June 16, 2019

Economics, the cheerful science …

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Thomas Carlyle

Thomas Carlyle: Image via Wikipedia

In 1980 the Stanford ecologist Paul Ehrlich and the Maryland economist Julian Simon struck a famous bet. Ehrlich had been the author of a best-selling and gloomy 1968 book “The Population Bomb” which warned about global overpopulation, increased scarcity, resource depletion, and resulting wars, famine, diseases and other horrors.

And Thomas Carlyle called economics the dismal science!

You are all probably too young to remember the decade leading up to 1980 but I am old enough to bear witness to the fact that in many respects it was gloomy in ways that had some similarities to the last decade, with recessions, soaring commodity prices and geopolitical conflicts.

Simon, being an economist, was of course a bit more cheerful, and invited Ehrlich to choose any commodities he wished, any date more than a year away, and Simon would wager that its inflation-adjusted price would fall over that period. Ehrlich agreed, chose copper, chromium, tin, nickel and tungsten as his commodities, and a period of ten years starting September 29th 1980.  By the end of the ten years in September 1990, the prices of all five commodities had fallen, in some cases spectacularly. Oil was not in the wager, but its real price fell substantially over the period also.  Ehrlich paid up in October 1990.

So what do you think? Was Simon lucky, are things different today, would you repeat the bet (and if you did would you take Ehrlich or Simon’s side), and is there anything in the Oil Price Watch Overview at all relevant to this?

I’ll bet you one thing – all our futures depend on the answers.

(PS Thomas Carlyle, the 19th Century historian called economics “the Dismal Science” after reading Malthus. His fuller description of it was that it was not just dismal but “dreary, desolate, indeed, quite abject and distressing”. He obviously liked alliteration more than he did economics).