Simon’s critics, Ehrlich included, have since argued that Simon got lucky. Had his bet with Ehrlich taken place over a different decade, the outcome might have been different. Between 2001 and 2008, for example, the world had experienced an unprecedented economic expansion that dramatically increased the price of commodities. But Simon’s larger point concerning the long-term decline in the price of commodities still stands. According to Simon, when a particular resource becomes scarcer, its price increases, and that change incentivizes people to discover more of the resource, ration it, recycle it, or develop a substitute for it. As such, population growth and resource use do not automatically lead to higher commodity prices in the long run.

Let’s look at a concrete example. Research suggests that commodity prices move in so-called super-cycles that last between 30 and 40 years. 27During periods of high economic growth, demand for commodities increases. When that happens, commodities go up in price. It is during this period that high commodity prices encourage the discovery of new supplies and the invention of new technologies. Once new supplies come online, prices of “now copiously supplied commodities” fall. 28

Accordingly, the current commodity cycle seems to have peaked in 2008. In June 2008, for example, the spot price of West Texas Intermediate crude oil reached $154 per barrel (2016 U.S. dollars). By January 2016, it stood at $29. 29 However, the high price of oil has led to fracking (hydraulic fracturing), which has revolutionized the oil industry. In late 2017, with the global economy on the mend, the price of oil hovered around $60 per barrel. Fracking, which enables people to gain access to previously inaccessible oil reserves in record volumes, seems to be keeping a lid on massive price increases. The so-called shale band refers to “a price level at which most North American deposits . . . can be accessed with hydraulic fracturing technology [and] become profitable.” 30Currently, the shale band moves in a range of between $40 and $60. When the price of oil moves much below $40, U.S. oil rigs shut down. As it moves close to $60, U.S. oil rigs go back to work, thus lowering the price of oil. 31

In fact, humanity has yet to run out of a single nonrenewable resource. Unfortunately, many people still believe that the answer to scarcity is to limit consumption of natural resources. This group includes Paul Ehrlich and his wife, Anne, who revisited the Stanford University professor’s dire warnings in a 2013 Proceedings of the Royal Society article titled “Can a Collapse of Global Civilization Be Avoided?” Undeterred by a half-century of evidence to the contrary, they came to conclusions similar to those that Paul Ehrlich had originally proposed in the 1960s. 32The Club of Rome is still around and publishing. In 2017, it published a new report titled Come On! Capitalism, Short-termism, Population and the Destruction of the Planet, which insisted that “the Club of Rome’s warnings published in the book Limits to Growth are still valid” and warned that the “current worldwide trends are not sustainable.” 33

To these warnings about humanity’s future, a veritable smorgasbord of similar publications may be added. They include Naomi Klein’s 2015 book This Changes Everything: Capitalism vs. The Climate, in which the Canadian author argues that “our economy is at war with many forms of life on earth, including human life. What the climate needs in order to avoid collapse is a contraction in humanity’s use of resources,” and Rob Dietz and Dan O’Neill’s 2013 offering, Enough Is Enough: Building a Sustainable Economy in a World of Finite Resources. According to the American and Canadian economists, “We’re overusing the earth’s finite resources, and yet excessive consumption is failing to improve our lives.” 34

But consumption limits are unpopular and difficult to enforce. More often than not, their effects fall hardest on the most vulnerable. A switch from fossil fuels to “renewable” sources of energy, for example, has increased the price of gas and electricity in many European countries to such an extent that a new term, energy poverty, was coined. 35 According to the German magazine Der Spiegel, “Germany’s aggressive and reckless expansion of wind and solar power has come with a hefty price tag for consumers, and the costs often fall disproportionately on the poor.” 36In democracies, such policies are, in the long run, unsustainable. More important, they are unnecessary, because real solutions to future scarcity are more likely to come from innovation and technological change.

Oil, Gold, and Silver

As previously noted, three commodities are outliers and rose in price more than income. Between 1960 and 2016, gold rose by 530 percent, silver by 234 percent, and oil by 367 percent. Does that disprove Simon’s thesis? Far from it. 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. 37 That’s partly because of fracking of previously inaccessible oil reserves in non-OPEC countries, such as the United States, and partly because of technological developments, such as the accelerating move away from combustion engine vehicles. 38 In expectation of permanently low oil prices, oil companies, such as Shell, and oil-producing countries, such as Saudi Arabia, are slowly diversifying to reduce their dependence on oil production. 39 Put differently, people with a stake in oil now assume that oil prices will follow Simon’s prediction in the future.

Gold and silver have more unusual characteristics. In addition to their commercial uses, such as serving as conductors of electricity in switches and cell phones, gold and silver are also “stores of value” or assets that can be saved, retrieved, and exchanged at a later time. Historically, people of all income groups used gold and silver to hide their wealth from rapacious government officials and in the time of war. More recently, both metals rose in price during the inflationary 1970s, when many of the world’s most important currencies, including the U.S. dollar, were rapidly losing their value because of monetary mismanagement. They spiked again after the outbreak of the Great Recession and the subsequent uncertainty about the soundness of the financial system.

Conclusion

The discussion in this paper is not meant to trivialize the challenges that humanity faces or imply that we will be able to solve all of the problems ahead. Instead, it is meant to show that the human brain, the ultimate resource, is capable of solving complex challenges. We have been doing so with disease, hunger, and extreme poverty, and we can do so with respect to the use of natural resources.

Thomas Babington Macaulay, a 19th-century British historian and politician, once asked, “On what principle is it that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?” 40In 1830, when Macaulay penned those words, the world was just beginning to industrialize. One hundred eighty-eight years later, humanity is not only still here, but it is flourishing like never before. Few people today would forgo the life expectancy, nutrition, health care, and education they now enjoy in exchange for those experienced by Macaulay’s contemporaries.

Appendix: The World Bank’s Commodity Price Data, 1960–2016 (2010 U.S. dollars)



Notes

“Population, Total,” World Bank, https://data.worldbank.org/indicator/SP.POP.TOTL. “GDP Per Capita (constant 2010 US$),” World Bank, http://data.worldbank.org/indicator/NY.GDP.PCAP.KD. “Poverty Headcount Ratio at $1.90 a Day (2011 PPP) (% of population),” World Bank, https://data.worldbank.org/indicator/SI.POV.DDAY?end=2014&start=1981. “World Bank Forecasts Global Poverty to Fall Below 10% for First Time; Major Hurdles Remain in Goal to End Poverty by 2030,” World Bank, October 4, 2015, http://www.worldbank.org/en/news/press-release/2015/10/04/world-bank-forecasts-global-poverty-to-fall-below-10-for-first-time-major-hurdles-remain-in-goal-to-end-poverty-by-2030. “Mortality Rate, Infant (per 1,000 Live Births),” World Bank, http://data.worldbank.org/indicator/SP.DYN.IMRT.IN. “Mortality Rate, Under-5 (per 1,000 Live Births),” World Bank, http://data.worldbank.org/indicator/SH.DYN.MORT. “Number of Maternal Deaths,” World Bank, https://data.worldbank.org/indicator/SH.MMR.DTHS. The United States Department of Agriculture estimates the calorie needs of an adult at 2,000 calories per day, with some variation. See “Estimated Calorie Needs per Day by Age, Gender, and Physical Activity Level,” United States Department of Agriculture Center for Nutrition Policy and Promotion, https://www.cnpp.usda.gov/sites/default/files/usda_food_patterns/EstimatedCalorieNeedsPerDayTable.pdf. “Food Supply — Crops Primary Equivalent,” Food and Agriculture Organization of the United Nations, Statistics Division, http://www.fao.org/faostat/en/#search/Food%20supply%20kcal%2Fcapita%2Fday. “Life Expectancy at Birth, Total (Years),” World Bank, http://data.worldbank.org/indicator/SP.DYN.LE00.IN. “Total Economy Database,” Conference Board, https://www.conference-board.org/data/economydatabase/. My calculation was based on the following countries, which were the only ones for which data were available: Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Mexico, Netherlands, Norway, Peru, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, the United Kingdom, the United States, and Venezuela. “Primary completion rate, total (% of relevant age group),” World Bank, https://data.worldbank.org/indicator/SE.PRM.CMPT.ZS. “Lower secondary completion rate, total (% of relevant age group),” World Bank, https://data.worldbank.org/indicator/SE.SEC.CMPT.LO.ZS. “Gross enrolment ratio, tertiary, both sexes (%),” World Bank, https://data.worldbank.org/indicator/SE.TER.ENRR. “Air Quality — National Summary,” U.S. Environmental Protection Agency, https://www.epa.gov/air-trends/air-quality-national-summary. Joshua S. Goldstein and Steven Pinker, “The Decline of War and Violence,” Boston Globe, April 15, 2016, https://www.bostonglobe.com/opinion/2016/04/15/the-decline-war-and-violence/lxhtEplvppt0Bz9kPphzkL/story.html. Julian Simon, The Ultimate Resource (Princeton, NJ: Princeton University Press, 1981). “Aluminum Cans,” The Aluminum Association, http://www.aluminum.org/product-markets/aluminum-cans. Until recently, there was no trade in natural gas between Europe and the United States, but that has changed and the prices of natural gas in the two are converging. See “About Us,” Club of Rome, https://www.clubofrome.org/. 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. Daniel W. O’Neill, Andrew L. Fanning, William F. Lamb, and Julia K. Steinberger, “A Good Life for All within Planetary Boundaries,” Nature Sustainability 1 (February 5, 2018): 88–95, https://www.nature.com/articles/s41893-018-0021-4. “Scarcity,” Business Dictionary, http://www.businessdictionary.com/definition/scarcity.html. Paul Ehrlich, The Population Bomb (New York: Ballantine Books, 1968), p. 11. Ronald Bailey, The End of Doom (New York: St. Martin’s Press, 2015), p. 45. David Jacks, “From Boom to Bust: A Typology of Real Commodity Prices in the Long Run,” National Bureau of Economic Research Working Paper no. 18874, March 2013, p. 2, http://www.nber.org/papers/w18874. Bailey, The End of Doom, p. 37. “Crude Oil Prices — 70 Year Historical Chart,” MacroTrends, http://www.macrotrends.net/1369/crude-oil-price-history-chart. “Shale Band,” Investopedia, https://www.investopedia.com/terms/s/shale-band.asp#ixzz4x6PNJzki. “Can Oil Prices Go Above $60? U.S. Shale Output a Pivotal Factor,” USA Today, October 29, 2017, https://www.usatoday.com/story/money/energy/2017/10/29/can-oil-prices-go-above-60-u-s-shale-output-pivotal-factor/804149001/. Paul R. Ehrlich and Anne H. Ehrlich, “Can a Collapse of Global Civilization Be Avoided?,” Proceedings of the Royal Society, January 9, 2013, http://rspb.royalsocietypublishing.org/content/280/1754/20122845. Ernst von Weizsaecker and Anders Wijkman, Come On! Capitalism, Short-termism, Population and the Destruction of the Planet (Zurich, Switzerland: Club of Rome, 2017). Rob Dietz and Dan O’Neill, foreword to Enough Is Enough: Building a Sustainable Economy in a World of Finite Resources (Oakland, California: Berrett-Koehler Publishers, 2013); and Naomi Klein, This Changes Everything: Capitalism vs. The Climate (New York: Simon & Schuster, 2015), p. 21. “How Electricity Became a Luxury Good,” Spiegel Online, September 4, 2013, http://www.spiegel.de/international/germany/high-costs-and-errors-of-german-transition-to-renewable-energy-a-920288.html. Ibid. See “World Oil: Market or Mayhem?,” James L. Smith, Journal of Economic Perspectives 23, no. 3 (Summer 2009): 145–64; and Matt Egan, “OPEC and Russia Have Failed to Fix the Epic Oil Glut,” CNN, May 26, 2017, http://money.cnn.com/2017/05/26/investing/opec-russia-fail-oil-glut/index.html. “Why Saudi Arabia Should Fear U.S. Oil Dominance,” USA Today, November 18, 2017, https://www.usatoday.com/story/money/energy/2017/11/18/analysis-why-saudi-ara bia-should-fear-u-s-oil-dominance/868990001/; and “Global Electric Car Sales Jump 63 Percent,” Bloomberg, November 21, 2017, https://www.bloomberg.com/news/articles/2017-11-21/global-electric-car-sales-jump-63-percent-as-china-demand-surges. “Shell Prepares for ‘Lower Forever’ Oil Prices,” Wall Street Journal, July 27, 2017, https://www.wsj.com/articles/royal-dutch-shells-second-quarter-earnings-rise-sharply-1501137915; and “Saudis Boxed In by Low Oil Prices,” Wall Street Journal, June 22, 2017, https://www.wsj.com/articles/saudis-boxed-in-by-low-oil-prices-1498141357. “Thomas Babington Macaulay Quotes,” Goodreads, https://www.goodreads.com/author/quotes/234077.Thomas_Babington_Macaulay.

World Bank, Commodity Price Data, http://www.worldbank.org/en/research/commodity-markets bbl = barrel; cfr = cost and freight; DAP = diammonium phosphate; dmtu = dry metric tonne unit; EU = European Union; HRW = Hard Red Winter; kg = kilogram; mmbtu = million British thermal units; mt = metric ton; MYS = Malaysia; oz = ounce; SGP = Singapore; SRW = Soft Red Winter; TSP = triple superphosphate; TSR = technically specified rubber; WTI = West Texas Intermediate; troy oz = troy ounce.