In 1980, Paul Ehrlich, a world famous biologist and author, accepted a bet proposed by Julian Simon, an economist. The bet was to resolve an ongoing debate about resource scarcity. Ehrlich chose five metals (copper, chromium, nickel, tin, and tungsten) and hypothetically bought $200 worth of each. If the real price of the metals increased over the following decade, Ehrlich wagered, it was an indication of increased scarcity. Simon won the bet. The real price of all five metals declined, signifying less scarcity.
Timing is everything. As demonstrated in the figure, the prices of metals wax and wane over time following an overall downward trend. Regardless, Simon’s point remains true. It is human ingenuity that prevents us from running out of resources – even finite resources. The key is not that prices continue to fall over time, rather that prices reflect consumer desires, and producers, given appropriate institutions, will respond.
Prices do reveal scarcity by increasing which, in turn, encourages conservation, substitution, and increased innovation and supply. In the end, the problem of scarcity is resolved by market coordination as shown by prices that peak and fall through the course of history.
Originally posted at Environmental Trends.
Founded 30 years ago in Bozeman, Montana, PERC—the Property and Environment Research Center—is the nation’s oldest and largest institute dedicated to improving environmental quality through property rights and markets.
PERC’s publications, each designed to resonate with specific groups, move ideas generated at PERC to broader audiences.
Research is at the heart of PERC's work, with a focus on the question: What is the link between economic growth and environmental quality?
The goal of PERC’s programs is to fully realize the vision of establishing “PERC University,” where scholars, students, policy makers, and others convene to expand the applications of free market environmentalism.
PERC's fellowships share a common goal of exposing new scholars, students, journalists, and policy makers to free market environmentalism, as well as enable scholars already familiar with FME to explore new applications.
PERC continues to publish and present a broad range of research and discussion through podcasts, videos, and other multimedia channels.