Simon–Ehrlich Wager - Analysis of Why Ehrlich Lost

Analysis of Why Ehrlich Lost

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 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." 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, and UN projections show that global population will continue to grow, from close to 7 billion currently to 10.1 billion in 2100.

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.

Inflation-adjusted price movements of the commodities in the wager between Simon and Ehrlich may be seen in the larger 1950–2002 context in the following chart. Prices for these five commodities were generally rising from 1960 up until 1978, and generally falling thereafter.