Articles tagged with "john tierney"
Posted by David Murphy on January 14, 2011 - 10:55am
Tags: bets, david murphy, depletion, john tierney, julian simon, matthew simmons, original, paul ehrlich, scarcity [list all tags]
For decades, economists (Cornucopians or optimists) have been at odds with natural scientists (Malthusians or pessimists) when it comes to the scarcity of natural resources. The economist’s argument, summarized here by Julian Simon, is as follows:
More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred. (Simon 1996)
The viewpoint of natural scientists seems to be a bit simpler; the more scarce something is the higher the price, leading to increasing prices as resources deplete over time. These opposing views have led to some famous wagers in the past. The most famous occurred in 1980 between economist Julian Simon and natural scientist Paul Ehrlich. The wager was whether the price of five metals would increase in ten years time. Simon won the bet. Another bet was made more recently. In 2005, John Tierney of the New York Times wagered with Matt Simmons over the price of oil. Simmons bet $5,000 that the price of oil would be $200 per barrel in 2010. Tierney won the bet.
As a result, Tierney has publicly applauded himself and the economists’ view in a recent article in the New York Times. He states: “Maybe something unexpected will change these happy trends, but for now I’d say that Julian Simon’s advice remains as good as ever. You can always make news with doomsday predictions, but you can usually make money betting against them.”
But what is the real message (if any) to be gleaned from these bets? Is it that economists are always right and natural scientists always wrong? Is it that prices decline for commodities over time?
I argue that there is very little (if anything) to be learned from these bets, and I explain why below the fold.
Toward the end he goes on to say:
The United States spent decades propping up the shah of Iran only to see the country fall into the hands of our archenemies, but Iran is still exporting oil -- and it is a lot more reliable producer than Iraq, despite all the money and lives we've spent there. The best guarantee of future oil supplies is the sellers' greed, not our diplomatic and military efforts.I'm very frustrated by this, you know?
When something finally comes along that's cheaper and more reliable than oil, no national energy plan will be necessary. Capitalists will be ready to sell it to eager American drivers. For now, the best strategy is to buy gasoline and stop worrying that it's sinful or dangerous.