| Chicago School of Economics | |
|---|---|
| Born | February 12, 1932 |
| Died | February 8, 1998 (aged 65) Chevy Chase, Maryland |
| Nationality | United States |
| Institution | University of Maryland Cato Institute University of Illinois at Urbana-Champaign |
| Field | Environmental economics |
| Opposed | Paul R. Ehrlich Albert Bartlett |
| Influenced | Cornucopian Theory, Founder of free-market environmentalism |
Julian Lincoln Simon (February 12, 1932 – February 8, 1998)[1] was a professor of business administration at the University of Maryland and a Senior Fellow at the Cato Institute at the time of his death, after previously serving as a longtime business professor at the University of Illinois at Urbana-Champaign.[2]
Simon wrote many books and articles, mostly on economic subjects. He is best known for his work on population, natural resources, and immigration. His work covers cornucopian views on lasting economic benefits from natural resources and continuous population growth, even despite limited or finite physical resources, empowered by human ingenuity, substitutes, and technological progress. His works are also cited by libertarians against government regulation. He died at the age of 65 of a heart attack in Chevy Chase, Maryland.
He is also known for the famous Simon–Ehrlich wager, a bet he made with ecologist Paul R. Ehrlich. Ehrlich bet that the prices for five metals would increase over a decade, while Simon took the opposite stance. Simon won the bet, as the prices for the metals sharply declined during that decade.
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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[3] 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". With respect to oil, the price in 2008 reached the $100 peak it reached (inflation adjusted) before 1880. In line with Simons predictions it had fallen after the 1970s oil shortages to comparably low levels in the 1980s and should do so in the future again.
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.[4] 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.[5]
Simon was one of the founders of free-market environmentalism. An article entitled "The Doomslayer"[6] profiling Julian Simon in Wired magazine inspired Bjørn Lomborg to write the book The Skeptical Environmentalist.
Simon was also the first to suggest that airlines should provide rewards for travelers to give up their seats on overbooked flights, rather than arbitrarily taking random passengers off the plane (a practice known as "bumping").[3] Although the airline industry initially rejected it, his plan was later implemented with resounding success, as recounted by Milton Friedman in the foreword to The Ultimate Resource II. Economist James Heins said in 2009 that the practice had added $100 billion to the United States economy in the last 30 years.[7] Simon gave away his idea to federal de-regulators and never received any personal profit from his solution.[7]
Although not all of Simon's arguments were universally accepted, they contributed to a shift in opinion in the literature on demographic economics from a strongly Malthusian negative view of population growth to a more neutral view. More recent theoretical developments, based on the ideas of the demographic dividend and demographic window, have contributed to another shift this time away from the debate viewing population growth as either good or bad.
Simon wrote a memoir, A Life Against the Grain, which was published by his wife after his death.
Simon challenged Paul Ehrlich to a wager[8] in 1980 over the price of metals a decade later; Simon had been challenging environmental scientists to the bet for some time. Ehrlich, John Harte and John Holdren selected a basket of five metals that they thought would rise in price with increasing scarcity and depletion.
Simon won the bet, with all five metals dropping in price.[8] Supporters of Ehrlich's position suggest that much of this price drop came because of an oil spike driving prices up in 1980 and a recession driving prices down in 1990, pointing out that the price of the basket of metals actually rose from 1950 to 1975. They also suggest that Ehrlich did not consider the prices of these metals to be critical indicators, and that Ehrlich took the bet with great reluctance. On the other hand, Ehrlich selected the metals to be used himself, and at the time of the bet called it an "astonishing offer" that he was accepting "before other greedy people jump in," hardly suggesting reluctance.
The total supply in none of these metals increased during this time, but prices declined for a variety of reasons:
In all of these cases, better technology allowed for either more efficient use of existing resources, or substitution with a more abundant and less expensive resource, as Simon predicted.
In 1995, Simon issued a challenge for a second bet. Ehrlich declined, and proposed instead that they bet on a metric for human welfare. Ehrlich offered Simon a set of 15 metrics over 10 years, victor to be determined by scientists chosen by the president of the National Academy of Sciences in 2005. There was no meeting of minds, because Simon felt that too many of the metrics measured attributes of the world not directly related to human welfare, e.g. the amount of nitrous oxide in the atmosphere.[9] For such indirect, supposedly bad indicators to be considered "bad", they would ultimately have to have some measurable detrimental effect on actual human welfare. Ehrlich refused to leave out measures considered by Simon to be trivial.
Simon summarized the bet with the following analogy:
"Let me characterize their [Ehrlich and Schneider's] 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 say 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."[10]
The same year as his second challenge to Ehrlich, Simon also began a wager with David South, professor of the Auburn University School of Forestry. The Simon / South wager[11] concerned timber prices. Consistent with his cornucopian analysis of this issue in The Ultimate Resource, Simon wagered that at the end of a five-year term the consumer price of pine timber would have decreased; South wagered that it would increase. Before five years had elapsed, Simon saw that market and extra-market forces were driving up the price of timber, and he paid Professor South $1,000. Simon died before the agreed-upon date of the end of the bet, by which time timber prices had risen further.
Simon's reasoning for his early exit out of the bet was due to "the far-reaching quantity and price effects of logging restrictions in the Pacific-northwest."[12] He believed this counted as interference from the Canadian government, which rendered the bet worthless according to his economic principles. Simon's bet only considered the possibility of prices being driven up by South Carolina's government; he did not believe anything worthwhile was shown when Canadian import restrictions drove the prices up.
The Institute for the Study of Labor established the annual Julian L. Simon Lecture to honor Simon's work in population economics.[13] The University of Illinois at Urbana-Champaign held a symposium discussing Simon's work on April 24, 2002.[2] The university also established the Julian Simon Memorial Faculty Scholar Endowment to fund an associate faculty member in the business school.[2] India's Liberty Institute also holds a Julian Simon Memorial Lecture.[14] The Competitive Enterprise Institute gives the Julian Simon Memorial Award annually to an economist in the vein of Simon; the first recipient was Stephen Moore, who had served as a research fellow under Simon in the 1980s.[8]
Simon was married to Rita James Simon, who was also a longtime member of the faculty at the University of Illinois at Urbana-Champaign and later became a public affairs professor at American University.[2] Simon suffered from a long time depression, which allowed him to work only a few productive hours in a day. He also studied psychology of depression and wrote a book[15] on overcoming it. One of his theses was, that when you feel inferior and failed, you should just mentally force yourself to stop the comparisons between yourself and other people.
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