmentalists’ inclination to boss people around.

As opposed to Ehrlich’s view of people as “large numbers of bodies,” Simon argued that more lives means enhanced welfare. He saw population growth as “a triumph rather than a disaster.” He argued for freer immigration.

The Bet is an even-handed book—more so than the present review. The author blames Ehrlich and Simon for having been too polemical, spiteful, ad hominem. A calmer, more academic debate, he says, would have helped each incorporate what was good in the other’s opinions. Yet a bottom line is reached, when Sabin finally admits that “human history over the past forty years has not conformed to Paul Ehrlich’s predictions.”

The book suffers from two limitations. One is that, in line with the reigning consensus, Sabin seems to assume that market failures automatically call for government intervention. He seems oblivious to the government failures that Public Choice analysis has brought to light.

A related question is one about which nearly all non-economists, and many economists—including even some critics of the environmentalist movement—seem to know nothing. Except when we refer to very small groups or to organizations created for a specific purpose, and except when we rhetorically bring into the discourse people who share our approach—the “we” in this very sentence does so—how can we say “we”? This is what economists (and political scientists) call the problem of preference aggregation: Can we aggregate, “add up” in some sense, the preferences of equal individuals in order to obtain “social preferences” on the basis of which “we” can make genuine choices?

The answer is no, as demonstrated by a long tradition of social-choice and welfare-economics analysis. A social choice is either dictatorial—that is, imposed on some—or inconsistent (A is preferred to B, B to C, but C to A).

This sort of question completely eluded Paul Ehrlich and his cohorts, as much as they liked to boast of their scientific knowledge. Physicist Gerald Barney, an advisor to Presidents Nixon and Carter, wanted to replace “personal interests and individualism” by the “interests of the whole society.” He was of course a spokesman for “the whole society.”

If Paul Sabin considered this issue, I suggest that he might understand “our society’s inability to agree” and perhaps change the last few pages of his book. Contrary to what he claims, “humanity’s course” cannot be determined “by the social and political choices that we make” if by “we” is meant all of us collectively. “What kind of world do we desire?” asks the last sentence of The Bet. It depends who is “we.” This “we” is only some of us, just as Ehrlich’s elitism would have it.

There may be a way out, but it is narrower than the eye of the needle through which the proverbial rich man enters the kingdom of God. The way out lies in the rare cases of pure public goods about which there is strong evidence of unanimity (or quasi-unanimity?). In most cases, the only alternative is to let each individual make his own choices, and let the results be what they will. This laissez-faire approach is not a perfect solution but, as Montesquieu said, “since a despotic government is productive of the most dreadful calamities to human nature, the very evil that restrains it is a good.”

But these limitations will not distract me from my main conclusion: Everybody should read this scholarly, instructive, and beautifully-written book.

Pierre Lemieux is an economist in the Department of Management Sciences of the Université du Québec en Outaouais. His upcoming book Who Needs Jobs? Spreading Poverty or Increasing Welfare will be published by Palgrave Macmillan in August 2014.

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Comments

  1. says

    The recommendation to read this book sounds like good advice. One should consider that Erlich and Simon seem to have made fairly short term predictions. Erlich assumed that we had already evaluated the sum of our resources and found them lacking, without considering what we might discover with advanced exploration and knowledge, whereas Simon was an optimist who assumed that people would learn to cope with the resources at our disposal.

  2. jbsay says

    While Simon was an optimist, you still mis the point.
    Simon did not assume. He KNEW people would adapt to change. As the review noted Simon would have lost 63% of the time – though it does not note those losses would have been small. More importantly the prices of 5 metals is NOT what Simon was arguing about, but the unlimited capacity for humans to improve their lives.

    Though Simon would have railed at the peak oil folks. Simon’s “optimism” does nto rely on the odds that resources are not as scares as malthusians beleive, but the certainty that whatever the true “limits” of some natural resource, there are no limits to the capacity of humans to increase their quality of life. Should all oil somehow be consumed – we will find something else. At worst there will be minor disruption.

    The difference between Simon and Ehrilich is not over the scarcity of raw materials. It is over the future of humanity. Ehrich and far too many on the left see it as going to hell no matter what and going farther and faster to hell absent draconian infringements on individual liberty. Simon grasp that there is no limit or disaster that free individuals can not overcome. While progressive Malthusians constantly overestimate scarcity. Simon is still right even should that scarcity prove true. Our standard of living will relentlessly increase – absent a progressive malthusian totalitarian state, regardless of the scarcity or abundance of any resources.

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