Julian L. Simon and Paul Ehrlich entered in a famous scientific wager in 1980, betting on a mutually agreed-upon measure of resource scarcity over the decade leading up to 1990. Simon had Ehrlich choose five commodity metals. Copper, chromium, nickel, tin, and tungsten were chosen and Simon bet that their prices would decrease, while Ehrlich bet they would increase.[note 1] Ehrlich ultimately lost the bet, and all five commodities that were selected as the basis for the wager continued to trend downward during the wager period.
In 1968, Ehrlich published The Population Bomb, which argued that mankind was facing a demographic catastrophe with the rate of population growth quickly outstripping growth in the supply of food and resources. Simon was highly skeptical of such claims, so proposed a wager, telling Ehrlich to select any raw material he wanted and select "any date more than a year away," and Simon would bet that the commodity's price on that date would be lower than what it was at the time of the wager.
Ehrlich and his colleagues (including John Holdren, later an advisor to President Barack Obama for Science and Technology) picked five metals that they thought would undergo big price increases: chromium, copper, nickel, tin, and tungsten. Then, on paper, they bought $200 worth of each, for a total bet of $1,000, using the prices on September 29, 1980, as an index. They designated September 29, 1990, 10 years hence, as the payoff date. If the inflation-adjusted prices of the various metals rose in the interim, Simon would pay Ehrlich the combined difference. If the prices fell, Ehrlich et al. would pay Simon.
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, the price of each of Ehrlich's selected metals had fallen. Chromium, 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.
As a result, in October 1990, Paul Ehrlich mailed Julian Simon a check for $576.07 to settle the wager in Simon's favor.
According to Paul Ehrlich's website:
In 1980, Julian Simon repeatedly challenged environmental scientists to bet against him on trends in prices of commodities, asserting that humanity would never run out of anything... Paul and the other scientists knew that the five metals in the proposed wager were not critical indicators and said so at the time... They emphasized that the depletion of so-called renewable resources — environmental resources such as soils, forests, species diversity, and groundwater — is much more indicative of the deteriorating state of society's life-support systems... Nonetheless, after consulting with many colleagues, Paul and Berkeley physicists John Harte and John Holdren accepted Simon's challenge in late 1980...
The fall in price among the five metals over the time-course of the wager can be attributed to the principle of substitution and the dynamic influence of technology with respect to commodity prices. For example, in the absence of any new technologies, copper prices would indeed be expected to increase as growing economies demanded more copper to meet the needs of expanding communication networks and plumbing infrastructure. Technological changes mitigated much of this expected demand as fiber optics replaced copper wire networks and various plastics replaced the once ubiquitous copper pipes throughout the construction industry.
Julian Simon won because the price of three of the five metals went down in nominal terms and all five of the metals fell in price in inflation-adjusted terms, with both tin and tungsten falling by more than half. So per the terms of the wager, Ehrlich paid Simon the difference in price between the same quantity of metals in 1980 and 1990 (which was $576.07). The prices of all five metals increased between 1950 and 1975, but Ehrlich believes three of the five went down during the 1980s because of the price of oil doubling in 1979, and because of a world-wide recession in the early 1980s.
Yet, it is significant that, according to an article in Wired:
All of [Ehrlich's] grim predictions had been decisively overturned by events. Ehrlich was wrong about higher natural resource prices, about "famines of unbelievable proportions" occurring by 1975, about "hundreds of millions of people starving to death" in the 1970s and '80s, about the world "entering a genuine age of scarcity." In 1990, for his having promoted "greater public understanding of environmental problems," Ehrlich received a MacArthur Foundation Genius Award." [Simon] always found it somewhat peculiar that neither the Science piece nor his public wager with Ehrlich nor anything else that he did, said, or wrote seemed to make much of a dent on the world at large. For some reason he could never comprehend, people were inclined to believe the very worst about anything and everything; they were immune to contrary evidence just as if they'd been medically vaccinated against the force of fact. Furthermore, there seemed to be a bizarre reverse-Cassandra effect operating in the universe: whereas the mythical Cassandra spoke the awful truth and was not believed, these days "experts" spoke awful falsehoods, and they were believed. Repeatedly being wrong actually seemed to be an advantage, conferring some sort of puzzling magic glow upon the speaker.
World population is still growing albeit more slowly than it was in the 1980s and UN projections show that world population will continue to grow, one estimate guessing from 7.1 billion (2013) to 10.1 billion by the end of this century.
Simon offered to raise the wager to $20,000 and to use any resources at any time that Ehrlich preferred. Ehrlich countered with a challenge to bet that temperatures would increase in the future. The two were unable to reach an agreement on the terms of a second wager before Simon died.
The price of raw and other natural commodities such as oil, gold, and uranium have risen substantially in recent years, due to increased demand from China, India, and other industrializing countries. However, this price increase is not necessarily contrary to Simon's cornucopian theory.
More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred.—Julian Simon
The bet doesn't mean anything. Julian Simon is like the guy who jumps off the Empire State Building and says how great things are going so far as he passes the 10th floor. I still think the price of those metals will go up eventually, but that's a minor point. The resource that worries me the most is the declining capacity of our planet to buffer itself against human impacts. Look at the new problems that have come up: the ozone hole, acid rain, global warming. It's true that we've kept up food production -- I underestimated how badly we'd keep on depleting our topsoil and ground water -- but I have no doubt that sometime in the next century food will be scarce enough that prices are really going to be high even in the United States.—Paul Ehrlich
If the bet had concluded in 2011, instead of 1990, Ehrlich would have won.
The proposed second wager
Understanding that Simon wanted to bet again, Ehrlich and climatologist Stephen Schneider counter-offered, challenging Simon to bet on 15 current trends, betting $1000 that each will get worse (as in the previous wager) over a ten-year future period.
The trends they bet would continue to worsen were:
- The three years 2002–2004 will on average be warmer than 1992–1994.
- There will be more carbon dioxide in the atmosphere in 2004 than in 1994.
- There will be more nitrous oxide in the atmosphere in 2004 than 1994.
- The concentration of ozone in the lower atmosphere (the troposphere) will be greater than in 1994.
- Emissions of the air pollutant sulfur dioxide in Asia will be significantly greater in 2004 than in 1994.
- There will be less fertile cropland per person in 2004 than in 1994.
- There will be less agricultural soil per person in 2004 than 1994.
- There will be on average less rice and wheat grown per person in 2002–2004 than in 1992–1994.
- In developing nations there will be less firewood available per person in 2004 than in 1994.
- The remaining area of virgin tropical moist forests will be significantly smaller in 2004 than in 1994.
- The oceanic fishery harvest per person will continue its downward trend and thus in 2004 will be smaller than in 1994.
- There will be fewer plant and animal species still extant in 2004 than in 1994.
- More people will die of AIDS in 2004 than in 1994.
- Between 1994 and 2004, sperm cell counts of human males will continue to decline and reproductive disorders will continue to increase.
- The gap in wealth between the richest 10% of humanity and the poorest 10% will be greater in 2004 than in 1994.
Simon declined Ehrlich and Schneider's offer to bet, and used the following analogy to explain why he did so:
Let me characterize their offer as follows. I predict, and this is for real, that the average performances in the next Olympics will be better than those in the last Olympics. On average, the performances have gotten better, Olympics to Olympics, for a variety of reasons. What Ehrlich and others says is that they don't want to bet on athletic performances, they want to bet on the conditions of the track, or the weather, or the officials, or any other such indirect measure.
Simon's thesis is that humanity's life-style will continue to improve, and several of the points of Ehrlich's second bet may increase for wholly benign reasons. For instance, the prediction of less agricultural soil per capita is a trend that Simon observed in The Ultimate Resource which Simon attributed to long-term rises in agricultural productivity.
In 1996, Simon bet $1000 with David South that the inflation-adjusted price of timber would decrease in the following 5 years. Simon paid out early on the bet in 1997 (before his death in 1998) based on his expectation that prices would remain above 1996 levels (which they did).
In 1999, when the Economist headlined an article entitled, "$5 a barrel oil soon?" and with oil trading in the $12/barrel range, David South offered $1000 to any economist who would bet with him that the price of oil would be greater than $12/barrel in 2010. No economist took him up on the offer. However, in October 2000, Zagros Madjd-Sadjadi, an economist with The University of the West Indies, bet $1000 with David South that the inflation-adjusted price of oil would decrease to an inflation-adjusted price of $25 by 2010 (down from what was then $30/barrel). Madjd-Sadjadi paid South an inflation-adjusted $1,242 in January 2010. The price of oil at the time was $81/barrel.
Asset manager Jeremy Grantham wrote that if the Simon–Ehrlich wager had been for a longer period (from 1980 to 2011), then Simon would have lost on four of the five metals. He also noted that if the wager had been expanded to "all of the most important commodities," instead of just five metals, over that longer period of 1980 to 2011, then Simon would have lost "by a lot." He concluded, "So, please "Cornucopians," let's not hear any more of the Ehrlich-Simon bet ... Ehrlich's argument was right (so far)."
- Malthusian catastrophe
- Oil price increases since 2003
- Peak oil
- Richard Rainwater
- Simmons–Tierney bet
- The contest occurred in the pages of Social Science Quarterly, where Simon challenged Ehrlich to put his money where his mouth was. In response to Ehrlich's published claim that "If I were a gambler, I would take even money that England will not exist in the year 2000"—a proposition Simon regarded as too silly to bother with—Simon countered with "a public offer to stake US$10,000 ... on my belief that the cost of non-government-controlled raw materials (including grain and oil) will not rise in the long run."
- Regis, Ed (February 1997). "The Doomslayer". Wired.com (Issue 5.02). Archived from the original on 2008-05-18. Retrieved 2008-05-18.
- "Center for Conservation biology". Stanford.edu. 2005-03-16. Retrieved 2009-09-07.
- Hecht, Jeff (2004). City of light the story of fiber optics (Rev. and expanded ed. ed.). Oxford [u.a.]: Oxford Univ. Press. p. 340. ISBN 0195162552.
- [dead link]
- Regis, Ed (February 1997). "The Doomslayer". Wired 5 (2).
- "World Population Prospects". United Nations. 2011-05-03. Retrieved 2011-09-03.
- Simon, Julian (1996). The State of Humanity. Wiley–Blackwell. p. 24. ISBN 978-1-55786-585-4.
- John Tierney (December 2, 1990). "Betting on the Planet". The New York Times Magazine.
- "World population: Now we are seven billion". The Economist. 2011-10-22. Retrieved 2013-06-15.
- "The Simon South Bet On Pine Sawtimber". Forestry.auburn.edu. 1998-02-08. Retrieved 2009-09-07.
- "The Madjd-Sadjadi South Bet On Oil". Forestry.auburn.edu. 2010-01-31. Retrieved 2012-01-29.
- Grantham, Jeremy (July 2011), "Resource Limitations 2: Separating the Dangerous from the Merely Serious", GMO Quarterly Letter (GMO LLC): 12, retrieved 2013-06-05
- Wired Magazine article on Julian Simon as Doomslayer and the wager
- Paul Ehrlich's webpage on the two Simon bets
- Overpopulation — The Population Explosion "Brownlash" and the wager
- "Julian Simon's Bet With Paul Ehrlich" by Brian Carnell at Libertarian International (.to Tonga) website
- Julian Simon's Perilous Optimism
- Graphs of carbon dioxide and nitrous oxide levels
- Long Bets Organization