In the end, we have decided to keep gold and silver in our basket of commodities for the following reasons. First, prices of many commodities, not just gold and silver, do not perfectly reflect global supply and demand. “For many decades, the oil market was partly shielded from competitive forces by the Organization of Petroleum Exporting Countries (OPEC), a cartel of oil-producing countries. The OPEC nations frequently colluded to restrict production of oil in order to keep its price artificially high. The extent to which OPEC was able to achieve its goal in the past is subject to much debate, but many experts have come to believe that OPEC’s ability to affect the future price of oil is in decline.”84 Prices of other commodities, including sugar and corn, may be artificially inflated by tariffs and subsidies.

Second, our aim is to be completely transparent with regard to our methodology and to avoid the charge of cherry-picking. Since gold and silver constitute parts of the World Bank’s database of commodities, we decided to include them. That said, we hope that this section will remind the readers that the prices of gold and silver are subjected to influences that most other commodities are not subject to. Finally, gold and silver together represent a mere 4 percent of the weight in our basket of commodities. Researchers are free to build their own indexes and reduce the weight of gold and silver to zero if they like.

Table 3: Summary of findings



Source: Authors’ analysis.

Notes: Real prices = nominal prices ÷ GDP deflator; Time Price = real price ÷ real hourly income; Time Price Multiplier = 1 ÷ (1 + rate of change in time price); Price Elasticty of Population = percentage change in time price ÷ percentage change in population; Simon Abundance Index (SAI) = [(1 + percentage change in population) ÷ (1 + percentage change in time price)] x 100 base year 1980 = 100

NOTES

The authors wish to thank the following for their kind help with this paper: Mark Perry, University of Michigan–Flint; Jeffrey Miron, Andrei Illarionov, Peter Van Doren, Chelsea Follett, Ian Vásquez, and Tyler Sutton, Cato Institute; David M. Simon, Eimer Stahl LLP; Daniel Simon, Indiana University; and Pierre Desrochers, University of Toronto Mississauga.

1 Daniel Richter et al., “The Age of the Hominin Fossils from Jebel Irhoud, Morocco, and the Origins of the Middle Stone Age,” Nature 546, no. 7657 (2017): 293–96, https://www.nature.com/articles/nature22335.

2 “Mass Production,” The Economist, October 20, 2009, https://www.economist.com/node/14299820.

3 Max Roser, “Life Expectancy,” Our World in Data, https://ourworldindata.org/life-expectancy.

4 These figures are in 1990 U.S. dollars adjusted for purchasing power parity (PPP). Note that in our analysis we do not use figures adjusted for PPP. That’s because we look at global prices of commodities, which theoretically reflect the influences of all local conditions. A Big Mac costs much less in Ukraine, where labor and other inputs are cheaper, than in Switzerland, where labor and other inputs are more expensive. But the price of imported zinc will be very similar in both countries. For income data, see Jutta Bolt, Marcel Timmer, and Jan Luiten van Zanden, “GDP per Capita since 1820,” in How Was Life? Global Well-Being since 1820, ed. Jan Luiten van Zanden, et al. (Paris: OECD Publishing, 2014), http://dx.doi.org/10.1787/9789264214262-7-en.

5 We do not have a global homicide rate going back to the 1800s, but consider the following examples. In 1800, homicide rates in Italy, Switzerland, and Germany were 8.0, 4.7, and 2.4 per 100,000, respectively. By the early 2000s, those rates fell to 2.30, 0.60 and 0.58, respectively. See Max Roser, “Homicides,” https://ourworldindata.org/homicides.

6 Max Roser, “War and Peace,” data visualization, Our World in Data, https://ourworldindata.org/wp-content/uploads/2013/08/Wars-Long-Run-military-civilian-fatalities-from-Brecke.png.

7 Max Roser and Esteban Ortiz-Ospina, “World Population Growth,” updated April 2017, https://ourworldindata.org/world-population-growth.

8Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, vol. 1 (Indianapolis: Liberty Fund, 1981), p. 13.

9 The Nobel Prize–winning economist Angus Deaton argues that population growth preceded the Great Enrichment of the last two centuries because of “the control of disease through public health measures. At first this took the form of improvements in sanitation and in water supplies. Eventually the science caught up with practice and the germ theory of disease was understood and gradually implemented, through more focused, scientifically based measures. These included routine vaccination against a range of diseases and the adoption of good practices of personal and public health based on the germ theory.” See Angus Deaton, The Great Escape: Health, Wealth, and the Origins of Inequality (Princeton: Princeton University Press, 2013), p. 93.

10 Julian L. Simon, The Ultimate Resource (Princeton: Princeton University Press, 1981). Note that until 1983, Simon was economics and business professor at the University of Illinois at Urbana–Champaign. He moved to the University of Maryland two years after publishing The Ultimate Resource.

11 New ideas are the result of the combination of existing ideas or, as the British writer Matt Ridley put it, “ideas have sex.” The more ideas people have, the more ideas they can have. See Matt Ridley, The Rational Optimist (New York: HarperCollins, 2010).

12 Paul Ehrlich, The Population Bomb (New York: Ballantine Books, 1968), p. 11.

13 Julian L. Simon, The Ultimate Resource, pp. 345, 346, 348.

14 Garrett Hardin, “The Tragedy of the Commons,” Journal of Natural Resources Policy Research 1, no. 3 (2009): 243–53; and Jared Diamond, Guns, Germs, and Steel (New York: W. W. Norton, 1997); Jared Diamond, Collapse: How Societies Choose to Fail or to Succeed (New York: Viking Press, 2005). For a discussion of the intellectual origins of Hardin’s thinking, see Fabien Locher, “Cold War Pastures: Garrett Hardin and the ‘Tragedy of the Commons,’” Revue d’Histoire Moderne et Contemporaine 60, no. 1 (2013): 7–36, https://www.cairn-int.info/article-E_RHMC_601_0007--cold-war-pastures-garrett-hardin-and.htm.

15 The full quote is this: “Most biologists and ecologists look at population growth in terms of the carrying capacity of natural systems. Julian [Simon] was not handicapped by being either. As an economist, he could see population growth in a much more optimistic light.” See “Julian Simon, 65, Optimistic Economist, Dies,” New York Times, February 12, 1998, https://www.nytimes.com/1998/02/12/business/julian-simon-65-optimistic-economist-dies.html.

16 Lester R. Brown, in “Julian Simon, 65, Optimistic Economist, Dies.”

17 Ridley continues, “I am not talking about swapping favors—any old primate can do that. There is plenty of ‘reciprocity’ in monkeys and apes: you scratch my back and I scratch yours. . . . Such reciprocity is an important human social glue, a source of cooperation and a habit inherited from the animal past that undoubtedly prepared human beings for exchange. But it is not the same thing as exchange. Reciprocity means giving each other the same thing (usually) at different times. Exchange—call it barter or trade if you like—means giving each other different things (usually) at the same time: simultaneously swapping two different objects.” Matt Ridley, The Rational Optimist (New York: HarperCollins, 2010), pp. 56–57.

18 Ronald Bailey, The End of Doom (New York: St. Martin’s Press, 2015), p. 45.

19 Paul Sabin, The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth’s Future (New Haven, CT: Yale University Press, 2013).

20 For a more detailed history of “the bet” and its consequences, see Pierre Desrochers and Vincent Geloso, “Snatching the Wrong Conclusions from the Jaws of Defeat: A Resourceship Perspective on Paul Sabin’s The Bet: Paul Ehrlich, Julian Simon, and Our Gamble over Earth’s Future, Part 1: The Missing History of Thought: Depletionism vs. Resourceship,” New Perspectives on Political Economy 12, nos. 1-2 (2016): 5–41 and “Part 2: The Wager: Protagonists and Lessons,” pp. 42–64.

21 Michael Cox and Richard Alm, “Onward and Upward! Bet on Capitalism—It Works,” 2015-16 Annual Report of the William J. O’Neil Center for Global Markets and Freedom, Southern Methodist University Cox School of Business, https://www.smu.edu/-/media/Site/Cox/CentersAndInstitutes/ONeilCenter/Research/AnnualReports/2016_annual_report_full.ashx?la=en.

22 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (London: W. Strahan and T. Cadell, 1776), book 1, chap. 5, http://geolib.com/smith.adam/won1-05.html.

23 Cox and Alms, “Onward and Upward!,” p. 8.

24 Steven Pinker, Enlightenment Now: The Case for Reason, Science, Humanism, and Progress (New York: Viking Press, 2018), p. 48.

25 Leda Cosmides and John Tooby, “Evolutionary Psychology: A Primer,” Center for Evolutionary Psychology, 1997, https://www.cep.ucsb.edu/primer.html.

26 It is noteworthy that very few pessimists are willing to put their skin in the game and bet against progress. Even Ehrlich, who has been repeating the same message of doom and gloom for the past 50 years, has never again engaged in a wager similar to that which he lost.

27 Paul R. Ehrlich and Anne H. Ehrlich, “Can a Collapse of Global Civilization Be Avoided?” Proceedings of the Royal Society B 280 (January 9, 2013): https://doi.org/10.1098/rspb.2012.2845, http://rspb.royalsocietypublishing.org/content/280/1754/20122845.

28 Paul R. Ehrlich, “Biological Extinction,” https://www.youtube.com/watch?v=1j7TpoLmR60.

29 United Nations Department of Economic and Social Affairs, The Determinants and Consequences of Population Trends: New Summary of Findings on Interaction of Demographic, Economic and Social Factors (New York: United Nations, 1973), p. 33.

30 United Nations, The Determinants and Consequences of Population Trends, p. 34.

31 Thomas R. Malthus, An Essay on the Principle of Population (London: J. Johnson, 1798).

32 “About Us,” Club of Rome, https://www.clubofrome.org/.

33 Donella H. Meadows, Dennis L. Meadows, Jørgen Randers, and William W. Behrens III, The Limits to Growth: A Report for the Club of Rome’s Project on the Predicament of Mankind (Washington: Potomac Associates, 1972) via Donella Meadows Collection, Dartmouth Digital Collections, http://collections.dartmouth.edu/teitexts/meadows/diplomatic/meadows_ltg-diplomatic.html.

34 Ernst von Weizsäcker and Anders Wijkman, Come On! Capitalism, Short-Termism, Population and the Destruction of the Planet (New York: Springer, 2017).

35 Alan Flippen and Damon Darlin, “Forty-Four Years of Earth Day,” The Upshot (blog), New York Times, April 22, 2014, https://www.nytimes.com/2014/04/23/upshot/forty-four-years-of-earth-day.html.

36 John McConnell, Earth Day (Eugene, OR: Wipf and Stock, 2011).

37 Simon, The Ultimate Resource, p. 346.

38 Paul Krugman, “Rare and Foolish,” New York Times, October 17, 2010, https://www.nytimes.com/2010/10/18/opinion/18krugman.html.

39 Eugene Gholz, “Rare Earth Elements and National Security,” Council on Foreign Relations energy report, October 1, 2014, https://www.jstor.org/stable/resrep00311, p. 6.

40 Gholz, “Rare Earth Elements and National Security.”

41 A. J. Willingham, “Mud Near This Small Japanese Island Could Change the Global Economy,” CNN, April 17, 2018, https://www.cnn.com/2018/04/16/asia/japan-rare-earth-metals-find-china-economy-trnd/index.html.

42 The numbers provided presume that the current usage rates of rare earths continue for centuries to come. If humanity learns how to use rare earths more efficiently, the currently known reserves of rare earths will last even longer.

43 Marian L. Tupy, “Man’s Ingenuity Is Quenching the World’s Thirst,” CapX, June 8, 2017, https://capx.co/mans-ingenuity-is-quenching-the-worlds-thirst/.

44 Rowan Jacobsen, “Israel Proves the Desalination Era Is Here: One of the Driest Countries on Earth Now Makes More Freshwater than It Needs,” Scientific American, July 29, 2016, https://www.scientificamerican.com/article/israel-proves-the-desalination-era-is-here/.

45 Paul Romer, “Economic Growth,” PaulRomer.Net, October 12, 2015, https://paulromer.net/economic-growth/.

46 “Commodity Price Data,” World Bank, http://www.worldbank.org/en/research/commodity-markets; International Monetary Fund, http://www.imf.org/external/np/res/commod/External_Data.xls.

47 “Gross Domestic Product: Implicit Price Deflator,” FRED Economic Data, https://fred.stlouisfed.org/series/GDPDEF#0.

48 The World Bank’s “GDP per Capita in Current U.S. Dollars” data span the period between 1960 and 2016. We have imputed the 2017 value by computing the average rate of income appreciation between 1960 and 2016, which came to 3 percent. We added 3 percent to the 2016 figure of $10,192.

49 “GDP per Capita (current US$),” World Bank, https://data.worldbank.org/indicator/NY.GDP.PCAP.CD.

50 “Total Economy Database: Annual Hours Worked per Worker,” The Conference Board, https://www.conference-board.org/data/economydatabase/.

51 The “Annual Hours Worked per Worker” dataset from The Conference Board covers 70 percent of the world’s population. We consider that to be a sufficient share of the world’s population to imply a global population–adjusted average annual hours worked per worker decline of 9.4 percent.

52 The relevant calculation for 1980 is GDP per capita of $6,431 ÷ 2,168 hours worked = $2.97 income per hour. The relevant calculation for 2017 is GDP per capita of $10,495 ÷ 1,964 hours worked = $5.34 income per hour. (All figures are in 2017 dollars.)

53 The relevant equation here is

TP = [(1+ percentage change in price) ÷ (1 + the percentage change in income)] − 1

TP = [1.10 ÷ 1.20] − 1

TP = 0.917 – 1

TP = −0.083 or −8.3 percent

54 The relevant equation here is

TP = [(1+ percentage change in price) ÷ (1 + the percentage change in income)] − 1

TP = [(1 − 0.363) ÷ (1 + 0.801)] − 1

TP = [0.637 ÷ 1.801] − 1

TP = 0.353 − 1

TP = −0.647 or −64.7 percent

55 The relevant equation here is

TPM = 1 ÷ (1 + percentage change in time-price)

TPM = 1 ÷ (1 + (−0.50))

TPM = 1 ÷ 0.5

TPM = 2

56 The relevant equation here is

TPM = 1 ÷ (1 + change in time-price)

TPM = 1 ÷ (1 + (−0.647))

TPM = 1 ÷ 0.353

TPM = 2.83

57 Price elasticity of a product (P) = percentage change in the quantity of P purchased ÷ percentage change in price of P sold; price elasticity of P = (−25 percent ÷ 50 percent); price elasticity of P = −0.5.

58 The relevant equation here is: PEP = percentage change in time-price ÷ percentage change in population.

59 “World Population Prospects, 2017,” United Nations Department of Economic and Social Affairs, https://esa.un.org/unpd/wpp/Download/Standard/Population/.

60 The relevant equation here is

PEP = percentage change in time-price ÷ percentage change in population

PEP = -64.7 ÷ 69.3

PEP = -0.934

61 Note that price elasticity of population is unlikely to be constant. The nearly direct link between population and time-price generated between 1980 and 2017 might not hold over the course of the next 37 years. For more discussion on this subject, see the “Forecasts” section of this paper.

62 Paul R. Ehrlich and Anne H. Ehrlich, The End of Affluence: A Blueprint for Your Future (New York: Ballantine Books, 1974), p. 33.

63 Paul R. Ehrlich et al., “No Middle Way on the Environment,” Atlantic Monthly 280, no. 6 (December 1997): 98–104, https://www.theatlantic.com/magazine/archive/1997/12/ehrlich/377016/.

64 “Scarcity,” Economics Online, http://www.economicsonline.co.uk/Definitions/Scarcity.html.

65 Peter H. Diamandis and Steven Kotler, Abundance: The Future Is Better Than You Think (New York: Free Press, 2014 ed.), p. 9.

66 Note that the PEP denominator will always be positive. That’s because we expect population to keep growing for the foreseeable future. The PEP does not deal with scenarios in which population remains constant or is declining. That’s consonant with the Simon–Ehrlich debate, since both scholars were concerned with the effect of population growth on the availability of resources.

67 The relevant equation here is

NLE = [1 ÷ (1 + percentage change in population)] − 1

NLE = [1 ÷ (1 + 0.50)] − 1

NLE = [1 ÷ 1.5] − 1

NLE = 0.66 − 1

NLE = −0.33 or −33 percent

68 The relevant equation here is

NLE = [1 ÷ (1 + percentage change in population)] − 1

NLE = [1 ÷ (1 + 0.693)] − 1

NLE = [1 ÷ 1.693] − 1

NLE = 0.59 − 1

NLE = −0.41 or −41 percent

69 To better understand this section, consider watching this video prepared by Gale Pooley: https://www.youtube.com/watch?v=OPWU4YF6RvI&feature=youtu.be.

70 The relevant equation is

SAI = [(1 + percentage change in population) ÷ (1 + percentage change in time-price)] × 100

SAI = [(1 + 0.693) ÷ (1 − 0.647)] × 100

SAI = [1.693 ÷ 0.353] × 100

SAI = 4.796 × 100

SAI = 479.6

71 Much of the contemporary discussion in academia and the popular press centers on the subject of income inequality. In this paper, we did not adjust our figures to indicate different resource availability for people of different income levels. That said, it is worth remembering that the Simon Index is composed of basic commodities, not yachts or Lamborghinis. The poor benefit most when basic commodities, including food, fall in price. Hundreds of millions of people, especially those in the developing world whose incomes remain relatively low, are escaping from absolute poverty because time-prices of commodities are getting cheaper. Other researchers might wish to examine spending patterns to determine the welfare implications of the falling time-price of commodities for different income groups.

72 See the section, “Ehrlich and Simon: A Clash of Visions.”

73 Quoted in Ed Regis, “The Doomslayer,” Wired, February 1, 1997, https://www.wired.com/1997/02/the-doomslayer-2/. Emphasis in original.

74 Ronald Bailey, “High School Students Are Very Worried about Overpopulation. They Shouldn’t Be,” Hit and Run (blog), Reason, January 18, 2018.

75 “World Population Prospects, 2017,” United Nations Department of Economic and Social Affairs, https://esa.un.org/unpd/wpp/Download/Standard/Population/.

76 The standard deviation was 5.71 and the standard error was 0.939. Assuming a normal distribution, the chance that the PEP average will exceed 1 (i.e., scarcity) is 2.69 standard deviations away from the mean. The probably of that occurring is 0.00355 percent.

77 Note that the PEP value for 1980–2017, which comes to -0.934, differs somewhat from the yearly average of -1.53. As such, our forecast of -0.90 errs on the side of caution.

78 A potential concern with our forecast is that innovation could, as Paul Romer put it, “peter out.” As humanity develops more ideas, finding enough good new ones to maintain the current level of productivity growth may require increasingly costly investments in human capital. Researchers may have to command a greater body of literature and solve increasingly difficult problems. Under this scenario, the cost of accumulating enough human capital to balance population growth with higher productivity may eventually become prohibitive, the PEP could move toward a positive value, and population growth could indeed presage decreasing abundance. Note that Romer does not endorse the “petering out” argument but merely gives that concept a useful name. Like Romer, we believe that, when it comes to innovation, there are reasons for optimism. As Peter Diamandis and Steven Kotler put it in their 2012 book Abundance: The Future Is Better Than You Think, “the advancement of new, transformational technologies—computational systems, networks and sensors, artificial intelligence, robotics, biotechnology, bioinformatics, 3-D printing, nanotechnology, human-machine interfaces, and biomedical engineering—will soon enable the vast majority of humanity to experience what only the affluent have access to today.” See Paul Romer, “Endogenous Technological Change,” Journal of Political Economy, 98, no. 5, pt. 2 (1990): S71–S102; and Diamandis and Kotler, Abundance: The Future Is Better Than You Think, p. 10.

79 Mauricio Lima, “Climate Change and the Population Collapse during the ‘Great Famine’ in Pre-industrial Europe,” Ecology and Evolution 4, no. 3 (February 2014): 284–91, https://onlinelibrary.wiley.com/doi/abs/10.1002/ece3.936.

80 Jonah Goldberg, Suicide of the West: How the Rebirth of Tribalism, Populism, Nationalism, and Identity Politics Is Destroying American Democracy (New York: Random House, 2018). The quote comes from Goldberg’s essay adapted from the book in National Review, April 12, 2018, https://www.nationalreview.com/magazine/2018/04/30/jonah-goldberg-suicide-of-the-west-excerpt/.

81 See Pinker, Enlightenment Now.

82 “Natural Gas Prices,” BP website, https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy/natural-gas/natural-gas-prices.html.

83 Marian L. Tupy, “Julian Simon Was Right: A Half-Century of Population Growth, Increasing Prosperity, and Falling Commodity Prices,” Cato Institute Economic Development Bulletin no. 29, February 16, 2018, p. 7, https://www.cato.org/publications/economic-development-bulletin/julian-simon-was-right-half-century-population-growth.

84 Tupy, “Julian Simon Was Right,” p. 7.