Wednesday, February 18, 2015
Apocalypse Not: The Legacy of Julian Simon
By Aaron Tao
“The ultimate resource is people—especially skilled, spirited, and hopeful young people endowed with liberty—who will exert their wills and imaginations for their own benefit and inevitably benefit the rest of us as well.” —Julian Simon
February 12 marks the birthday of the late economist Julian Simon (1932–1998). On this special occasion, I wish to bring attention to this thinker whose work I feel has not been fully appreciated. The implications of his controversial but time-tested ideas certainly deserve greater attention in academia and society at large.
Simon is perhaps best known for his famous wager against ecologist Paul R. Ehrlich, author of the notorious best-seller The Population Bomb.
In line with classical Malthusian theory, Ehrlich predicted that human population growth would result in overconsumption, resource shortages, and global famine—in short, an apocalyptic scenario for humanity. Simon optimistically countered Ehrlich’s claim and argued that the human condition and our overall welfare would flourish thanks to efficient markets, technological innovation, and people’s collective ingenuity. Both men agreed to put their money where their mouth is.
They agreed that rising prices of raw materials would indicate that these commodities were becoming more scarce, and this became the premise of The Bet. The metals chromium, copper, nickel, tin, and tungsten were chosen as measures of resource scarcity by Ehrlich’s team. Ehrlich and his Malthusian colleagues invested a total of $1,000 (in 1980 prices) on the five metals ($200 each). The terms of the wager were simple: If by the end of the period from September 29, 1980, to September 29, 1990, the inflation-adjusted prices of the metals rose, then Simon would pay Ehrlich the combined difference, and vice versa if the prices fell.
Here’s the final outcome as summarized by Wired:
Between 1980 and 1990, the world’s population grew by more than 800 million, the largest increase in one decade in all of history. But by September 1990, without a single exception, the price of each of Ehrlich’s selected metals had fallen, and in some cases had dropped through the floor. Chrome, which had sold for $3.90 a pound in 1980, was down to $3.70 in 1990. Tin, which was $8.72 a pound in 1980, was down to $3.88 a decade later.
Which is how it came to pass that in October 1990, Paul Ehrlich mailed Julian Simon a check for $576.07.
A more perfect resolution of the Ehrlich-Simon debate could not be imagined.
Looking back on this high-profile debate, it is important to realize that Simon did not win because he was a savvier investor or had special knowledge about economic trends. Rather, Simon’s ideas were shown to be more empirically, intellectually, and morally sound. A distinguishing hallmark of Simon’s work was that he held a sincere conviction that human imagination was the ultimate renewable resource that can create a better world. In his magnum opus The Ultimate Resource, Simon looked to the future with optimism tempered by an ultimate belief in human potential:
I do not believe that nature is limitlessly bountiful. I believe instead that the possibilities in the world are sufficiently great so that with the present state of knowledge, and with the additional knowledge that the human imagination and human enterprise will develop in the future, we and our descendants can manipulate the elements in such fashion that we can have all the mineral raw materials that we need and desire at prices ever smaller relative to other prices and to our total incomes. In short, our cornucopia is the human mind and heart, and not a Santa Claus natural environment. So has it been in the past, and therefore so is it likely to be in the future.
Despite Simon’s vindication from the celebrated public wager (and from lots of contemporary research), the Malthusian views of Ehrlich and company still remain popular and entrenched among academics, political activists, and the mass media.
Having studied evolutionary biology back in college, I can attest to the predominance of Malthusian views in higher education. It’s understandable why Thomas Malthus continues to occupy a “hallowed place in the history of biology” (mainly for his having influenced Charles Darwin’s theory of evolution through natural selection). But as much as I appreciated evolutionary insights in explaining the diversity of life on Earth, I often felt uneasy when my teachers and fellow students talked about public policy and politics, especially when the discussion involved environmentalism.
I was particularly disturbed that many environmentalists expressed blatant anti-globalization, anti-industrial, anti-trade, and misanthropic views (an observation shared by ecologist Patrick Moore, a founder of Greenpeace who left that organization because it began to embrace far-left politics). On a regular basis, I heard environmentalists on campus propose “solutions” that called for more government control over people and resources—or else [insert apocalyptic scenario] was destined to happen. Having a basic understanding of free-market economics certainly helped keep me immune from these bad ideas, but I felt something crucial was missing from my intellectual arsenal.
Being the curious student that I was (and because belonging to an ideological minority taught me to “know thyself and thy enemy”), I read extensively, and eventually I came across science writer Matt Ridley and his book The Rational Optimist. And from there I was introduced to the work of Julian Simon.
These thinkers were a breath of fresh air. I also came to realize that Simon had laid the intellectual groundwork for a modern, optimistic vision for humanity, perhaps more so than anyone else. In the biological sciences, growth limits are usually seen within the carrying capacity of natural systems. But when it comes to resource consumption, Homo sapiens are not rodents or locusts—and this obvious fact has huge implications.
As Simon crucially pointed out, we human beings possess imagination and ingenuity that have enabled us to overcome numerous challenges throughout our history. Although these factors are often overlooked and cannot be easily modeled, they are what differentiate us from all other species on the planet.
In The Ultimate Resource, Simon emphasizes that raw materials such as petroleum and copper are not “resources” until they are altered by human intellect:
Resources in their raw form are useful and valuable only when found, understood, gathered together, and harnessed for human needs. The basic ingredient in the process, along with the raw elements, is human knowledge. And we develop knowledge about how to use raw elements for our benefit only in response to our needs.
Human beings are hardwired to find new ways to do more with less. When a given resource becomes more scarce, it becomes more expensive; and the greater scarcity is conveyed through the price system. As a result of price signals, people are incentivized to use less of the resource and to develop new substitutes—or to find new reserves of that resource that were previously unknown or unprofitable to bring to market.
From the predicted food shortages back in Thomas Malthus’s day to modern dire warnings over peak oil, Malthusian fear mongering has been discredited again and again. It is past time to retire Malthus and reject the toxic ideologies pushed by his latter-day followers for once and for all. Although we certainly have genuine heroes to thank, like Norman Borlaug (the “Father of the Green Revolution”), the triumph of free-market and classical liberal ideas was the most critical factor in preventing the horrific scenarios envisioned by the doom crowd. As Chelsea German at HumanProgress.org succinctly summarizes it, “Capitalism Defused the Population Bomb.”
But what, or more accurately, who drives the innovative engine of capitalism? Again, we go back to Simon and his unique insights:
[T]he source of knowledge is the human mind. Ultimately, then, the key constraint is human imagination acting together with educated skills. This is why an increase of human beings, along with causing an additional consumption of resources, constitutes a crucial addition to the stock of natural resources.
We must remember, however, that human imagination can flourish only if the economic system gives individuals the freedom to exercise their talents and to take advantage of opportunities.
Although vast amounts of empirical evidence support the case for crediting free markets, free trade, and globalization for raising living standards and creating new sources of prosperity, we must never lose sight of the fundamental components that made it all possible: people themselves and their unlimited imaginations.
Julian Simon contributed truly original wisdom to the intellectual and moral case for a free society. Much more can be said of his legacy as a scholar, but Simon’s vast accomplishments best speak for themselves. The Ultimate Resource is a treasure and deserves to be on the bookshelf of every freedom lover and entrepreneur.
LBJ's $22,000,000,000,000 War on Poverty Penalizes Parents Who Marry
Fifty-one years ago, President Lyndon B. Johnson launched the War on Poverty. Since then, taxpayers have spent more than $22 trillion fighting Johnson’s war, three times the cost of all military wars in U.S. history.
Last year, taxpayers spent more than $920 billion on 80 different anti-poverty programs.
Despite this spending, the percentage of Americans who are poor has barely budged since the late 1960s. As President Reagan put it: “We declared war on poverty, and poverty won.”
A major reason for the nation’s lack of success for the last half century has been the collapse of marriage. Marriage is a powerful force in reducing poverty; a single mother with children is four times more likely to be poor than a similar mother who is married. More than two-thirds of all poor families with children in the U.S. are headed by single parents.
But since the beginning of the war on poverty, marriage has declined sharply. In 1964, 7 percent of U.S. children were born outside marriage. Today, the number is 41 percent. Society is dividing into two castes. In the top half, children are raised by married couples with college education; in the bottom half, children are raised by single mothers with a high-school degree or less.
When compared to children in intact married homes, children raised by single parents are more likely to have emotional and behavioral problems; be physically abused; smoke, drink, and use drugs; be aggressive; engage in violent, delinquent, and criminal behavior; have poor school performance; be expelled from school; and drop out of high school.
Given the effectiveness of marriage in reducing poverty and other social problems, you would think that strengthening marriage would be a top priority for the welfare state. Wrong. The welfare system does the opposite. Welfare actively penalizes marriage by reducing benefits when low-income couples do marry.
For example, a single mother with two children who earns $15,000 per year will generally receive around $5,200 per year from the Food Stamp program. However, if she marries a father with the same earnings level, her food stamps would be cut to zero. A single mother receiving public housing benefits would receive a subsidy worth on average around $11,000 per year if she was not employed. But if she married a man earning $20,000 per year, these benefits would be cut nearly in half.
The federal government runs more than 80 welfare aid programs; nearly all of them provide very real financial incentives for couples to remain separate and unmarried. Is there a way to reduce welfare’s marriage penalties without raising overall welfare spending and costing the taxpayer a bundle? Yes.
Shrink welfare fraud. Take the earned income tax credit. This program provides more than $56 billion per year in cash grants to low-income persons. But, according to the IRS, a quarter to a third of all EITC claims are fraudulent. It would not be hard to sharply reduce fraud and save some $10 to $15 billion per year. These savings could be redirected toward reducing marriage penalties in other welfare programs.
Reducing welfare’s marriage penalties would aid moms, dads and kids. That’s a positive first step toward actually winning the war on poverty.
Jihad in Copenhagen
Islamic terrorism has once again struck Europe. The Wall Street Journal reports, “Danish police said they shot dead a gunman on Sunday who they believe was behind shootings at a free-speech event at a Copenhagen cafe and a nearby synagogue a day earlier.”
The first clue of motive comes from the fact that what Barack Obama might call a “random shooting” happened at a synagogue, killing one Jewish man.
The second clue is this from the WSJ: “Police said a man sprayed dozens of gunshots through the plate glass windows of central Copenhagen’s Krudttoenden cafe, where Swedish cartoonist Lars Vilks and France’s ambassador to Denmark, François Zimeray, were attending the free-speech conference. Neither Mr. Vilks nor Mr. Zimeray was injured.” One person was killed, however.
In 2007, Vilks drew caricatures of Muhammad as a dog, and the Islamic State has a $150,000 bounty on his head. And witnesses reported hearing the shooter yell, “Allahu Akbar!”
These attacks are by no means “random” acts of “lone wolves,” and these murderers aren’t motivated by what Obama called “whatever ideology” – this is jihad in the name of Islam.
'Blockbuster' Report: Scott Walker Didn't Finish College
Wisconsin Governor Scott Walker has made a splash in the 2016 Republican presidential field. That makes him a prime Leftmedia target, and The Washington Post is on the case. Did you know — gasp! — that Walker dropped out of Marquette University? Where’s the fainting couch?
Even though college attendance is prevalent these days, the majority of Americans still don’t have a four-year degree. And the shocking reason Walker didn’t finish is that he found a good job. Hardly scandalous.
If college is a requisite for the presidency, someone should have told George Washington — our greatest president. He didn’t attend college at all. And speaking of college records, political analyst Michael Barone asks the Leftmedia, “Why weren’t you — why aren’t you — curious about how Obama behaved in college?”
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Posted by JR at 1:35 AM