The Simon Abundance Index A New Way to Measure Availability of Resources , 2018
A re we running out of resources? That's been a hotly debated question since the publication of P... more A re we running out of resources? That's been a hotly debated question since the publication of Paul Ehrlich's The Population Bomb in 1968. The Stanford University biologist warned that population growth would result in the exhaustion of resources and a global catastrophe. University of Maryland economist Julian Simon, in contrast, argued that humans would innovate their way out of resource shortages. He believed that people were the "ultimate resource" that would make other resources more plentiful. In this paper, we revisit the main points of contention in the debate regarding availability of resources and their relationship with population growth. Using the latest price data for 50 foundational commodities covering energy, food, materials, and metals, we propose a new way of measuring resource availability based on four concepts. First, the time-price of commodities allows us to measure the cost of resources in terms of human labor. We find that, in terms of global average hourly income, commodity prices fell by 64.7 percent between 1980 and 2017. Second, the price elasticity of population (PEP) allows us to measure sensitivity of resource availability to population growth. We find that the time-price of commodities declined by 0.934 percent for every 1 percent increase in the world's population over the same time period. Third, we develop the Simon Abundance Framework, which uses the PEP values to distinguish between different degrees of resource abundance, from decreasing abundance at one end to superabundance at the other end. Considering that the time-price of commodities decreased at a faster proportional rate than population increased, we find that humanity is experiencing superabundance. Fourth, we create the Simon Abundance Index, which uses the time-price of commodities and change in global population to estimate overall resource abundance. We find that the planet's resources became 379.6 percent more abundant between 1980 and 2017. On the basis of our analysis of the relationship between resource availability and population growth, we forecast that the time-price of commodities could fall by a further 29 percent over the next 37 years. Much will depend on policies and institutions that nations pursue. For the time-price of commodities to decline and resource abundance to increase, it is necessary for market incentives and the price mechanism to endure. When prices of commodities temporarily increase, people have an incentive to use resources more efficiently, increase their supply, and develop cheaper substitutes.
Luck or Insight? A Reexamination of the Simon-Ehrlich Bet, 2020
After a decade of arguing about the effect of population growth on the availability of resources,... more After a decade of arguing about the effect of population growth on the availability of resources, University of Maryland economist Julian Simon and Stanford University biologist Paul Ehrlich entered into a $1,000 bet on October 6, 1980. The so-called "Simon-Ehrlich Wager" concerned the inflation-adjusted prices of five metals (chromium, copper, nickel, tin, and tungsten). If, over 10 years, prices rose, Simon would pay Ehrlich. If they fell, Ehrlich would pay Simon. On October 11, 1990 Ehrlich mailed Simon a check for $576.07. The real price of the five-metal basket of commodities fell by 36 percent. Since then, a number of researchers have argued that Simon got lucky. Several have analyzed the price of the same basket of commodities in 10-year intervals between 1900 and found that Ehrlich would have won a majority of the time. We analyzed the data from 1900 to 2019. We used time prices instead of real prices and found that Simon would have won 54.2 percent of the time. In addition, we also considered the war clause in the original bet. If war years are excluded, Simon would have won the bet 69.9 percent of the time. While analyzing different betting ranges is interesting, the most important finding is that during this 119-year period, the time price of the five-metal basket of commodities fell by 87.2 percent. The time required for a blue-collar U.S. worker to earn enough money to buy one basket in 1900 would get him or her 7.84 baskets in 2019. This 684 percent increase in abundance occurred during the same time that U.S. population increased by 330 percent and global population increased 375 percent. JEL Classification Codes: Q30, Q31
The Simon Abundance Index A New Way to Measure Availability of Resources , 2018
A re we running out of resources? That's been a hotly debated question since the publication of P... more A re we running out of resources? That's been a hotly debated question since the publication of Paul Ehrlich's The Population Bomb in 1968. The Stanford University biologist warned that population growth would result in the exhaustion of resources and a global catastrophe. University of Maryland economist Julian Simon, in contrast, argued that humans would innovate their way out of resource shortages. He believed that people were the "ultimate resource" that would make other resources more plentiful. In this paper, we revisit the main points of contention in the debate regarding availability of resources and their relationship with population growth. Using the latest price data for 50 foundational commodities covering energy, food, materials, and metals, we propose a new way of measuring resource availability based on four concepts. First, the time-price of commodities allows us to measure the cost of resources in terms of human labor. We find that, in terms of global average hourly income, commodity prices fell by 64.7 percent between 1980 and 2017. Second, the price elasticity of population (PEP) allows us to measure sensitivity of resource availability to population growth. We find that the time-price of commodities declined by 0.934 percent for every 1 percent increase in the world's population over the same time period. Third, we develop the Simon Abundance Framework, which uses the PEP values to distinguish between different degrees of resource abundance, from decreasing abundance at one end to superabundance at the other end. Considering that the time-price of commodities decreased at a faster proportional rate than population increased, we find that humanity is experiencing superabundance. Fourth, we create the Simon Abundance Index, which uses the time-price of commodities and change in global population to estimate overall resource abundance. We find that the planet's resources became 379.6 percent more abundant between 1980 and 2017. On the basis of our analysis of the relationship between resource availability and population growth, we forecast that the time-price of commodities could fall by a further 29 percent over the next 37 years. Much will depend on policies and institutions that nations pursue. For the time-price of commodities to decline and resource abundance to increase, it is necessary for market incentives and the price mechanism to endure. When prices of commodities temporarily increase, people have an incentive to use resources more efficiently, increase their supply, and develop cheaper substitutes.
Luck or Insight? A Reexamination of the Simon-Ehrlich Bet, 2020
After a decade of arguing about the effect of population growth on the availability of resources,... more After a decade of arguing about the effect of population growth on the availability of resources, University of Maryland economist Julian Simon and Stanford University biologist Paul Ehrlich entered into a $1,000 bet on October 6, 1980. The so-called "Simon-Ehrlich Wager" concerned the inflation-adjusted prices of five metals (chromium, copper, nickel, tin, and tungsten). If, over 10 years, prices rose, Simon would pay Ehrlich. If they fell, Ehrlich would pay Simon. On October 11, 1990 Ehrlich mailed Simon a check for $576.07. The real price of the five-metal basket of commodities fell by 36 percent. Since then, a number of researchers have argued that Simon got lucky. Several have analyzed the price of the same basket of commodities in 10-year intervals between 1900 and found that Ehrlich would have won a majority of the time. We analyzed the data from 1900 to 2019. We used time prices instead of real prices and found that Simon would have won 54.2 percent of the time. In addition, we also considered the war clause in the original bet. If war years are excluded, Simon would have won the bet 69.9 percent of the time. While analyzing different betting ranges is interesting, the most important finding is that during this 119-year period, the time price of the five-metal basket of commodities fell by 87.2 percent. The time required for a blue-collar U.S. worker to earn enough money to buy one basket in 1900 would get him or her 7.84 baskets in 2019. This 684 percent increase in abundance occurred during the same time that U.S. population increased by 330 percent and global population increased 375 percent. JEL Classification Codes: Q30, Q31
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