Julian Simon - Theory

Theory

Simon's 1981 book The Ultimate Resource is a criticism of what was then the conventional wisdom on population growth, raw-material scarcity and resource consumption. Simon argues that our notions of increasing resource-scarcity ignore the long-term declines in wage-adjusted raw material prices. Viewed economically, he argues, increasing wealth and technology make more resources available; although supplies may be limited physically they may be viewed as economically indefinite as old resources are recycled and new alternatives are assumed to be developed by the market. Simon challenged the notion of an impending Malthusian catastrophe—that an increase in population has negative economic consequences; that population is a drain on natural resources; and that we stand at risk of running out of resources through over-consumption. Simon argues that population is the solution to resource scarcities and environmental problems, since people and markets innovate. His ideas were praised by Nobel Laureate economists Friedrich Hayek and Milton Friedman, the latter in a 1998 foreword to The Ultimate Resource II, but they have also attracted critics such as Paul R. Ehrlich and Albert Bartlett.

Simon examined different raw materials, especially metals and their prices in historical times. He assumed that besides temporary shortfalls, in the long run prices for raw materials remain at similar levels or even decrease. E.g. aluminium was never as expensive as before 1886 and steel used for medieval armor carried a much higher price tag in current dollars than any modern parallel.

His 1984 book The Resourceful Earth (co-edited by Herman Kahn), is a similar criticism of the conventional wisdom on population growth and resource consumption and a direct response to the Global 2000 report. For example, it predicted that "There is no compelling reason to believe that world oil prices will rise in the coming decades. In fact, prices may well fall below current levels". Oil prices have subsequently risen and, in 2008, the price of crude oil reached $100 per barrel, a level last attained in the 1860s (inflation adjusted).

Simon was skeptical, in 1994, of claims that human activity caused global environmental damage, notably in relation to CFCs, ozone depletion and climate change, the latter primarily because of the perceived rapid switch from fears of global cooling and a new ice age (in the mid 1970s) to the later fears of global warming. Simon also listed numerous claims about severe environmental damage and health dangers from pollution as "definitely disproved". These included claims about lead pollution & IQ, DDT, PCBs, malathion, Agent Orange, asbestos, and the chemical contamination at Love Canal.