The late University of Maryland economist Julian Simon disagreed. In his 1981 book The Ultimate Resource, Simon argued that humans were intelligent beings, capable of innovating their way out of shortages. And so we have. Fracking, to give just one example, has enabled us to tap previously inaccessible oil reserves, thus turning the United States into a fossil‐fuel super‐power.
Our findings in a recently published paper confirm Simon’s thesis. We revisited the debate by looking at 50 foundational commodities covering energy, food, materials, and metals. Between 1980 and 2017, the real price of commodities fell by 36 percent on average.
Also, due to productivity gains, the price of labor increases faster than inflation. Commodities that took 60 minutes of work to buy in 1980 took only 21 minutes of work to buy in 2017. Put differently, the time‐price of commodities fell by 64.7 percent.
We also measured the sensitivity of resource availability to population growth. Between 1980 and 2017, the world’s population increased by 69 percent and time‐price of commodities fell by 64.7 percent. That means that the time‐price of commodities declined by 0.934 percent for every 1 percent increase in the world’s population.
Moreover, we created the Simon Abundance Index: the change in population since 1980 over the change in the time‐price of commodities, times 100. (E.g., if population has risen 20 percent since 1980 and the time‐price has fallen 20 percent, the numerator will be 1.2, the denominator will be 0.8, and the Simon Abundance Index will be 150.) This takes into account the fact that resources are available to more people and more cheaply than they were before. By this measure, the Earth became 379.6 percent more plentiful between 1980 and 2017, a compounded annual growth rate of 4.32 percent.
Population growth and abundance seem to be connected. Adam Smith observed that division of labor, or separation of the work process into distinct tasks, leads to faster growth. Simon took Smith’s ideas a step further. He noted that in addition to more labor, a growing population produces more ideas. More ideas lead to more innovations, and more innovations improve productivity. Finally, higher productivity translates to better standards of living.
Considering that world population will likely peak at 9.8 billion people at around 2080 and fall to 9.5 billion by 2100 — in the medium fertility scenario calculated by demographer Wolfgang Lutz and his colleagues at the International Institute of Applied Systems Analysis — our descendants may yet find that the Earth is short on the most important resource: people.