Something that seems obvious if you think about it for a minute is that a growing population pushing on a finite planet means that resources will become pricier and people will become, on average, poorer. In 2019, Bill Maher, for example, who most people, including me, think is a smart person, stated, “In 1900, there were less [sic] than two billion people on Earth; now it’s approaching eight. We can’t just keep on like this. The world is just too crowded.” He went on to propose that we “not have kids, die, and stay dead.” Maher is a 21st-century Malthusian. Thomas Robert Malthus, recall, was the person who wrote the famous 1798 Essay on the Principle of Population, in which he argued that food production grows arithmetically while population tends to grow geometrically. Malthus did more thinking than Maher, by the way. The fact that Britain didn’t have widespread starvation was what led Malthus to examine the ways people did check their tendency to multiply. But Malthus did not foresee what actually happened: huge increases in standards of living for a much greater population.
Fortunately, we can think about this issue for much more than a minute. And our thinking can be informed not just by gut feelings but also by basic economic thinking about progress and by a vast economic history. It can also be informed by knowledge of a famous bet about resources. And the bottom line of all this thinking and economic history is that the vast majority of resources, especially those sold in relatively free markets, have become more plentiful relative to population.
Ted Baxter and Julian Simon
Many of my fellow baby boomers probably remember The Mary Tyler Moore Show, which ran in the 1970s. The anchorman who read the news at the television studio where Mary worked was Ted Baxter. Ted often said foolish or outrageous things; he was in the show to provide laughs, which he did regularly. Once, in discussing population growth, Ted said that he wanted to have six children so that maybe one of them could solve the population explosion. Silly, right?
Actually, no. Not when you understand the work of a famous economist named Julian Simon, who departed this earth much too soon.
Early in his professional life, Simon, like many people, thought that population growth was a problem. He thought we would run out of resources. But then he read a book that got him rethinking and caused him to dig more into the data. He never stopped. That book was Harold J. Barnett and Chandler Morse’s Scarcity and Growth: The Economics of Natural Resource Availability, published in 1963. Barnett and Morse showed that between 1870 and 1956, the inflation-adjusted prices of eleven out of thirteen minerals had fallen. Because prices reflect demands and supplies, and it was unlikely that demand for these resources had fallen, the lower prices must have been due to increases in supply.
How could that have happened at a time when both population and overall standards of living had increased substantially? Simon, in his book The Ultimate Resource, posited that it was precisely the growth in population that had led to the increased supply of resources. How so? Because, argued Simon, with more people, there were more minds, and with more minds, there were more minds solving problems. That’s what led to his book’s title. People, he argued, were the ultimate scarce resource.
In “Natural Resources,” published in David R. Henderson, ed., The Concise Encyclopedia of Economics, Princeton University economists Sue Anne Batey Blackman and William J. Baumol lay out three ways in which “the effective stocks of a natural resource can be increased.” First, a technological innovation can reduce the amount of waste. They give the example of reducing the amount of iron ore lost in mining or smelting. They also note that improvements in technology can help force more oil out of wells that have been abandoned. Second, they write, there is some substitutability over a wide range of resources. They give the example of insulation, which allowed homeowners and tenants to use less oil. This doesn’t mean that oil became more plentiful, of course. But it does mean that the available supply of oil was stretched so that the awful thing people feared—running out of oil—didn’t happen. The final way they note of increasing resources is to recycle. While some products really should not be recycled because the resource costs of doing so exceed the savings, other resources, like aluminum, can be profitably recycled.
In their article, Blackman and Baumol give some striking data on five minerals: tin, copper, iron ore, lead, and zinc. They show world reserves in 1950, world production between 1950 and 2000, and reserves in 2000. If we were running out of those resources, all of the reserves should have been smaller in 2000 than in 1950. In fact, all were larger. The case of iron ore is the most striking. In 1950, there were 19 billion metric tons. Between 1950 and 2000, 37.6 billion metric tons of iron ore were produced, which was more than the number of tons to begin with. By 2000, world reserves were 140 billion metric tons, over seven times as many as in 1950!
Earlier similar data caused Julian Simon to conclude that the real constraint on resource availability was not resources but people.
The bet
Simon put his money where his mouth was. Seeing the amount of publicity Stanford University biology professor Paul Ehrlich received for his book The Population Bomb, co-authored with his wife, Anne Ehrlich, Simon offered Ehrlich a bet on the future prices of resources. Simon reasoned that if resources were to become scarcer, their prices, adjusted for inflation, should rise. Ehrlich, presumably, bought that reasoning. Simon let Ehrlich choose five resources and Simon bet that their prices would, on average, fall over the next ten years. Ehrlich chose chromium, copper, nickel, tin, and tungsten. He also brought two other people into the bet: Harvard University’s John Holdren, who later became President Obama’s science advisor, and ecologist John Harte of the University of California, Berkeley. The five resources were equally weighted, with $200 worth of each at 1980 prices. If, ten years later, the values added up to less than $1,000, Ehrlich et al. would pay the difference; if greater than $1,000, Simon would pay the difference. Notice, by the way, that the bet was asymmetric. At worst, Ehrlich et al. would have to pay $1,000 in the unlikely event that each mineral was priced at zero in 1990. But at worst for Simon, he could have easily paid much more than $1,000. Yet Simon was supremely confident. As he explained in The Ultimate Resource, “The odds were all against them [Ehrlich et al,] because the prices of metals have been falling throughout human history.” Simon added, “From my point of view, the bet was like shooting fish in a barrel.”
Fortunately, Ehrlich’s integrity was better than his predictive ability. Ten years later, he sent a check, written by his wife, to Simon. (Here’s an imagined scenario, based on admittedly little evidence: Anne Ehrlich says to her husband, “C’mon dear, you lost the bet. Pay up, and if you don’t, I will.”)
Norman Borlaug, the Green Revolution, and lightbulbs
It’s easiest to see the importance of human minds by looking at extreme cases. Norman Borlaug, by figuring out how to grow high-yield wheats that resisted disease, helped start the “Green Revolution.” His methods were used to almost double yields in Pakistan and India. Some observers claim, quite credibly, that his work saved more than one billion lives. Not for nothing did Borlaug win the 1970 Nobel Peace Prize. Interestingly, though, Borlaug didn’t understand the bigger picture. Simon points out that in his Nobel Prize lecture, Borlaug referred to “the population monster.”
Another way to see how minds can stretch resources, making them much more plentiful, is with a particular product, the lightbulb.
Before lightbulbs were invented, people typically got light in dark places by using candles. But, as Yale University economist William D. Nordhaus has shown, lightbulbs brought the cost of lighting down to a tiny fraction of what it had been. It’s a pity that the Nobel Prize committee, in granting him the Nobel Prize in economics (shared with Paul Romer) didn’t even mention that important work.
In their 2002 book, Superabundance, Marian L. Tupy, a senior fellow with the Cato Institute, and Gale L. Pooley, an associate professor of business management at Brigham Young University-Hawaii, quote Nordhaus: “The Age of Invention showed a dramatic improvement in lighting efficiency, with an increase by a factor of 900, representing a rate [of improvement] of 3.5 percent per year between 1800 and 1992.”
Time prices: DeLong, Tupy, and Pooley
In a path-breaking 2000 study for the National Bureau of Economic Research, Brad DeLong, an economist at the University of California, Berkeley, took a number of items from the 1895 Montgomery Ward catalogue, and estimated the amount of time someone would have had to work at the average wage in 1895 to buy these items. Then he considered the amount of time someone would have had to work at the average wage in 2000 to buy those items in 2000. The study was titled “Cornucopia.” The reason for the title is that the amount of time you had to work in 2000 to buy all but one item was typically a small fraction of the amount of time in 1895.
One example is a one-speed bicycle. In 1895, the average worker had to work 260 hours, or about a month, to make enough money to buy such a bike. By 2000, the average worker needed to work only 7.2 hours, less than a day.
In Superabundance, Tupy and Pooley extend the DeLong approach. They take fifty basic commodities from 1980 to 2018. They find that the “time prices” of the fifty fell by 71.6 percent. In other words, the amount of time someone had to work in 2018 to buy the fifty commodities was 71.6 percent less than in 1980. I recommend paging through the book’s many graphs. It’s hard to argue with so much good data.
Possible objections
It’s hard to argue, but not impossible. In August 2022, my former co-blogger Arnold Kling wrote a critical review of Superabundance. He argues that the changes in the prices of exhaustible resources reflect new information that speculators receive. Therefore, he argues, changes could just as easily be in one direction as in another. He bases his reasoning on a famous 1931 article by economist Harold Hotelling. But when I taught that article to the students in my energy economics class, I pointed out that virtually all the assumptions in the Hotelling model are at odds with reality. Laying out how that matters would take me too far afield. But I do want to point out the problem with the one counterexample that Kling gives: tickets to see the St. Louis Cardinals play baseball, whose prices are much higher now relative to wages than they were in 1966. The problem with this counterexample is that the number of seats has not increased substantially. But for the resources that Tupy and Pooley consider, the amounts have increased substantially. To Arnold Kling, I would propose the same kind of bet that Simon proposed. Choose ten exhaustible resources, price them now, and wait eight years. Why only eight? Because I’m 73. I’m more optimistic about the world than about my health.
There are two other possible objections to the Simon/Tupy/Pooley optimism. First, for some resources, governments have hampered the working of markets. I have in mind, for example, water, which governments in the United States have a heavy hand in allocating. We could run out of water. Even then, though, I think that awful prospect would push governments to allowing a market in water, as a drought in Australia did in 2007.
The second objection is that the events that happened in the past few decades occurred in relatively free markets. But governments increasingly are restricting innovation. If that trend continues, then even very clever minds will have trouble making progress.
Why the pessimism?
Nevertheless, I’m relatively optimistic. Even if US governments get in the way of innovation, governments in other countries may not and we, as consumers, will still get the fruits of innovations. Another Nordhaus finding, which, disappointingly, the Nobel Prize committee also failed to mention, is that only 2.2 percent of the gains from innovation go to the innovators, with the remaining 97.8 percent being reaped by consumers.
Why are so many people so pessimistic? The reasons are too numerous to examine at length. But one is that people watch and read the news. A saying I read recently is: “If you don’t read the news, you’ll be uninformed; if you do read the news, you’ll be misinformed.” There are two ways you’ll be misinformed. One, which I think is implicit in the saying, is that the media often get the facts wrong. But the second is that the media tend to focus on bad news. As Harvard University professor Steven Pinker put it, “The news is a nonrandom sample of the worst events happening on the planet on a given day.” Pinker is quoted, by the way, in a recent post by Malcolm Cochran titled “1,000 Bits of Good News You May Have Missed in 2023.” I challenge readers to peruse those thousand bits and not emerge with at least a little more optimism.
