February 17, 2009
Notes on Julian Simon

After prepping my notes for Econ 323 (the source of the Adam Smith quotes below), I started grinding down the accumulating pile of stuff in my office. Among said stuff was a set of notes on Julian Simon's The Ultimate Resource 2, which I hadn't read until my first semester at Rhodes but which I would like to integrate into the undergraduate curriculum in some way. I'll be using the notes to update my IHS lecture on the limits to growth for this summer. Notes are below the fold.

Simon lays out his system on page 579: population growth and increases in income lead to higher demand, which raises prices. This leads people to search for new supplies and for ways to use what they have better, which creates new sources of income as well as substitutes.

The mind is the ultimate resource. On p. xxxi, Simon gives his testimony, paraphrasing a Jewish chaplain at Iwo Jima:

“How many who would have been a Mozart or a Michaelangelo or an Einstein have we buried here? And then I thought: ‘Have I gone crazy? What business do I have trying to help arrange it that fewer human beings will be born, each of whom might be a Mozart or a Michaelangelo or an Einstein—or simply a joy to his or her family and community, and a person who will enjoy life?”

He then states the fundamental issue and the “central matters in dispute” on p. xxxiv:
“The real issue is not whether one cares about nature, but whether one cares about people.”
“The central matters in dispute here are truth and liberty, versus the desire to impose one’s aesthetic and moral tastes on others.”

An insertion based on reading Paul Heyne and Thomas Jefferson: do those who wish to impose their values by force have a right to be consulted on others’ decisions that neither pick their pockets nor break their legs?

Simon quotes Franklin Pierce Adams on p. 17: “Nothing is more responsible for the good old days than a bad memory.”

p. 571: “…even talented and energetic people require an incentive to create better techniques and organizations…(t)herefore, the political-economic structure is the crucial determinant of the speed with which economic development occurs.”

On the Popularity of the Malthusian Model (p. 583):
1. Malthusian reasoning is simple and analogous to many situations. Simon’s model is not.
2. Immediate pressure creates immediate negative effects, and these effects have distributional consequences stemming from a change in relative prices.
3. There are groups that have stakes in alarmism.
4. Scare sells.
5. Organizations that arise to “fix” different problems do not always disband when they accomplish their objectives.
6. The profit motive is ugly, not beautiful; superficially, it calls to mind our baser instincts.
7. Environmentalism enjoys a “wide reputation for high-minded concern” (p. 584).

Simon’s contribution is a triumph of good science. He asks: if something were growing ever more scarce, how would we know it? His answer is that we should look at economic rather than physical measures. In other words, instead of looking at proven reserves, we should look at the price (paraphrased, no page number for this). Simon proposes a method that would allow us to distinguish between competing hypotheses and rule out one of them as false.

On page 27, Simon distinguishes between the methods of the technologists/engineers and those of the economists. The technologist/engineering approach estimates proven reserves and extrapolates rates of current use, treating the first as the inventory and the second as depletions of that inventory. Simon asks whether the data suggest whether the future will be substantially different from the past. This is summarized in his statement on page 31: “Current and future price is our best measure of both current and future scarcity.”

Recycling is an example of innovation that creates new resources (p. 43). Further, when resources that biodegrade slowly are put in landfills, they don’t disappear forever. They are waiting for new ways to be processed and reused. Of course, there are possible externalities from chemicals polluting groundwater.

Posted by Art Carden at 11:43 AM in Economics

The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith

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