Tag: julian simon

The Enduring Wisdom of Julian Simon

Last week, the World Bank updated its commodity database, which tracks the price of commodities going back to 1960. Over the last 55 years, the world’s population has increased by 143 percent. Over the same time period, real average annual per capita income in the world rose by 163 percent. What happened to the price of commodities?

Out of the 15 indexes measured by the World Bank, 10 fell below their 1960 levels. The indexes that experienced absolute decline included the entire non-energy commodity group (-20 percent), agricultural index (-26 percent), beverages (-32 percent), food (-22 percent), oils and minerals (-32 percent), grains or cereals (-32 percent), raw materials (-32 percent), “other” raw materials (-56 percent), metals and minerals (-4 percent) and base metals (-3 percent).

Five indexes rose in price between 1960 and 2015.  However, only two indexes, energy and precious metals, increased more than income, appreciating 451 percent and 402 percent respectively. Three indexes increased less than income. They included “other” food (7 percent), timber (7 percent) and fertilizers (38 percent).

Market Solutions for Population Problems

The Wall Street Journal put out an article with some excellent visual representations of the world’s changing demographics. (Please remember that you can also explore population growth, fertility rates, and the changing age make-up of the population using HumanProgress.org’s interactive maps and charts).

The WSJ notes,

In 1798 Thomas Malthus, a British essayist, argued that humanity would reproduce faster than food production could rise, leading to destitution and starvation. He was wrong. The Western world’s population grew rapidly over the 19th and 20th centuries, with a dip in 1918-19 because of World War I and the Spanish flu pandemic. But rising agricultural productivity proved more than capable of feeding the extra mouths.

Humanity found ways to produce more food per unit of land through innovations like synthetic fertilizers and increasingly advanced genetic modification techniques. As production increased, prices fell, calorie consumption increased, and undernourishment fell even as the world’s population grew.

Malthus’ mistake was to ignore human beings’ ability to innovate their way out of problems. But, as Julian Simon found in The Ultimate Resource, people are excellent problem-solvers. A challenge (feeding a growing population), led to technological innovation (the Green Revolution and GMOs) and that led to a solution (higher agricultural productivity and falling food prices).

As Human Progress advisory board member Matt Ridley notes in The Rational Optimist and The Evolution of Everything, technological innovation depends on the exchange of ideas. The more people there are (and the freer and more timely their exchange of ideas), the better.

The WSJ article recognizes problems associated with declining working-age populations—especially when it comes to unsustainable social security commitments those countries have made to their elderly. The WSJ also notes that government programs to incentivize having more children do not seem to work very well, and are not a viable solution.

One of the ways in which nations could increase their growth rates is to attract immigrants from other countries where their talents may be wasted. To learn more about the economics of immigration and the contentious issues surrounding the debate, including the effects of immigration on the native-born population’s wages and culture, consider registering for Cato’s forum in January on the subject.

Return of the Neo-Malthusians

This Earth Day we heard various commentators bemoan the growth in population, consumption, and carbon emissions driven by fossil fueled technologies. Once again we are told that this is unsustainable, that we are running out of resources, prices are inevitably headed up, and, worse, such consumption reduces  both environmetal and human well-being. In this worldview, industrialization and economic development were fashioned in the Devil’s crucible, and that de-industrialization and de-development will be our saviour.

I have started a series of posts at Master Resources that compares the above Neo-Malthusian view of industrialization, economic growth, and technological change against empirical data on human well-being from the age of industrialization.  The first post revisits the bet made in 1980 by Julian Simon and Paul Ehrlich on the direction of commodity prices, and examines long term trends in the prices and affordability of various commodities.  Specifically,  for metals, I look at trends going back to 1800, while for food I examine trends from 1900 onward. Parts II and III will compare long term trends in population, consumption, economic development, and carbon emissions against trends in human well-being for the world (from 1750 onward) and the United States (from 1900 onward). Finally, Part IV will provide an explanation as to why empirical data is at odds with the Neo-Malthusian worldview.

Part I, which examines the Simon-Ehrlich Bet in the context of long term trends in the prices and affordability of various commodities, is here.

Nostalgia Used to Be Better

Julian Simon often wrote about the persistence of the belief that life was better in the past or that things are steadily getting worse. It takes many forms: people used to be more polite, the media used to be more literate, life is more dangerous today, we’re running out of natural resources. Simon pointed out in many books and articles that, at least since the industrial revolution, life on earth is in fact getting longer, healthier, more comfortable, and less dangerous. Or, as the title of one of his books put it, It’s Getting Better All the Time.

He was mostly right. But in a review of a new collection of H. L. Mencken’s writings, I found an exception: Nostalgia itself, the longing for a lost golden age, was at least more eloquent when Mencken was writing it back in the 1920s. Jonathan Yardley of the Washington Post quotes these eulogies for old Baltimore:

Mencken was born in Baltimore in 1880 and lived almost his entire life in the house on Hollins Street where he grew up. “The Baltimore of the 80’s had a flavor that has long since vanished,” he wrote in a 1925 Evening Sun piece reprinted here. “The town is at least twice as big now as it was then, and twice as showy and glittering, but it is certainly not twice as pleasant, nor, indeed, half as pleasant. The more the boomers pump it up, the more it comes to resemble such dreadful places as Buffalo and Cleveland.”…

Mencken believed, as he wrote in 1930, that the great fire of 1904 was what killed the old Baltimore that he knew so intimately and loved so deeply: “The new Baltimore that emerged from the ashes was simply a virtuoso piece of Babbitts. It put in all the modern improvements, especially the bad ones. It acquired civic consciousness. Its cobs climbed out of the alleys behind the old gin-mills and began harassing decent people on the main streets.”…

“I am glad I was born long enough ago to remember, now, the days when the town had genuine color, and life here was worth living. I remember Guy’s Hotel. I remember the Concordia Opera House. I remember the old Courthouse. Better still, I remember Mike Sheehan’s old saloon on Light street – then a mediaeval and lovely alley; now a horror borrowed from the boom towns of the Middle West. Was there ever a better saloon in this world? Don’t argue: I refuse to listen! The decay of Baltimore, I believe, may be very accurately measured by the distance separating Mike’s incomparable bar from the soda-fountains which now pollute the neighborhood – above all, by the distance separating its noble customers (with their gold watch-chains and their elegant boiled shirts) from the poor fish who now lap up Coca-Cola.”

Man, you just don’t get nostalgia like that any more!